Prospectus
October 21, 1999
Citicorp Mortgage Securities, Inc.
12855 North Outer Forty Drive
St. Louis, MO 63141
(314) 851-1467
$246,833,836 (approximate)
Remic Pass-Through Certificates
Series 1999-7
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consisting of approximately
o $237,746,836, in 10 subclasses, of senior class A Certificates
o $5,851,000 of senior subordinated class M Certificates
o $3,236,000, in 2 subclasses, of subordinated class B Certificates
The purchase price for the offered Certificates will be set by the underwriter
or negotiated by the purchaser and the underwriter at the time of sale. Total
proceeds to the Trust for the offered Certificates will be approximately
$237,288,953, plus accrued interest from October 1, 1999 to the closing date.
CMSI does not intend to list the Certificates on a national securities exchange
or the Nasdaq Stock Market.
YOU SHOULD READ "GENERAL RISK FACTORS," BEGINNING ON PAGE 3 OF THE CORE
PROSPECTUS, AND "SERIES RISK FACTORS," BEGINNING ON PAGE S-7 OF THE
SUPPLEMENT, BEFORE YOU PURCHASE ANY CERTIFICATES.
CREDIT SUISSE FIRST BOSTON
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THE CERTIFICATES ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED THE CERTIFICATES OR DETERMINED
THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
HOW TO READ THIS PROSPECTUS
This prospectus consists of a prospectus supplement followed by a core
prospectus. The core prospectus gives general background information that
applies to all Series of Certificates. The supplement gives specific information
about your Series of Certificates. You should carefully read both the core
prospectus and the supplement before investing.
The supplement may update or modify information in the core prospectus.
Whenever information in the supplement differs from information in the core
prospectus, you should rely on the information in the supplement.
In deciding whether to purchase Certificates, you should rely solely on the
information in this prospectus. We have not authorized anyone to give you
different information about the Certificates.
CONTENTS
PROSPECTUS SUPPLEMENT
Summary S-3
Series risk factors S-7
Ratio stripping S-8
Subordination S-9
Distributions of interest S-12
Distributions of principal S-13
Losses S-15
Sensitivity of Certificates to prepayments S-17
Voting Rights S-25
Additional erisa considerations S-25
Legal investment S-26
Federal income tax consequences S-26
Plan of distribution S-26
Legal opinions S-27
Incorporation of additional sec filings S-27
CORE PROSPECTUS
Summary 2
General risk factors 3
Distributions on the Certificates 4
Delinquency, foreclosure and loss experience 11
The mortgage loans 12
Defective mortgage loans 15
Insurance and other credit support 16
Mortgage documents 17
Cmsi and its affiliates 17
Mortgage loan underwriting 18
Servicing 21
Default by cmsi 23
The Trustee 23
The pooling agreement 24
Book-entry and physical Certificates 26
Erisa considerations 27
Legal investment considerations 29
Taxation of Certificate holders 30
Taxation of the Trust 38
Legal aspects of mortgage loans 39
Use of proceeds 51
Additional information 51
Index 52
<PAGE>
Prospectus Supplement
October 21, 1999
SUMMARY
SERIES OVERVIEW--THE CERTIFICATES
Offered by this prospectus
<TABLE>
<CAPTION>
PRINCIPAL BALANCE EXPECTED
AT CUT OFF DATE INTEREST SPECIAL RATING
CLASS +/- UP TO 5% RATE FEATURES S&P/FITCH SUBORDINATED TO BOOK-ENTRY
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
A-1 $133,500,000 7.00% AAA/AAA N/A Yes
A-2 10,450,000 7.00% AAA/AAA N/A Yes
A-3 16,750,000 7.00% AAA/AAA N/A Yes
A-4 24,895,000 7.00% NAS AAA/AAA N/A Yes
A-5 13,585,000 7.00% Accrual AAA/AAA N/A Yes
A-6 14,040,000 7.50% AAA/AAA N/A Yes
A-7 3,510,000 5.00% AAA/AAA N/A Yes
A-8 5,225,000 7.00% AAA/AAA N/A Yes
A-9 14,025,000 7.00% AAA/AAA N/A Yes
A-10 1,766,836 0% PO strip AAAr/AAA N/A No
M 5,851,000 7.00% --/AA A No
B-1 2,116,000 7.00% --/A A, M No
B-2 1,120,000 7.00% --/BBB A, M, B-1 No
</TABLE>
Not offered by this prospectus
<TABLE>
<CAPTION>
PRINCIPAL BALANCE
AT CUT-OFF DATE,
CLASS +/- UP TO 5% INTEREST RATE SPECIAL FEATURES SUBORDINATED TO
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A-IO $202,047,751 (notional) Variable IO strip N/A
B-3 871,000 7.00% A, M, B-1, B-2
B-4 623,000 7.00% A, M, B-1, B-2, B-3
B-5 622,523 7.00% A, M, B-1, B-2, B-3, B-4
Residual N/A N/A Residual N/A
</TABLE>
S-3
<PAGE>
TRUSTEE The Bank of New York
101 Barclay Street, Floor 12W
New York, New York 10286
(212) 815-7166
PAYING AGENT, TRANSFER AGENT AND
CERTIFICATE REGISTRAR The Bank of New York
RELATIVE SIZE OF CLASSES Principal balance of
class or subclass as
percentage of principal
balance of all
Certificates at cut-off
Class date (the class percentage)
----- ---------------------------
A 94.50% to 96.50%
M 1.85% to 2.85%
B 1.65% to 2.65%
B-1 0.65% to 1.05%
B-2 0.25% to 0.65%
RATINGS The offered Certificates will not be
sold unless Standard & Poor's Ratings
Group (S&P) and/or Fitch IBCA, Inc.
(Fitch) have rated the offered
Certificates as shown above. The "r"
symbol in certain S&P ratings identifies
securities that S&P believes may
experience high volatility or high
variability in expected returns due to
non-credit risks. You should evaluate
these ratings independently from similar
ratings on other types of securities. A
rating is not a recommendation to buy,
sell or hold securities. S&P or Fitch
may revise or withdraw a rating at any
time.
DENOMINATIONS $1,000 and any whole dollar amount above
$1,000 except that one Certificate of
each such subclass may be in a different
denomination.
DISTRIBUTION DAYS 25th day (or, if that is not a
business day, the next business day) of
each month, beginning November 26, 1999.
LAST DISTRIBUTION DAY September 25, 2029, except that based on
assumptions described in "Sensitivity of
Certificates to prepayment--The
prepayment model," the last distribution
day for the class A-3 Certificates
should be no later than May 25, 2011.
CLEAN-UP CALL Permitted when principal balance of
the mortgage loans is below 5% of the
scheduled principal balance of the
mortgage loans as of the cut-off date.
LOSS LIMITS (APPROXIMATE) Special hazard: $2,987,861 (or
approximately 1.20% of
the initial aggregate
scheduled principal
balance of the mortgage
loans)
Fraud: $2,489,504 (1.00%)
Bankruptcy: $100,000 (0.04%)
PREPAYMENT RATE ASSUMED IN
STRUCTURING SERIES 250% of the prepayment model.
"MORTGAGE RELATED SECURITIES"
UNDER SMMEA Classes A and M.
RECORD DATE For a distribution day, the close
of business on the last business day of
the calendar month preceding that
distribution day.
CLOSING DATE October 28, 1999.
CONDITIONS TO CLOSING The Certificates offered by this
prospectus will not be sold unless the
Certificates in classes B-3, B-4 and B-5
(none of
S-4
<PAGE>
which are offered by this prospectus)
are sold on the closing date.
Credit Suisse First Boston Corporation
has agreed to purchase the offered
Certificates on the closing date,
subject to the satisfaction of customary
closing conditions. Also see "Ratings"
above.
SERIES OVERVIEW--THE MORTGAGE LOANS AT THE CUT-OFF DATE
CUT-OFF DATE October 1, 1999.
NUMBER OF MORTGAGE LOANS 698.
TYPES OF MORTGAGE LOANS Fixed rate one- to four-family
residential, of which
o at least 95% of the mortgaged
properties will be one-family
dwellings,
o no more than 15% of mortgaged
properties will be condominiums,
townhouses, rowhouses or
cooperative apartments,
o less than 5% of the mortgaged
properties will be investment
properties, and
o at least 95% of the mortgaged
properties are determined by CMSI
to be primary residences of
borrowers.
(Percentages are of scheduled principal
balance of mortgage loans.)
GEOGRAPHIC CONCENTRATION No more than
o 35% of the mortgaged properties
are in California and no more than
25% are in New York,
o 10% of the mortgaged properties
are in any one other state, and
o 5% of the mortgaged properties are
in any one ZIP code.
(Percentages are of scheduled principal
balance of mortgage loans.)
SCHEDULED PRINCIPAL BALANCE ON
CUT-OFF DATE $248,950,359 +/- up to 5%.
RANGE OF SCHEDULED PRINCIPAL o No more than 5% of the mortgage
BALANCES ON CUT-OFF DATE loans will have a scheduled
principal balance less than
$250,000.
o At least 80% of the mortgage loans
will have a scheduled principal
balance less than $500,000.
o No mortgage loan will have a
scheduled principal balance
greater than $1,500,000.
(Percentages are of scheduled principal
balance of mortgage loans.)
LOAN-TO-VALUE RATIOS At origination,
o no more than 15% of the mortgage
loans had a loan-to-value ratio
greater than 80%,
o no more than 5% of the mortgage
loans had a loan-to-value ratio
greater than 90%,
o none of the mortgage loans had a
loan-to-value ratio greater than
95%, and
o the weighted average loan-to-value
ratio of the mortgage loans was no
more than 77%.
(Percentages are of scheduled principal
balance of mortgage loans.)
S-5
<PAGE>
Mortgage loans for which additional
collateral (i.e., collateral other than
the mortgaged property) was considered
in calculating loan-to-value ratios
represent not more than 5% of the
mortgage loans by scheduled principal
balance. If the loan-to-value ratios for
these loans are calculated without
regard to the value of the additional
collateral, their weighted average
loan-to-value ratio is approximately
92%.
RANGE OF INTEREST RATES ON
MORTGAGE LOANS
(BEFORE DEDUCTION OF
SERVICING FEE) 6.125% to 8.75% per annum.
WEIGHTED AVERAGE MORTGAGE
INTEREST RATE (BEFORE
DEDUCTION OF SERVICING FEE) 7.526% per annum.
SERVICING FEE 0.25% per annum.
RANGE OF MATURITIES 17 to 30 years.
LATEST SCHEDULED MATURITY September 1, 2029.
WEIGHTED AVERAGE REMAINING TERM
TO MATURITY 355 months.
WEIGHTED AVERAGE ORIGINAL TERM
TO MATURITY 358 months.
PREMIUM MORTGAGE LOANS--I.E., Scheduled principal balance:
LOANS WITH NET LOAN RATES (INTEREST $202,047,751 (approximate).
RATE LESS SERVICING FEE) OF 7.00% Weighted average interest rate: 7.652%
OR MORE per annum (approximate).
Weighted average remaining term to
maturity: 356 months (approximate).
DISCOUNT MORTGAGE LOANS-- Scheduled principal balance: $46,902,608
I.E., LOANS WITH NET LOAN RATES (approximate).
LESS THAN 7.00% Weighted average interest rate: 6.986%
per annum (approximate).
Weighted average remaining term to
maturity: 354 months (approximate).
MORTGAGE LOANS ORIGINATED OR Citicorp Mortgage, Citi FSB, Citibank
ACQUIRED BY (originator only).
ORIGINATED FROM October 1, 1993 through September 1,
UNDERWRITING POLICIES 1999.
o At least 95% of the mortgage loans
were originated using loan
underwriting policies that
require, proof of income and
liquid assets and telephone
verification of employment, or are
refinanced mortgage loans
originated using alternative or
streamlined underwriting policies.
o No more than 5% of the mortgage
loans were orginated using a loan
underwriting policy that requires
verification of employment and may
require proof of liquid assets,
but does not require verification
of the prospective borrower's
income as stated on the loan
application.
o No more than 35% of the mortgage
loans will be refinanced mortgage
loans originated using alternative
or streamlined underwriting
policies.
(Percentages are of scheduled principal
balance of the mortgage loans.)
S-6
<PAGE>
DETAILED INFORMATION
The mortgage loans actually included in the Trust may differ from the preceding
description, but the differences will not be material. Within 15 days after the
closing date, CMSI will file a Form 8-K with the sec containing detailed
information on the mortgage loans actually in the Trust and other matters,
including
o years of origination,
o types of dwellings,
o principal balances,
o loan-to-value ratios at origination,
o mortgage interest rates,
o geographical distribution by state,
o the special hazard, fraud and bankruptcy loss limits,
o the aggregate initial principal balances of the class A, class M and class
B Certificates, and
o the subordination levels for classes A, M, B-1, B-2, B-3 and B-4.
SERIES RISK FACTORS
You should consider the following risk factors for this Series, as well as the
general risk factors for the Certificates discussed in the core prospectus,
before you purchase any Certificates.
LIMITED CREDIT ENHANCEMENT
Credit enhancement for the senior classes of Certificates is provided by the
subordination of other classes of Certificates. The amount of credit enhancement
provided by subordination for any class of Certificates will, however, be
limited and will decrease over the life of the transaction due to reductions of
the principal balances of the subordinated classes through the distribution of
principal and allocation of principal losses to them. Also, special hazard,
fraud and bankruptcy losses will only be allocated to the subordinated classes
up to specific dollar limits; once these limits are reached, such losses will be
allocated proportionally among all classes other than the class A-10
Certificates, which will absorb all such losses experienced by the hypothetical
PO loans. The class A-5 Certificates, which are accrual Certificates, will be
allocated principal losses on the basis of the lesser of their current or
initial principal balance.
GEOGRAPHIC CONCENTRATION
Approximately 30% of the total initial scheduled principal balance of the
mortgage loans in this Series are mortgage loans secured by mortgaged properties
located in California and approximately 22% are secured by mortgaged properties
located in New York. No other state contains mortgaged properties securing more
than 10% of the initial scheduled principal balance of the mortgage loans.
In recent years, California, the New York metropolitan area and several
other regions have experienced significant fluctuations in housing prices.
Weaker economic conditions and housing markets may result in a higher rate of
delinquencies and defaults by homeowners and in less proceeds being realized
upon liquidations of defaulted mortgage loans. Any concentration of mortgage
loans in such a region presents risk considerations in addition to those
generally present for similar mortgage-backed securities. In addition,
California, Florida and other regions have experienced natural disasters such as
earthquakes, fires, floods and hurricanes. These disasters may adversely affect
property values generally in the region, and may result in physical damage to
mortgaged properties located in such regions. Any direct damage to a mortgaged
property caused by such disasters, and any deterioration in housing prices or in
economic conditions in a region, may reduce the ability of homeowners to make
scheduled monthly payments on their mortgage loans. This in turn may increase
the likelihood and magnitude of delinquencies and losses on mortgage loans.
Losses on mortgage loans may adversely affect the yield to maturity on your
Certificates, especially if your Certificates are subordinated. In addition,
delinquencies on mortgage loans may increase the likelihood of foreclosures and
prepayments, which in turn may have an adverse effect on the yield to maturity
of your Certificates.
SUBORDINATION
Classes M and B are subordinated. Consequently, shortfalls in payments received
on the mortgage loans will result in shortfalls in distributions to the
subordinated classes, in the following order of priority:
S-7
<PAGE>
o Class M is subordinated to class A. Class M will therefore not receive a
distribution of interest or principal on a distribution day until class A
has received full distributions on that day.
o Class B-1 is subordinated to classes A and M. Class B-1 will therefore not
receive a distribution of interest or principal on a distribution day until
classes A and M have received full distributions on that day.
o Class B-2 is subordinated to classes A, M and B-1. Class B-2 will therefore
not receive a distribution of interest or principal on a distribution day
until classes A, M and B-1 have received full distributions on that day.
If a principal loss is allocated to a class, it reduces (by the amount of the
loss) the principal balance that can ultimately be distributed to that class.
Principal losses realized on mortgage loans are generally allocated to the most
subordinated class until its principal balance is reduced to zero, then to the
next most subordinated class until its principal balance is reduced to zero, and
so on through the subordinated classes. As a result, the ultimate distribution
to holders of the class M and the offered class B Certificates of their
principal balances depends upon the timing and the level of losses realized on
the mortgage loans and other shortfalls in payments on the mortgage loans.
Although some realized losses on mortgage loans may initially be allocated
to the class A-10 Certificates, these losses are likely to be allocated
ultimately to the subordinated classes. This is because the class A-10
Certificates will generally be reimbursed for principal losses out of amounts of
principal otherwise distributable to classes B and M.
See "Subordination" below.
RATINGS CONSIDERATIONS
The ratings of S&P on mortgage pass-through certificates address the likelihood
of the receipt by certificateholders of timely payments of interest and the
ultimate return of principal. S&P ratings take into consideration the credit
quality of the mortgage pool, including any credit support providers, structural
and legal aspects associated with the certificates, and the extent to which the
payment stream on the mortgage pool is adequate to make payments required under
the certificates. S&P's ratings on such certificates do not, however, constitute
a statement regarding frequency of prepayments on the mortgage loans. S&P's
rating does not address the possibility that investors may suffer a lower than
anticipated yield as a result of prepayments of the underlying mortgages. In
addition, in some structures a default on a mortgage is treated as a prepayment
and may have the same effect on yield as a prepayment.
The ratings assigned by Fitch to mortgage pass-through certificates address
the likelihood of the receipt by certificateholders of all distributions to
which such certificateholders are entitled. Fitch's ratings address the
structural and legal aspects associated with the certificates, including the
nature of the underlying mortgage loans. Fitch's ratings on mortgage
pass-through certificates do not represent any assessment of the likelihood or
rate of principal prepayments. The ratings do not address the possibility that
certificateholders might suffer a lower-than-anticipated yield.
RATIO STRIPPING
This Series uses a structuring technique known as "ratio stripping." Ratio
stripping converts a pool of mortgage loans with varying interest rates into
three hypothetical pools:
o a pool with a single fixed TARGET INTEREST RATE,
o a pool of principal-only mortgage loans (i.e., loans with a zero interest
rate), and
o a pool of interest-only mortgage loans.
This structure is achieved by dividing the loans into one group of PREMIUM
LOANS with net loan rates equal to or greater than the target rate, which for
this Series is 7.00%, and one group of DISCOUNT LOANS with net loan rates less
than the target rate. The NET LOAN RATE is the interest rate on the mortgage
loan minus the servicing fee. Then:
o For each premium loan, the interest rate in excess of the target rate is
"stripped off" from the loan and considered as a separate "interest-only"
mortgage loan. For example, a premium loan with a 7.50% net loan
rate--0.50% greater than the target rate--and a principal balance of
$100,000 will be divided into a TARGET-RATE LOAN with a 7.00% net loan rate
and a $100,000 principal balance and an INTEREST-ONLY (or IO) LOAN with a
$100,000 "notional" principal amount and a 0.50% net loan rate. The IO loan
will distribute 0.50% per annum
S-8
<PAGE>
on its notional principal balance, but will never distribute any principal.
o For each discount loan, a portion of the principal of the loan is stripped
off and applied to create a PRINCIPAL-ONLY (or PO) LOAN. This stripping-off
of principal is done to make the effective yield on the remaining loan
equal the target rate. For example, suppose a discount loan has a 5.60% net
loan rate and a $100,000 principal balance. Such a loan would be split into
a target-rate loan with a $80,000 principal balance (5.60% of $100,000
being the same as 7.00% of $80,000) and a $20,000 PO loan. The PO loan will
make scheduled distributions of principal equal to 20% of the scheduled
principal payments on the original discount loan (before stripping), but
will not distribute any interest.
In general, the principal amount of the target-rate loan can be calculated
by solving the equation:
(principal of discount loan) X (net interest rate on discount loan) =
(principal of target-rate loan) X (target rate).
The principal amount of the PO loan is then found by subtracting the principal
amount of the target-rate loan from the principal amount of the discount loan.
o Finally, the target-rate loans are grouped into a TARGET-RATE STRIP, the PO
loans are grouped into a PO STRIP, and the IO loans are grouped into an IO
STRIP.
Subject to the qualifications described below in this supplement,
o payments received on the PO strip will be directed to a PO class--for this
Series, class A-10,
o payments received on the IO strip will be directed to an IO class--for this
Series, class A-IO, and o payments received on the target-rate strip will be
directed to the remaining classes.
Those classes of Certificates that receive interest and/or principal
distributions from the target-rate strip--classes M and B, and all class A
subclasses EXCEPT the class A-10 and A-IO subclasses--will be the TARGET-RATE
classes.
If there is a prepayment on a discount loan, the prepayment is divided
between the target-rate loan and the PO loan in proportion to their principal
balances. Thus, a $10,000 prepayment on the $100,000 discount loan described
above would result in an $8,000 prepayment of the target-rate loan and a $2,000
prepayment of the PO loan. These prepayments on the target-rate and PO loans
will reduce the target-rate strip by the same $8,000 and the PO strip by the
same $2,000.
Prepayments on premium loans work a bit differently: the full prepayment is
applied both to reduce the principal balance of the target-rate loan and to
reduce the notional principal balance of the IO loan. For example, for the
$100,000 premium loan described above, a $10,000 prepayment will reduce both the
principal balance of the target-rate loan and the notional principal balance of
the IO loan to $90,000. The $10,000 prepayment on the premium loan would be
distributed solely to the target-rate classes.
Principal losses are handled similarly. A $10,000 principal loss on the
$100,000 discount loan described above would reduce the principal balance of the
target-rate loan (and the target-rate strip) by $8,000 and the principal balance
of the PO loan (and the PO strip) by $2,000. A $10,000 principal loss on the
premium loan described above will reduce both the principal balance of the
target-rate loan and the notional principal balance of the IO loan by $10,000
(and similarly for the strips of which the target-rate and IO loans are a part).
The target rate, IO and PO strips are groups of HYPOTHETICAL MORTGAGE
LOANS, not real mortgage loans. The obligations of a homeowner with a premium or
discount loan are not affected in any way by ratio stripping. Principal and
interest payments received on premium loans will not be segregated from
principal and interest payments received on discount loans, nor will funds to be
directed to target-rate classes be kept separately from funds to be directed to
other classes. Rather, the strips are ways of understanding how mortgage loan
payments are allocated among the different classes of the Series.
SUBORDINATION
DISTRIBUTION PRIORITIES
On each distribution day, cash in the Trust that is available for distribution
will be distributed in the following order of priority:
1 accrued interest on class A (including any past due interest),
2 principal on class A,
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<PAGE>
3 reimbursement to class A-10 of any principal losses allocated to it,
4 accrued interest on class M (including any past due interest),
5 principal on class M,
6 accrued interest on class B-1 (including any past due interest),
7 principal on class B-1,
8 accrued interest on class B-2 (including any past due interest),
9 principal on class B-2 and
10 accrued interest (including any past due interest) and principal on the
remaining class B subclasses, sequentially to classes B-3, B-4 and B-5.
Reimbursement to class A-10 under clause 3 above will only be made out of
amounts that would otherwise have been distributed as principal on class M and
the class B subclasses on that distribution day, with such amounts being
redirected from the most subordinated of those classes or subclasses before any
amount is redirected from the next most subordinated class or subclass.
PROTECTION AGAINST LOSSES AND SHORTFALLS
Subordination protects the senior classes against losses and shortfalls in
receipts of interest and principal on the mortgage loans caused by
o delinquent monthly payments that are not covered by an advance, and
o mortgage loans that have gone into default where the proceeds of insurance,
foreclosure sales and any other receipts do not cover the principal balance plus
accrued interest on the loans.
An interest loss or shortfall will result in an equal shortfall in the
distribution received by the most subordinated class. The general principle is
that a senior class (other than class A-10) will not experience a loss or a
shortfall in required distributions so long as there is a more subordinated
class outstanding. However, once the principal amounts of classes M and B are
reduced to zero, all credit enhancement from subordination will be gone. The
date on which this occurs is the subordination depletion date", "subordination
depletion date".
LOSSES AND SHORTFALLS THAT ARE NOT COVERED BY SUBORDINATION
There are four exceptions to the general principle that, on each distribution
day, a senior class (other than class A-10) will not experience a loss or
shortfall so long as on that distribution day a more subordinate class is
outstanding:
1 The benefits of subordination will not cover delinquencies and losses
resulting from certain extraordinary events, including
o hostile or warlike action in peace or war,
o the use of any nuclear weapon in peace or war, and
o insurrection, rebellion, revolution or civil war, or governmental action to
prevent such occurrences (but not including peacetime looting or rioting).
2 Class A-10 will not have the same senior status as the other class A
subclasses. Instead, class A-10 will have the right to be reimbursed out of
principal that otherwise would be distributed to classes M and B for principal
losses that are initially allocated to class A-10. Reimbursement will be made
from principal payable on that distribution day to the most subordinate class
until there is no more principal to be distributed to it, then from principal
payable to the next most subordinate class until there is no more principal to
be distributed to it, and so on. As a result, one or more class B subclasses
and, depending on the amount of the reimbursement, the class M Certificates may
not receive their anticipated payments of principal.
3 If a borrower prepays any principal during a month and does not also pay a
full month's accrued interest on the amount of the prepayment, there will be a
PREPAYMENT INTEREST SHORTFALL. If there is a prepayment interest shortfall on a
distribution day, CMSI will apply up to one-half of the servicing fee it would
be entitled to retain out of the scheduled principal and interest payments on
the mortgage loans due on the first day of the month (but not more than the
servicing fee it actually receives during the calendar month before the
distribution day) to reduce the shortfall. To the extent a net shortfall
remains, it will be allocated over all interest-bearing classes in proportion to
interest accrued.
4 Losses on mortgage loans include
o SPECIAL HAZARD LOSSES--that is, direct physical loss or damage from a cause
that is not an extraordinary event referred to in the first exception to
subordination listed above and is not covered by (a) a homeowner's, fire, flood
or extended coverage insurance policy required by the mortgage
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<PAGE>
loan or (b) hazard insurance on the mortgaged property that CMSI is required to
maintain,
o BANKRUPTCY LOSSES attributable to the actions of a bankruptcy court, including
a reduction of the principal balance or interest rate on a mortgage loan or an
extension of its maturity, and
o FRAUD LOSSES resulting from fraud committed by the borrower in obtaining the
mortgage loan.
Special hazard, bankruptcy and fraud losses are only covered by
subordination up to dollar limits specified by the rating agencies for each type
of loss. Once the limit for one of these types of losses is exceeded, that
portion of the loss allocable to the target-rate strip will be allocated among
the target-rate classes
o if it is a loss of interest, in proportion to their accrued interest, and
o if it is a loss of principal, in proportion to their principal balances (with
adjustments for accrual classes, as described in "Losses--Loss allocations"
below). The initial limits for special hazard, bankruptcy and fraud losses are
approximately:
o Special hazard: $2,987,861 (or 1.20% of the
initial aggregate scheduled
principal balance)
o Fraud: $2,489,504 (1.00%)
o Bankruptcy: $100,000 (0.04%)
Thereafter, the limit for each type of loss will be reduced by any losses of
that type, except that: o The special hazard loss limit can not at any time be
greater than the amount on the preceding anniversary of the cut-off date of the
greater of (1) 1% (or, if greater than 1%, the highest percentage of mortgage
loans by principal balance in any California ZIP code) of the scheduled
principal balance of the mortgage loans and (2) twice the largest scheduled
principal balance of any mortgage loan.
o After the first anniversary of the cut-off date, the bankruptcy loss limit
will be (1) the bankruptcy loss limit on the business day preceding the most
recent anniversary of the cut-off date minus (2) the aggregate amount of
bankruptcy losses since that anniversary.
o From the second through the fifth anniversary of the cut-off date, the fraud
loss limit will be (1) the lesser of (a) the fraud loss limit on the most recent
anniversary of the cut-off date and (b) 0.50% of the aggregate scheduled
principal balance of the mortgage loans on the most recent anniversary of the
cut-off date minus (2) the aggregate amount of fraud losses since that
anniversary. After the fifth anniversary of the cut-off date, the fraud loss
limit will be zero.
o The bankruptcy loss limit and the related coverage levels described above may
be reduced or modified if S&P and Fitch confirm in writing that the reduction or
modification will not adversely affect their then-current ratings of the
Certificates.
MAINTENANCE OF SUBORDINATION
Credit enhancement is provided to the Certificates through subordination. The
distribution priorities described under "Distribution priorities" above reflect
this subordination.
The degree of credit enhancement enjoyed by a class due to subordination
may be measured by that class's subordination level. A class's subordination
level is the sum of the class percentages of all classes that are subordinated
to that class. On the closing date, the following classes will have the
following approximate subordination levels:
Class A: 4.50% ($11,203,523)
Class M: 2.15% ($5,352,523)
Class B-1: 1.30% ($3,236,523)
Class B-2: 0.85% ($2,116,523)
Thus, those classes subordinate to class A will have an aggregate principal
balance on the closing date that is approximately 4.50% of the aggregate
principal balance of all the Certificates.
To preserve the class A target-rate subclasses' subordination level, for
five years after the first distribution day, all principal prepayments and other
unscheduled receipts on the target-rate loans will be distributed solely to the
class A target-rate subclasses. This disproportionate allocation will result in
a faster reduction of the class A target-rate subclasses' principal balances
than would have occurred if these distributions were made proportionately. As a
result, the class A target-rate subclasses' class percentage will decrease, and
the class A target-rate subclasses' subordination level will increase. After
five years, the percentage of prepayment principal and other receipts
distributed to the class A target-rate subclasses will gradually decline for a
further five years to a proportionate share.
Classes M, B-1, B-2, B-3 and B-4 are also entitled to maintain a degree of
credit enhance-
S-11
<PAGE>
ment by subordination throughout the life of the transaction: o If on a
distribution day, class M's subordination level is less than it was on the
closing date, then class B will not receive a principal distribution on that
distribution day, such distribution instead being added to the principal
distribution to class M.
o If class M's subordination level on the distribution day is at least equal to
what it was on the closing date, but class B-1's subordination level is lower
than it was on the closing date, then classes B-2 through B-5 will not receive a
principal distribution on that distribution day, such distribution instead being
added to the principal distribution to classes M and B-1 in proportion to their
principal balances.
o If class M's and class B-1's subordination levels on the distribution day are
at least equal to what they were on the closing date, but class B-2's
subordination level is lower than it was on the closing date, then classes B-3
through B-5 will not receive a principal distribution on that distribution day,
such distribution instead being added to the principal distribution to classes
M, B-1 and B-2 in proportion to their principal balances.
o Finally, if the subordination level of the class B-3 or B-4 subclasses is
lower than it was on the closing date, then the more subordinate subclasses will
not receive a principal distribution on that distribution day. Instead, such
distribution will be added to the principal distributions being made to class M
and the less subordinate class B subclasses in proportion to their principal
balances.
DISTRIBUTIONS OF INTEREST
Interest for the preceding calendar month on the principal balance of each class
(other than class A-IO) at the annual interest rate for the class shown in
"Series overview--The Certificates" above will be distributed on a distribution
day, subject to
o the distribution priorities described in "Subordination" above,
o a reduction to interest accrued for the class's proportionate share of (1) any
prepayment interest shortfalls that are not recovered from CMSI's servicing fee
and (2) the interest portion of any special hazard, bankruptcy and fraud losses
that exceed the limits for such losses, and
o the availability of sufficient cash.
No interest will be paid on the accrual class A-5 Certificates until either
the distribution day following the day on which the principal balance of the
class A-3 Certificates is reduced to zero or the subordination depletion date
has occurred. Prior to that time the amount of interest that would otherwise be
payable on the class A-5 Certificates will instead be paid as principal to the
class A-3 Certificates as described under "Distributions of
principal--Priorities in class A principal distributions" below. The principal
balance of the class A-5 Certificates will increase on each distribution day to
the extent accrued interest is not paid on that class.
The class A-IO Certificates will accrue interest on their notional amount
at a per annum rate equal to the weighted average of the net loan rates of the
premium loans minus 7.00%; the initial interest rate is expected to be
approximately 0.4018% per annum.
INTEREST SHORTFALLS
In the unlikely event that, on a distribution day before the subordination
depletion date, there is not enough available cash to distribute all interest
that the class A Certificates, the class M Certificates or the class B
subclasses are entitled to receive, any shortfall in accrued interest allocated
to such class or subclass will be carried forward to the next distribution day,
subject to the conditions for interest distributions described above.
On each distribution day, available cash for interest distributions to the
class A Certificates, class M Certificates and class B subclasses will first be
used to distribute accrued interest for the preceding month to such class or
subclass, and any cash remaining will be used to distribute any interest
shortfalls that have been carried forward. Distributions of interest shortfalls
to class A will be allocated among the class A subclasses in proportion to the
amount of interest shortfalls carried forward.
S-12
<PAGE>
No interest will accrue on any unpaid interest shortfalls.
DISTRIBUTIONS OF PRINCIPAL
SCHEDULED AND UNSCHEDULED PRINCIPAL PAYMENTS ON MORTGAGE LOANS
Principal received on mortgage loans is either scheduled principal or
unscheduled principal.
SCHEDULED PRINCIPAL for a mortgage loan on a distribution day consists of:
o the scheduled payment of principal due on the mortgage loan (including a
defaulted mortgage loan, other than a loan for which the related mortgaged
property has been acquired by the Trust) on the first day of the month in which
the distribution day occurs, whether or not actually received by CMSI, minus
o if the dollar limit for bankruptcy losses has been exceeded, any reduction in
the homeowner's scheduled principal payments due to bankruptcy proceedings.
UNSCHEDULED PRINCIPAL for a mortgage loan on a distribution day is the sum
of:
o all principal prepayments received by CMSI in the calendar month preceding the
distribution day,
o the principal balance of the mortgage loan if CMSI repurchased the loan during
the calendar month preceding the distribution day, as described in the core
prospectus under "Defective mortgage loans--Repurchase or substitution," and
o the net liquidation proceeds on the mortgage loan if it became a liquidated
loan during the calendar month preceding the distribution day, less the
principal portion of any unreimbursed advances previously made by CMSI or the
Trustee on the loan and the portion of the net liquidation proceeds allocable to
interest.
The SCHEDULED PRINCIPAL BALANCE of a mortgage loan on a distribution day is
the loan's actual principal balance, subject to the following adjustments:
o it takes into account the scheduled principal payment for that calendar month,
whether or not received;
o it does not take into account any unscheduled principal payments received in
that month; and
o it does not take into account scheduled principal payments for later months
even if already received.
The principal balance of each class of Certificates will be equal to the
initial principal balance of that class indicated on page S-3 minus all
principal payments paid on, and all principal losses allocated to, that class.
For class A-5, the principal balance will be increased by all interest accrued
but not paid on each distribution day. On each distribution day after the
payment of principal and the allocation of losses, the total principal balance
of all the Certificates must be equal to the scheduled principal balance of all
of the mortgage loans.
The principal balance of each class of Certificates will be reduced to the
extent that class is allocated principal losses on the mortgage loans as
described under "Subordination" above and "Losses" below. Generally, the more
subordinated a class, the more likely it is to be allocated losses.
PRINCIPAL DISTRIBUTIONS TO CLASS A-10
Class A-10 will be entitled to receive on each distribution day a principal
distribution equal to the scheduled and unscheduled principal payments on the
hypothetical mortgage loans in the PO strip. If there is not enough money
available to make a full principal distribution to class A-10 on a distribution
day, or if class A-10 realizes a principal loss on a hypothetical mortgage loan
in the PO strip that is covered by subordination, the class A-10 Certificates
will be reimbursed on that day for the amount of the shortfall and/or loss and
any shortfall or loss from a prior distribution day that is covered by
subordination and has not been reimbursed. Reimbursement will be made from
principal that would otherwise be distributed to classes M and B on that
distribution day, beginning with the principal that would be distributed to the
most subordinated class. Once there is no more principal available for
reimbursement from that class, reimbursement will be made from the next most
subordinated class, and so on until the shortfall or loss has been reimbursed or
there is no more principal distributable on that day to the class M and B
Certificates.
PRINCIPAL DISTRIBUTIONS TO TARGET-RATE CLASSES
The target-rate classes (that is, the class A subclasses, other than classes
A-10 and A-IO, the class M and the class B subclasses) will receive an aggregate
principal distribution on each distribution day equal to the scheduled and
unscheduled
S-13
<PAGE>
principal payments on the target-rate strip for that distribution day. The
distributions will be allocated, subject to subordination and priorities, as
follows:
o the class A target-rate subclasses, the class M and the class B subclasses
will each receive a percentage of the SCHEDULED principal distributions
proportionate to their principal balances. On the first distribution day, the
class A target-rate subclasses are expected to receive distributions of between
94.47% and 96.47% of scheduled principal payments on the target-rate strip. This
distribution to class A will be allocated among the class A target-rate
subclasses according to the priorities described in the next section.
o Until the fifth anniversary of the first distribution day, the class A
target-rate subclasses will receive principal distributions equal to 100% of all
UNSCHEDULED principal on the target-rate strip. From the fifth anniversary of
the first distribution day, class A target-rate subclasses will receive
principal distributions equal to the percentage set forth below (the class A
prepayment percentage") of all unscheduled principal on the target-rate strip.
Subject to the following sentence, any remaining unscheduled principal will be
distributed to the class M and the class B subclasses in proportion to their
principal balances.
o Some class B subclasses may not be entitled to a principal distribution on a
distribution day as described under "Subordination--Maintenance of
subordination" above.
<TABLE>
<CAPTION>
PERIOD (DATES INCLUSIVE) CLASS A PREPAYMENT PERCENTAGE
- ------------------------------------------------------------------------------------------------------
<S> <C>
November 2004-October 2005 Class A's class percentage plus 70% of the class A subordination level*
November 2005-October 2006 Class A's class percentage plus 60% of the class A subordination level*
November 2006-October 2007 Class A's class percentage plus 40% of the class A subordination level*
November 2007-October 2008 Class A's class percentage plus 20% of the class A subordination level*
November 2008 and after Class A's class percentage*
*For these purposes, class A's class percentage and subordination level are
calculated solely by reference to the target-rate classes.
- ------------------------------------------------------------------------------------------------------
</TABLE>
However, the class A prepayment percentage will be 100% for any distribution day
on which the ratio of the principal balance of the class A target-rate
subclasses to all target-rate classes is greater than it was on the closing
date.
In addition, no reduction of the class A prepayment percentage as described
in the preceding table will occur on a distribution day unless:
o on the first distribution day to which a reduction applies, either (1) the
scheduled principal balance of mortgage loans delinquent 60 days or more
(including, for this purpose, mortgage loans in foreclosure and real estate
owned by the Trust as a result of homeowner default), averaged over the last six
months, is less than 50% of the sum of the class M principal balance and the
class B principal balance averaged over the last six months, or (2) the
scheduled principal balance of such delinquent mortgage loans averaged over that
period, is less than 2% of the scheduled principal balance of all mortgage loans
averaged over that period, and
o cumulative realized losses on the mortgage loans are less than:
(a) for distribution days in November 2004 through October 2005, 30% of the
aggregate initial principal balance of class M and class B (THE ORIGINAL
SUBORDINATED AMOUNT),
(b) for distribution days in November 2005 through October 2006, 35% of the
original subordinated amount,
(c) for distribution days in November 2006 through October 2007, 40% of the
original subordinated amount,
(d) for distribution days in November 2007 through October 2008, 45% of the
original subordinated amount, and
(e) for distribution days in November 2008 and afterwards, 50% of the
original subordinated amount.
Principal distributed to a class A subclass will be distributed
proportionately among holders of Certificates of the subclass.
PRIORITIES IN CLASS A PRINCIPAL DISTRIBUTIONS
On each distribution day, before current accrued interest is paid on the accrual
class A-5 Certificates, the amount of interest that is added to the principal
balance of the class A-5 Certificates instead of being paid on the class A-5
Certificates will be applied to make principal payments to the class A-3
Certificates until their principal balance is
S-14
<PAGE>
reduced to zero, and then to the class A-5 Certificates.
On each distribution day before the subordination depletion date, principal
distributions to the class A-10 Certificates will be made based on the principal
paid from the PO strip until the principal balance of the class A-10
Certificates is reduced to zero.
On each distribution day before the subordination depletion date, principal
distributions to the class A target-rate subclasses will be allocated first to
the class A-4 Certificates according to the special rules set out in "Special
rules for class A-4" below. The remaining principal will be allocated in the
following sequence: FIRST, concurrently as follows:
o 87.3977086743% to the class A-1 Certificates until their principal balance is
reduced to zero, and
o 12.6022913257% sequentially
1 to the class A-9 Certificates until their principal balance is reduced
to zero, and
2 then to the class A-8 Certificates until their principal balance is
reduced to zero.
SECOND, concurrently to the class A-2, A-6 and A-7 Certificates, in proportion
to their principal balances, until their principal balances are reduced to zero.
This will result in concurrent distributions of approximately 37.3214285714% to
the class A-2 Certificates, 50.1428571429% to the class A-6 Certificates and
12.5357142857% to the class A-7 Certificates.
THIRD, sequentially as follows:
1 to the class A-3 Certificates until their principal balance is reduced to
zero, and
2 then to the class A-5 Certificates until their principal balance is reduced
to zero.
FOURTH, to the class A-4 Certificates until their principal balance is reduced
to zero.
Beginning on the subordination depletion date, cash available to the class
A-10 Certificates and the class A target-rate subclasses will be distributed
proportionally based on the amount of principal to which the class A-10
Certificates and the class A target-rate subclasses are entitled, without regard
to the priorities of distributions described above.
SPECIAL RULES FOR CLASS A-4
Class A-4 is a "non-accelerated senior" (NAS) class. So long as any other class
A subclass is outstanding, class A-4 will not receive a principal distribution
before November 2004. From November 2004 through October 2008, class A-4 will be
eligible to receive the percentage set forth below of its proportional share of
scheduled and unscheduled principal for the target-rate strip allocated to the
class A Certificates for that distribution day, based on the proportion of class
A-4 principal balance to the aggregate principal balances of all the class A
subclasses (other than class A-10), until its principal balance is reduced to
zero.
Distribution Day Percentage
- ---------------- ----------
November 2004 through October 2005 30%
November 2005 through October 2006 40%
November 2006 through October 2007 60%
November 2007 through October 2008 80%
November 2008 and thereafter 100%
Class A-4's weighted average life will be longer, and could be significantly
longer, than if it always received principal distributions proportional to its
principal balance.
CLEAN-UP CALL
CMSI may, at any time after the principal balance of the mortgage loans is less
than 5% of the initial scheduled principal balance, repurchase the mortgage
loans and any other property owned by the Trust. Certificate holders would then
receive a final distribution reducing the principal balance of their
Certificates to zero. The final distribution of principal on the Certificates
will be made according to the distribution priorities described above under
"Subordination--Distribution priorities" and "Distributions of principal." Some
Certificates may not receive a distribution equal to their principal balance
plus accrued interest if CMSI's purchase price is based in part on the fair
market value of the Trust's property.
CMSI may transfer its right to repurchase the mortgage loans to a third
party.
LOSSES
REALIZED LOSSES
If the net liquidation proceeds on a liquidated mortgage loan are less than the
loan's principal balance plus accrued interest at the mortgage loan interest
rate through the last day of the month in which the loan was liquidated, the
difference will
S-15
<PAGE>
be a REALIZED loss. Realized losses also include special hazard, fraud and
bankruptcy losses.
A mortgage loan becomes a LIQUIDATED LOAN if CMSI either
o determines that all recoverable liquidation and insurance proceeds have been
received, or
o accepts payment for the release of the mortgage of less than the principal
balance of the loan after determining that liquidation expenses would exceed the
difference between the cash portion of the payment and the principal balance.
Liquidation proceeds are amounts received or property acquired by CMSI in
liquidating a defaulted mortgage loan. In calculating a liquidated loan loss,
net liquidation proceeds (after reimbursement to CMSI and the Trustee for
unreimbursed advances and liquidation expenses on the mortgage loan) are applied
first to accrued interest and then to the principal balance of the loan.
LOSS ALLOCATIONS
The interest portion of a realized loss on a mortgage loan will reduce the
amount available to make payments to the classes of Certificates. The most
subordinate class will bear such realized losses as a result of the priorities
in distribution of cash actually available as described under
"Subordination--Distribution priorities" above.
Allocation to a class of part or all of the principal portion of a realized
loss on a mortgage loan will reduce the class's principal balance by the amount
of the loss allocated to the class. A principal loss can therefore not be
allocated to a class that exceeds the principal balance of the class.
Realized losses on hypothetical mortgage loans in the target-rate strip
that are covered by subordination will be allocated to the target-rate classes
in accordance with their subordination priorities. That is, losses will be
allocated first to class B-5 until its principal balance is reduced to zero,
then to class B-4 until its principal balance is reduced to zero, and so forth.
Realized losses that are not covered by subordination will be allocated among
the classes in accordance with their principal balances.
EXAMPLE 1: Suppose the principal balance of class B-5 is $1,000 and of
class B-4 is also $1,000. Then a realized $1,500 loss on the target-rate strip
that is covered by subordination would be allocated to class B-5 until its
principal balance is reduced to zero. The remaining $500 of the loss would then
be allocated to class B-4, reducing its principal balance to $500.
EXAMPLE 2: Same facts, except that the loss is a bankruptcy loss that
exceeds the limit for such losses. Since such an excess loss is not covered by
subordination, classes B-4 and B-5 will each be allocated their proportional
share of the loss, based on the principal balances of all the target-rate
classes.
Principal losses on the target-rate strip will be allocated among class A
(other than class A-10), class M and the class B subclasses in proportion to
their principal balances. Principal losses on the target-rate strip that are
allocated to class A will be further allocated to the class A target-rate
subclasses in proportion to their principal balances (or, for class A-5, its
initial principal balance, if lower). Principal losses allocated to a class will
be allocated to the Certificates in the class in proportion to their principal
balances.
Realized principal losses on the PO strip will be allocated to class A-10.
However, if the loss is covered by subordination, it will be reimbursed by
classes B and M, as described in "Distributions of principal--Principal
distributions to class A-10" above.
A bankruptcy loss will not be allocated so long as CMSI has notified the
Trustee in writing that CMSI is diligently pursuing any remedies that may exist
in connection with the representations and warranties made regarding the related
mortgage loan and either
o the mortgage loan is current on payments due, or
o delinquent payments of principal and interest on the mortgage loan, premiums
on any applicable standard hazard insurance policy and any escrow payments for
the mortgage loan are being advanced on a current basis by CMSI,
in each case without giving effect to any reduction in monthly payments on the
loan due to bankruptcy proceedings.
Prior to the subordination depletion date, the principal balance of the
most subordinate class will be reduced by the amount, if any, needed so that the
sum of the principal balances of the class A, class M and class B subclasses
equals the scheduled principal balances of the mortgage loans.
After the subordination depletion date, the principal balances of the class
A target-rate subclasses
S-16
<PAGE>
will be reduced so that the sum of the principal balances equals the principal
balance of the target-rate strip and the principal balance of class A-10 will be
reduced so that its principal balance equals the principal balance of the PO
strip.
RECOVERIES
Any recovery of principal on a mortgage loan that had previously been allocated
as a realized loss will be allocated to the classes in order of seniority,
beginning with the most senior class. The amount of all recoveries allocated to
a class will not, however, exceed the amount of principal losses previously
allocated to the class.
SENSITIVITY OF CERTIFICATES TO PREPAYMENTS
THE PREPAYMENT MODEL
As discussed in the core prospectus ("Distributions on the Certificates--Effect
of prepayments"), the rate at which mortgage loans are prepaid (including by
refinancing, repurchase or foreclosure) affects a Certificate's
o weighted average life, and
o for Certificates purchased at a premium or a discount, yield to maturity.
Prepayments on mortgage loans are commonly measured by a prepayment model.
A prepayment model is a set of assumptions about the rate at which homeowners
will prepay their mortgage loans. "Prepayment" includes refinancings,
liquidations and repurchases by CMSI. The model used in this prospectus assumes
that homeowners will prepay new mortgage loans at some multiple of
o 0.2% per annum of the principal balance of the mortgage loans in the first
month of the mortgage loans,
o an additional 0.2% per annum in each month thereafter (i.e., 0.4% per annum in
the second month, 0.6% per annum in the third month) until the 30th month, and
o beginning in the 30th month and in each month thereafter, 6.0% per annum.
If homeowners prepaid their mortgages at exactly these rates, we would say
that they were prepaying at 100% of the prepayment model. Similarly, we would
say that homeowners were prepaying at 200% of the prepayment model if they
prepaid their loans twice as fast as 100%--that is, 0.4% per annum in the first
month, 0.8% per annum in the second month, and so forth. If homeowners never
made a prepayment, they would be said to prepay at 0% of the prepayment model.
There is no assurance that prepayment of the mortgage loans will conform to
any level of the prepayment model. The rate of principal payments on pools of
mortgage loans is influenced by a variety of economic, geographic, social and
other factors, including the level of mortgage interest rates and the rate at
which homeowners sell their homes, refinance their mortgage loans or default on
their mortgage loans. In general, if prevailing interest rates fall
significantly below the interest rates on the mortgage loans, the mortgage loans
are more likely to prepay faster than if prevailing rates rise or remain level.
Conversely, if interest rates rise above the interest rates on the mortgage
loans, we would expect the rate of prepayment to decrease.
Other factors affecting prepayment of mortgage loans include changes in
homeowners' housing needs, job transfers, unemployment and homeowners' net
equity in the mortgaged properties. In addition, as homeowners move or default
on their mortgage loans, the houses are generally sold and the mortgage loans
prepaid, although some of the mortgage loans may be assumed by a new buyer.
Because the amount of principal payments on each class will depend on the
rate of repayment (including prepayments) of the mortgage loans, the date by
which the principal balance of any class is reduced to zero is likely to occur
earlier than the last scheduled distribution day of September 25, 2029. In
particular, assuming the structuring assumptions described below and that no
prepayments are made on the mortgage loans, the last scheduled distribution day
for the class A-3 Certificates should be no later than May 25, 2011.
The following tables of weighted average lives and yields to maturity have
been prepared using the following STRUCTURING ASSUMPTIONS:
o The mortgage loans and the classes of Certificates have the characteristics
set forth in "Summary--Series overview" above, without regard to any variation
or approximation provided for in that section.
S-17
<PAGE>
o Scheduled payments of principal and interest on the mortgage loans are
received in a timely manner.
o The discount mortgage loans have a weighted average original term to maturity
of 358 months, a weighted average remaining term to maturity of 354 months, a
gross weighted average interest rate of 6.9863078406% and an aggregate scheduled
principal balance of $46,902,608.00.
o The premium mortgage loans have a weighted average original term to maturity
of 358 months, a weighted average remaining term to maturity of 356 months, a
gross weighted average interest rate of 7.6517991647% and an aggregate scheduled
principal balance of $202,047,750.60.
O CMSI does not make a clean-up call.
O You purchase the Certificates on October 28, 1999.
o CMSI'S servicing fee is 0.25% per annum.
THE PREPAYMENT MODEL, THE STRUCTURING ASSUMPTIONS AND THE OTHER ASSUMPTIONS
DESCRIBED BELOW ARE MADE FOR ILLUSTRATIVE PURPOSES ONLY. IT IS HIGHLY UNLIKELY
THAT THE MORTGAGE LOANS WILL PREPAY AT A CONSTANT RATE UNTIL MATURITY. THE
CHARACTERISTICS OF THE ACTUAL MORTGAGE LOANS ARE ALSO LIKELY TO DIFFER FROM THE
STRUCTURING AND OTHER ASSUMPTIONS. AS A RESULT, THE ACTUAL PRINCIPAL BALANCES,
WEIGHTED AVERAGE LIVES AND PRE-TAX YIELDS OF THE CERTIFICATES ARE LIKELY TO
DIFFER FROM THOSE SHOWN IN THE TABLES IN THE FOLLOWING SUBSECTIONS OF THIS
"SENSITIVITY OF CERTIFICATES TO PREPAYMENT" SECTION, EVEN IF ALL OF THE MORTGAGE
LOANS PREPAY AT THE INDICATED PERCENTAGES OF THE PREPAYMENT MODEL. WE URGE YOU
TO CONSULT YOUR INVESTMENT ADVISOR AND TO MAKE YOUR INVESTMENT DECISION BASED ON
YOUR OWN DETERMINATION AS TO ANTICIPATED RATES OF PREPAYMENT UNDER A VARIETY OF
SCENARIOS AND THE SUITABILITY OF A CLASS OF CERTIFICATES TO YOUR INVESTMENT
OBJECTIVES.
WEIGHTED AVERAGE LIVES
Weighted average life refers to the average amount of time from the date a
Certificate is owned by you until its principal balance is reduced to zero. The
weighted average life of each class or subclass shown in the following tables is
determined by (1) multiplying the amount of each distribution of principal by
the number of years from October 28, 1999 to the related distribution day, (2)
adding the results and (3) dividing the sum by the initial principal balance of
the class or subclass.
S-18
<PAGE>
PRINCIPAL BALANCE AS PERCENT OF INITIAL PRINCIPAL BALANCE
<TABLE>
<CAPTION>
PERCENTAGE OF PREPAYMENT MODEL
-----------------------------------------------------------------------------------------------------
CLASS A-1 CERTIFICATES CLASS A-2 CERTIFICATES CLASS A-3 CERTIFICATES
-------------------------------- -------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Distribution day 0% 150% 250% 350% 500% 0% 150% 250% 350% 500% 0% 150% 250% 350% 500%
Initial 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100
October 25, 2000 99 94 91 89 84 100 100 100 100 100 94 94 94 94 94
October 25, 2001 97 83 74 65 53 100 100 100 100 100 88 88 88 88 88
October 25, 2002 95 69 53 38 18 100 100 100 100 100 81 81 81 81 81
October 25, 2003 93 56 35 16 0 100 100 100 100 64 74 74 74 74 74
October 25, 2004 91 44 19 0 0 100 100 100 95 0 66 66 66 66 20
October 25, 2005 89 34 7 0 0 100 100 100 32 0 58 58 58 58 0
October 25, 2006 87 25 0 0 0 100 100 89 0 0 49 49 49 27 0
October 25, 2007 85 18 0 0 0 100 100 50 0 0 39 39 39 0 0
October 25, 2008 83 11 0 0 0 100 100 21 0 0 29 29 29 0 0
October 25, 2009 80 6 0 0 0 100 100 0 0 0 18 18 17 0 0
October 25, 2010 77 1 0 0 0 100 100 0 0 0 6 6 0 0 0
October 25, 2011 74 0 0 0 0 100 81 0 0 0 0 0 0 0 0
October 25, 2012 71 0 0 0 0 100 59 0 0 0 0 0 0 0 0
October 25, 2013 68 0 0 0 0 100 39 0 0 0 0 0 0 0 0
October 25, 2014 64 0 0 0 0 100 21 0 0 0 0 0 0 0 0
October 25, 2015 60 0 0 0 0 100 5 0 0 0 0 0 0 0 0
October 25, 2016 56 0 0 0 0 100 0 0 0 0 0 0 0 0 0
October 25, 2017 51 0 0 0 0 100 0 0 0 0 0 0 0 0 0
October 25, 2018 46 0 0 0 0 100 0 0 0 0 0 0 0 0 0
October 25, 2019 41 0 0 0 0 100 0 0 0 0 0 0 0 0 0
October 25, 2020 35 0 0 0 0 100 0 0 0 0 0 0 0 0 0
October 25, 2021 29 0 0 0 0 100 0 0 0 0 0 0 0 0 0
October 25, 2022 22 0 0 0 0 100 0 0 0 0 0 0 0 0 0
October 25, 2023 15 0 0 0 0 100 0 0 0 0 0 0 0 0 0
October 25, 2024 7 0 0 0 0 100 0 0 0 0 0 0 0 0 0
October 25, 2025 0 0 0 0 0 91 0 0 0 0 0 0 0 0 0
October 25, 2026 0 0 0 0 0 42 0 0 0 0 0 0 0 0 0
October 25, 2027 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
October 25, 2028 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
October 25, 2029 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Weighted average
life (years) 16.68 4.93 3.32 2.62 2.07 26.86 13.57 8.15 5.76 4.18 6.55 6.55 6.44 5.41 4.17
</TABLE>
S-19
<PAGE>
PRINCIPAL BALANCE AS PERCENT OF INITIAL PRINCIPAL BALANCE
<TABLE>
<CAPTION>
PERCENTAGE OF PREPAYMENT MODEL
-----------------------------------------------------------------------------------------------------
CLASS A-4 CERTIFICATES CLASS A-5 CERTIFICATES CLASS A-6 CERTIFICATES
-------------------------------- -------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Distribution day 0% 150% 250% 350% 500% 0% 150% 250% 350% 500% 0% 150% 250% 350% 500%
Initial 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100
October 25, 2000 100 100 100 100 100 107 107 107 107 107 100 100 100 100 100
October 25, 2001 100 100 100 100 100 115 115 115 115 115 100 100 100 100 100
October 25, 2002 100 100 100 100 100 123 123 123 123 123 100 100 100 100 100
October 25, 2003 100 100 100 100 100 132 132 132 132 132 100 100 100 100 64
October 25, 2004 100 100 100 100 100 142 142 142 142 142 100 100 100 95 0
October 25, 2005 100 97 95 92 88 152 152 152 152 65 100 100 100 32 0
October 25, 2006 99 92 88 83 74 163 163 163 163 9 100 100 89 0 0
October 25, 2007 98 86 78 70 51 175 175 175 136 0 100 100 50 0 0
October 25, 2008 96 79 68 57 33 187 187 187 99 0 100 100 21 0 0
October 25, 2009 94 70 56 44 23 201 201 201 77 0 100 100 0 0 0
October 25, 2010 92 62 47 34 16 215 215 184 59 0 100 100 0 0 0
October 25, 2011 90 55 39 26 11 223 223 152 46 0 100 81 0 0 0
October 25, 2012 87 49 32 20 7 223 223 126 35 0 100 59 0 0 0
October 25, 2013 85 43 26 15 5 223 223 104 27 0 100 39 0 0 0
October 25, 2014 82 38 22 12 3 223 223 85 20 0 100 21 0 0 0
October 25, 2015 78 33 18 9 2 223 223 69 16 0 100 5 0 0 0
October 25, 2016 75 29 14 7 1 223 203 56 12 0 100 0 0 0 0
October 25, 2017 71 25 12 5 1 223 176 46 9 0 100 0 0 0 0
October 25, 2018 67 21 9 4 1 223 151 37 7 0 100 0 0 0 0
October 25, 2019 63 18 7 3 * 223 129 29 5 0 100 0 0 0 0
October 25, 2020 58 15 6 2 * 223 108 23 4 0 100 0 0 0 0
October 25, 2021 53 13 5 1 * 223 90 18 3 0 100 0 0 0 0
October 25, 2022 48 10 3 1 * 223 74 14 2 0 100 0 0 0 0
October 25, 2023 42 8 3 1 * 223 59 10 1 0 100 0 0 0 0
October 25, 2024 36 6 2 * * 223 46 7 1 0 100 0 0 0 0
October 25, 2025 29 5 1 * * 223 34 5 1 0 91 0 0 0 0
October 25, 2026 22 3 1 * * 223 23 3 * 0 42 0 0 0 0
October 25, 2027 14 2 * * * 199 14 2 * 0 0 0 0 0 0
October 25, 2028 6 1 * * * 81 5 1 * 0 0 0 0 0 0
October 25, 2029 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Weighted average
life (years) 21.40 14.14 11.82 10.38 8.69 28.77 21.51 15.26 10.88 6.05 26.86 13.57 8.15 5.76 4.18
</TABLE>
* Indicates that between zero and 0.5% of initial principal balance is
outstanding.
S-20
<PAGE>
PRINCIPAL BALANCE AS PERCENT OF INITIAL PRINCIPAL BALANCE
<TABLE>
<CAPTION>
PERCENTAGE OF PREPAYMENT MODEL
------------------------------------------------------------------------------------------------------
CLASS A-7 CERTIFICATES CLASS A-8 CERTIFICATES CLASS A-9 CERTIFICATES
-------------------------------- -------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Distribution day 0% 150% 250% 350% 500% 0% 150% 250% 350% 500% 0% 150% 250% 350% 500%
Initial 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100
October 25, 2000 100 100 100 100 100 100 100 100 100 100 98 92 88 84 78
October 25, 2001 100 100 100 100 100 100 100 100 100 100 96 77 64 52 35
October 25, 2002 100 100 100 100 100 100 100 100 100 66 94 57 35 15 0
October 25, 2003 100 100 100 100 64 100 100 100 60 0 91 39 10 0 0
October 25, 2004 100 100 100 95 0 100 100 70 0 0 88 23 0 0 0
October 25, 2005 100 100 100 32 0 100 100 27 0 0 85 9 0 0 0
October 25, 2006 100 100 89 0 0 100 92 0 0 0 82 0 0 0 0
October 25, 2007 100 100 50 0 0 100 64 0 0 0 79 0 0 0 0
October 25, 2008 100 100 21 0 0 100 41 0 0 0 76 0 0 0 0
October 25, 2009 100 100 0 0 0 100 21 0 0 0 73 0 0 0 0
October 25, 2010 100 100 0 0 0 100 3 0 0 0 69 0 0 0 0
October 25, 2011 100 81 0 0 0 100 0 0 0 0 65 0 0 0 0
October 25, 2012 100 59 0 0 0 100 0 0 0 0 60 0 0 0 0
October 25, 2013 100 39 0 0 0 100 0 0 0 0 56 0 0 0 0
October 25, 2014 100 21 0 0 0 100 0 0 0 0 51 0 0 0 0
October 25, 2015 100 5 0 0 0 100 0 0 0 0 45 0 0 0 0
October 25, 2016 100 0 0 0 0 100 0 0 0 0 39 0 0 0 0
October 25, 2017 100 0 0 0 0 100 0 0 0 0 33 0 0 0 0
October 25, 2018 100 0 0 0 0 100 0 0 0 0 26 0 0 0 0
October 25, 2019 100 0 0 0 0 100 0 0 0 0 19 0 0 0 0
October 25, 2020 100 0 0 0 0 100 0 0 0 0 11 0 0 0 0
October 25, 2021 100 0 0 0 0 100 0 0 0 0 2 0 0 0 0
October 25, 2022 100 0 0 0 0 81 0 0 0 0 0 0 0 0 0
October 25, 2023 100 0 0 0 0 54 0 0 0 0 0 0 0 0 0
October 25, 2024 100 0 0 0 0 25 0 0 0 0 0 0 0 0 0
October 25, 2025 91 0 0 0 0 0 0 0 0 0 0 0 0 0 0
October 25, 2026 42 0 0 0 0 0 0 0 0 0 0 0 0 0 0
October 25, 2027 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
October 25, 2028 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
October 25, 2029 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Weighted average
life (years) 26.86 13.57 8.15 5.76 4.18 24.14 8.76 5.53 4.19 3.20 13.90 3.50 2.50 2.03 1.65
</TABLE>
S-21
<PAGE>
PRINCIPAL BALANCE AS PERCENT OF INITIAL PRINCIPAL BALANCE
<TABLE>
<CAPTION>
PERCENTAGE OF PREPAYMENT MODEL
-----------------------------------------------------------------------------------------------
CLASS A-10 CERTIFICATES CLASS M, B-1 AND B-2 CERTIFICATES
--------------------------------------------- --------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Distribution day 0% 150% 250% 350% 500% 0% 150% 250% 350% 500%
Initial 100 100 100 100 100 100 100 100 100 100
October 25, 2000 99 96 94 92 88 99 99 99 99 99
October 25, 2001 98 88 82 76 68 98 98 98 98 98
October 25, 2002 97 79 69 60 47 97 97 97 97 97
October 25, 2003 95 71 58 46 32 96 96 96 96 96
October 25, 2004 94 64 48 36 22 94 94 94 94 94
October 25, 2005 92 57 41 28 15 93 91 89 87 84
October 25, 2006 91 51 34 22 11 92 86 82 78 72
October 25, 2007 89 46 28 17 7 90 80 73 66 57
October 25, 2008 87 41 24 13 5 88 72 63 54 42
October 25, 2009 85 36 20 10 3 86 65 52 42 29
October 25, 2010 83 32 16 8 2 84 57 43 32 20
October 25, 2011 81 28 13 6 2 82 51 36 25 13
October 25, 2012 78 25 11 5 1 80 45 30 19 9
October 25, 2013 76 22 9 3 1 77 40 24 15 6
October 25, 2014 73 19 7 3 * 75 35 20 11 4
October 25, 2015 70 17 6 2 * 72 30 16 8 3
October 25, 2016 67 15 5 2 * 69 27 13 6 2
October 25, 2017 63 13 4 1 * 65 23 11 5 1
October 25, 2018 59 11 3 1 * 62 20 9 4 1
October 25, 2019 56 9 3 1 * 58 17 7 3 1
October 25, 2020 51 8 2 * * 53 14 5 2 *
October 25, 2021 47 6 2 * * 49 12 4 1 *
October 25, 2022 42 5 1 * * 44 10 3 1 *
October 25, 2023 37 4 1 * * 39 8 2 1 *
October 25, 2024 31 3 1 * * 33 6 2 * *
October 25, 2025 25 2 * * * 27 4 1 * *
October 25, 2026 18 2 * * * 20 3 1 * *
October 25, 2027 11 1 * * * 13 2 * * *
October 25, 2028 4 * * * * 5 1 * * *
October 25, 2029 0 0 0 0 0 0 0 0 0 0
Weighted average
life (years) 19.51 9.06 6.35 4.85 3.59 19.94 13.33 11.24 9.96 8.79
</TABLE>
* Indicates that between zero and 0.5% of initial principal balance is
outstanding.
S-22
<PAGE>
YIELD TO MATURITY
If a Certificate is purchased at a discount from parity (as described below),
and the anticipated yield to maturity of the Certificate assumed faster
prepayments of the mortgage loans than are actually received, the actual yield
to maturity will generally be lower than anticipated. Conversely, if a
Certificate is purchased at a premium to parity, and the anticipated yield to
maturity of the Certificate assumed slower prepayments of the mortgage loans
than are actually received, the actual yield to maturity will generally be lower
than anticipated. PARITY is the price at which a Certificate will yield its
coupon, after giving effect to any payment delay.
The yield on the class A-10 Certificates, which are not entitled to receive
interest, will be very sensitive to prepayments on the hypothetical loans in the
PO strip. A slower than anticipated rate of prepayment on these loans will lower
their yield. Since the PO strip is derived from the discount loans, which accrue
interest at a rate below the target rate, it is historically more likely that
these loans will prepay more slowly than the premium loans.
The timing of changes in the rate of prepayments on the mortgage loans may
significantly affect an investor's actual yield to maturity, even if the average
rate of principal payments is consistent with the investor's expectations. In
general, the earlier a prepayment is received, the greater the effect on the
investor's yield to maturity. As a result, higher (or lower) than anticipated
principal payments during the period immediately following the closing date will
not be offset by the same amount of lower (or higher) principal payments in a
subsequent period.
CMSI intends to file additional yield tables and other computational
material for some classes of Certificates with the SEC in a report on Form 8-K.
See "Incorporation of additional sec filings" below. These tables and materials
were prepared by the underwriter at the request of some prospective investors,
based on assumptions provided by, and satisfying the special requirements of,
the investors. These assumptions may differ from the structuring assumptions and
may not be relevant to or appropriate for other investors.
SENSITIVITY OF THE CLASS A-10 CERTIFICATES
The following tables indicate sensitivity to various rates of prepayment on the
mortgage loans of the pre-tax yields to maturity on a corporate bond equivalent
basis of the class A-10 Certificates. In addition to the structuring assumptions
described in "The prepayment model" above, we have assumed that the class A-10
Certificates will be issued at a purchase price of approximately 55.00% of their
initial principal balance.
You should note that the only prepayments that affect the class A-10
Certificates are prepayments on the hypothetical loans in the PO strip.
PRE-TAX YIELDS
PERCENTAGES OF PREPAYMENT MODEL
CLASS 0% 150% 250% 350% 500%
- --------------------------------------------------------------------------------
Class A-10 3.258% 8.145% 11.891% 15.558% 20.795%
The pre-tax yields set forth in the preceding table (and in the tables below for
yields on offered class B Certificates) were calculated by
o determining the monthly discount rates that, when applied to the streams of
cash flows assumed to be paid on the Certificates, would make the discounted
present value of the assumed stream of cash flows equal to the assumed purchase
price on October 28, 1999 for each class of Certificates, and
o converting the monthly rates to corporate bond equivalent rates.
The calculation does not take into account the interest rates at which you
might reinvest distributions received by you on the Certificates.
YIELDS ON OFFERED CLASS B CERTIFICATES
If the principal balances of the unoffered class B Certificates are reduced to
zero, the yields to maturity on the offered class B Certificates will become
S-23
<PAGE>
extremely sensitive to the amount and timing of losses on the mortgage loans,
because the losses (other than losses that are not covered by subordination)
will be entirely allocated to class B-2 until its principal balance is reduced
to zero, and then to class B-1.
Defaults on the mortgage loans may be measured relative to a default
standard or model. The model used in the following tables, the standard default
assumption, or SDA, assumes constant default rates of
o 0.02% per annum of the principal balance in the first month of the mortgage
loans,
o an additional 0.02% per annum in each month from the second month until the
30th month,
o 0.60% per annum in each month from the 30th month through the 60th month,
o 0.0095% per annum less in each month from the 61st month through the 120th
month, and
o 0.03% per annum in each month after the 121st month.
Mortgage loans that conform to this assumption are said to be 100% SDA. A
default assumption of 50% SDA would assume default rates in each month that were
50% of the assumption, and similarly for 150% SDA and other assumptions. No
percentage SDA purports to be a historical description of default experience or
a prediction of the anticipated rate of default of any pool of mortgage loans.
The following yield tables have been prepared using the structuring
assumptions, except that we assumed that
o scheduled interest and principal payments on the mortgage loans are received
timely, except for mortgage loans on which defaults occur in accordance with the
indicated percentages of SDA,
o all defaulted loans are liquidated after exactly 12 months,
o there are realized losses of a percentage (referred to in the tables as the
"loss severity" percentage) of the principal balance at liquidation of the
liquidated mortgage loans,
o all realized losses are covered by subordination,
o the class A prepayment percentage is reduced only when permitted as described
above under "Distributions of principal--Principal distributions to target-rate
classes," and
o there are no interest shortfalls due to prepayments.
The pre-tax yields shown in the following tables were calculated in the same
manner as the pre-tax yields on the class A-10 Certificates, as described in the
preceding section. We assumed purchase prices of 93.25% of the initial principal
balance plus accrued interest for the class B-1 Certificates and 86.5% of the
initial principal balance plus accrued interest for the class B-2 Certificates.
PRE-TAX YIELD TO MATURITY OF CLASS B-1 CERTIFICATES
PREPAYMENT RATE
SDA PERCENTAGE 20% LOSS SEVERITY 40% LOSS SEVERITY
- --------------------------------------------------------------------------------
150% 250% 350% 150% 250% 350%
---- ---- ---- ---- ---- ----
50% 7.948% 8.027% 8.091% 7.958% 8.030% 8.092%
100% 7.960 8.032 8.093 7.948 8.039 8.100
150% 7.971 8.040 8.093 4.789 7.328 8.107
200% 7.967 8.040 8.102 (15.448) 1.893 5.406
PRE-TAX YIELD TO MATURITY OF CLASS B-2 CERTIFICATES
PREPAYMENT RATE
SDA PERCENTAGE 20% LOSS SEVERITY 40% LOSS SEVERITY
- --------------------------------------------------------------------------------
150% 250% 350% 150% 250% 350%
---- ---- ---- ---- ---- ----
50% 8.962% 9.130% 9.266% 8.980% 9.137% 9.268%
100% 8.983 9.140 9.270 4.057 7.768 9.284
150% 8.732 9.155 9.271 (22.453) (16.941) 1.058
200% 4.426 8.008 9.288 (33.165) (29.677) (25.157)
S-24
<PAGE>
The following table shows aggregate realized losses on all the Certificates
under the assumptions used in preparing the preceding tables, expressed as a
percentage of the aggregate initial principal balance of the Certificates:
AGGREGATE REALIZED LOSSES
PREPAYMENT RATE
SDA PERCENTAGE 20% LOSS SEVERITY 40% LOSS SEVERITY
- --------------------------------------------------------------------------------
150% 250% 350% 150% 250% 350%
---- ---- ---- ---- ---- ----
50% 0.278% 0.229% 0.191% 0.557% 0.457% 0.381%
100% 0.553 0.454 0.379 1.105 0.909 0.758
150% 0.823 0.677 0.565 1.646 1.354 1.131
200% 1.089 0.897 0.749 2.178 1.794 1.499
Investors should note that
o the loss severity percentage does not purport to be a historical description
of loss severity experience or a prediction of the anticipated loss severity of
any pool of mortgage loans, and
o even if subsequently cured, delinquencies may affect the timing of
distributions on the offered class B Certificates, because the entire amount of
the delinquencies would be borne by the offered class B subclasses in reverse
order of seniority before they would affect the class M and A Certificates.
VOTING RIGHTS
At all times,
o 98% of the voting rights of registered holders of the Certificates will be
allocated among the class A (other than the A-IO), M and B Certificates in
proportion to their principal balances, and
o 2% of such voting rights will be allocated to the class A-IO Certificates.
ADDITIONAL ERISA CONSIDERATIONS
The Department of Labor has granted the underwriter, Credit Suisse First Boston
(CSFB), an administrative exemption, Prohibited Transaction Exemption PTE 89-90,
from some of ERISA's prohibited transaction rules and some of the excise taxes
imposed by the Internal Revenue Code for the initial purchase, the holding and
the subsequent resale by ERISA plans of certificates in pass-through trusts that
meet the conditions and requirements of CSFB's exemption. CSFB'S exemption
should apply to the acquisition, holding, and resale of the offered class A
Certificates by an ERISA plan, provided that specified conditions are met,
including
o the acquisition of offered class A Certificates by an ERISA plan is on terms
that are at least as favorable to the ERISA plan as they would be in an
arm's-length transaction with an unrelated party,
o the rights and interests evidenced by the offered class A Certificates
acquired by the ERISA plan are not subordinated to the rights and interests
evidenced by other Certificates issued by the Trust,
o at the time the ERISA plan acquired the offered class A Certificates, S&P,
Fitch, Duff & Phelps Credit Rating Co. or Moody's Investors Service, Inc. rated
the Certificates in one of the three highest generic rating categories,
o the sum of all payments made to the underwriter in connection with the
distribution of the offered class A Certificates represents not more than
reasonable compensation for underwriting those Certificates, and
o the sum of all payments made to and retained by the servicer represents not
more than reasonable compensation for the services provided to the Trust by the
servicer and for reimbursement of the servicer's reasonable expenses in
providing those services.
CSFB's exemption does not apply to the acquisition and holding of offered
class A Certificates by ERISA plans sponsored by CMSI, the underwriter, the
Trustee or any of their affiliates. Moreover, the exemption provides relief from
certain self-dealing/conflict of interest prohibited transactions only if, among
other requirements
o an ERISA plan's investment in each class A subclass does not exceed 25% of the
outstanding amount of that subclass at the time it acquired that position, and
S-25
<PAGE>
o immediately after it acquired that position, no more than 25% of the assets of
an ERISA plan with respect to which the person who has discretionary authority
or renders advice are invested in certificates representing an interest in a
trust containing assets sold or serviced by the same person.
A governmental plan as defined in Section 3(32) of ERISA is not subject to
ERISA or Internal Revenue Code section 4975. However, a governmental plan may be
subject to similar federal, state or local laws. A fiduciary of a governmental
plan should make its own determination as to the need for the availability of
any exemptive relief under such similar laws.
Neither CSFB's exemption nor PTE 83-1 (discussed under "ERISA
considerations" in the core prospectus) applies to the acquisition or holding of
the class M Certificates or the offered class B Certificates, which are
subordinated to the class A Certificates.
LEGAL INVESTMENT
The offered class A and class M Certificates will be "mortgage related
securities" for purposes of the Secondary Mortgage Market Enhancement Act of
1984 (SMMEA), so long as they are rated in one of the two highest rating
categories by at least one nationally recognized statistical rating
organization. The offered class B Certificates will not be "mortgage related
securities" under SMMEA.
FEDERAL INCOME TAX CONSEQUENCES
The assets of the Trust will consist of mortgage loans. For federal income tax
purposes, an election will be made to treat the Trust as a REMIC. Each class of
the offered Certificates will be designated as a regular interest in the REMIC.
Offered Certificates will be treated as debt instruments for US federal income
tax purposes.
It is anticipated that
o the class A-5 Certificates will be issued with original issue discount (OID)
equal to the excess of the sum of all distributions of principal and interest
(whether current or accrued) expected to be received on those Certificates over
their issue price (including accrued interest from October 1, 1999).
o the class A-10 Certificates will be issued with OID equal to the excess of
their initial principal balance over their issue price.
o the class A-1, A-2, A-4, A-7, A-8, A-9, M, B-1 and B-2 Certificates will be
issued with OID equal to the excess of their initial principal balance (plus
three days of accrued interest) over their respective issue prices (including
accrued interest from October 1, 1999).
o the class A-3 and A-6 Certificates will be issued with DE MINIMIS OID.
The offered Certificates will be treated as
o "loans . . . secured by an interest in real property which is . . .
residential real property" and "regular interests in a REMIC" for domestic
building and loan associations,
o "real estate assets" for real estate investment trusts,
o "qualified mortgages" for another REMIC, and
o "permitted assets" for a financial asset securitization investment trust.
PLAN OF DISTRIBUTION
Subject to the terms and conditions of the underwriting agreement among
Citicorp, CMSI and CSFB, CSFB, as underwriter, will purchase the offered
Certificates from CMSI upon issuance. The underwriter has committed to purchase
all the offered Certificates if any Certificates are purchased. The underwriter
will distribute the offered Certificates from time to time in negotiated
transactions or otherwise at varying prices to be determined at the time of
sale.
Proceeds to CMSI will be approximately 96.28517% of the aggregate initial
principal balance of the class A Certificates, approximately 93.83500% of the
aggregate initial principal balance of the class M Certificates and
approximately 89.11372% of the aggregate initial principal balance of the
offered class B Certificates, plus accrued interest at the rate of 7.00% and
before deducting expenses of approximately $270,000 payable by CMSI, provided
that if the aggregate initial principal balance of the class A Certificates is
less than $237,746,836, the aggregate proceeds to CMSI (as a percentage of the
aggregate initial principal balance of the class A Certificates) will be
adjusted upwards by not more than 0.002% and if the aggregate initial principal
balance of the class A Certificates is greater than $237,746,836, the aggregate
proceeds to CMSI (stated as a percentage of the aggregate initial principal
balance of the class A Certificates) will be adjusted downwards
S-26
<PAGE>
by not more than 0.002%. In connection with the purchase and sale of the offered
Certificates, the underwriter may be deemed to have received compensation from
CMSI in the form of underwriting discounts.
Subject to the terms and conditions of the purchase agreement among
Citicorp, CMSI and CSFB, CSFB will purchase the unoffered class B Certificates
upon issuance. CSFB has committed to purchase all of the unoffered class B
Certificates if any offered Certificates are purchased. Csfb will offer the
unoffered class B Certificates through one or more negotiated transactions, as a
private placement to a limited number of institutional investors. The closing of
the sale of the unoffered class B Certificates is a condition to the closing of
the sale of the offered Certificates to the underwriter.
The underwriting agreement provides that CMSI and Citicorp will indemnify
the underwriter against certain civil liabilities under the Securities Act of
1933 or contribute to payments the underwriter may be required to make under
that Act.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE OFFERED
CERTIFICATES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
CMSI anticipates that Certificates will be sold primarily to institutional
investors. A purchaser of Certificates, including a dealer, may be deemed to be
an "underwriter" of those securities under the Securities Act of 1933 in making
re-offers and sales by it of Certificates. Certificate holders should consult
their legal advisers as to the consequences of being deemed an "underwriter."
Underwriters and agents participating in the distribution of the
Certificates, and their affiliates, may engage in transactions with and perform
services for Citicorp or its affiliates in the ordinary course of business.
LEGAL OPINIONS
Legal opinions will be delivered for CMSI and Citicorp by John R. Dye, as
Associate General Counsel--Corporate Law of Citigroup, and for the underwriter
by Cadwalader, Wickersham & Taft, New York, New York. Rona Daniels, Vice
President and Tax Counsel for Asset Securitization of Citibank, will deliver an
opinion on federal income tax matters for CMSI. Mr. Dye and Ms. Daniels each
owns or has the right to acquire less than 0.01% of the outstanding common stock
of Citigroup. Cadwalader, Wickersham & Taft, will deliver an opinion on ERISA
matters for CMSI.
INCORPORATION OF ADDITIONAL SEC FILINGS
The following documents filed with the SEC by CMSI under the Securities Exchange
Act of 1934 are incorporated by reference in this prospectus as of their filing
dates:
o Current Report on Form 8-K dated October 21, 1999, filed pursuant to Section
13, and
o all reports subsequently filed pursuant to sections 13(a), 13(c) or 15(d)
prior to the termination of the offering of the Certificates.
S-27
<PAGE>
INDEX
accrual classes, 2
adjusted issue price, 32
affiliated mortgage loans, 2
affiliated originators, 11
agency certificates, 3
annual interest rate, S-3
ARMS, 11
available for distribution, 6
balloon mortgage loan, 13
Bankruptcy Code, 46
bankruptcy losses, S-11
beneficial owner, 26
book-entry securities, 26
CERCLA, 49
Certificates, 2
Citi FSB, 11
Citicorp Mortgage, 18
class A prepayment percentage, S-14
class percentage, S-4
classes, 2
clean-up call, 9, S-4
closing date, S-5
CMSI, 2
Conference Committee Report, 31
cooperative apartment leases, 43
cooperative apartment loans, 12
CSFB, S-25
cut-off date, 4, S-5
debt burden, 20
denominations, S-4
determination day, 5
discount loans, S-8
distribution day, 5, S-4
DTC, 4
due-on-sale clause, 9
ERISA, 4, 27
ERISA plans, 27
events of default, 23
FDIC, 18
Fitch, S-4
fraud losses, S-11
Freddie Mac, 3
fully amortizing mortgage loan, 13
Garn-St Germain Act, 48
Ginnie Mae, 3
graduated-payment mortgage loan, 13
homeowner, 4
hypothetical mortgage loans, S-9
interest-only, 2
interest only loan, S-8
IO, 2
IO loan, S-8
IO strip, S-9
IRA, 27
IRS, 31
issue price, 31
last distribution day, S-4
liquidated loan, S-16
loanable value, 14
loan-to-value ratio, 14
losses, 9
market discount, 34
master servicer, 21
mortgage loans, 2
mortgaged properties, 2
mortgagee, 39
mortgagor, 39
NAS, S-15
net loan rate, S-8
non-U.S. person, 37
objective rate, 33
OID, 31, S-26
OID rules, 31
order of seniority, 10
order of subordination, 10
original issue discount, 31, S-26
original subordinated amount, S-14
outstanding, 9
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parity, S-23
PO, 2
PO loan, S-9
PO strip, S-9
pool insurance, 17
pooling agreement, 24
premium loans, S-8
prepayment charge, 7
prepayment interest shortfall, 8, S-10
prepayment model, 8, S-17
principal balance, 4, S-3
principal-only, 2
principal-only loan, S-9
PTE 83-1, 28
PTE 95-60, 28
qualified floating rate, 33
qualified inverse floating rate, 33
RCRA, 50
record date, S-4
realized loss, S-16
registered holder, 26
regular classes, 5
relocation loans, 15
REMIC, 3
residual class, 5
retail class Certificate, 33, S-8
scheduled payment, 4
scheduled principal, S-13
scheduled principal balance, S-13
SDA, S-24
SEC, 51
secured creditor exemption, 49
securities intermediaries, 26
securitized, 11
senior classes, 2, 9
Series, 2
servicer, 5
servicing fee, S-6
SMMEA, 29, S-32
special hazard insurance, 17
special hazard losses, S-10
S&P, S-4
standard default assumption, S-24
structuring assumptions, S-17
subordinated classes, 2, 9
subordination depletion date, S-10
subordination level, S-11
superliens, 49
target interest rate, S-8
target-rate classes, S-9
target-rate loan, S-8
target-rate strip, S-9
third-party mortgage loans, 2
Title V, 48
Trust, 2
Trustee, 2, S-4
UCC, 43
unscheduled principal, S-13
UST, 50
variable rate Certificates, 33
voluntary advance, 6
