<PAGE>
SUPPLEMENT
(TO PROSPECTUS SUPPLEMENT DATED JANUARY 16, 1996 AND PROSPECTUS DATED JANUARY
16, 1996)
$178,210,201 (APPROXIMATE)
THE PRUDENTIAL HOME MORTGAGE SECURITIES COMPANY, INC.
SELLER
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1996-1
PRINCIPAL AND INTEREST PAYABLE MONTHLY, COMMENCING IN FEBRUARY 1996
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Prospective investors should be aware of the following:
(A) As of January 29, 1995, as a result of recent flooding (the "Floods"),
all counties in the Commonwealth of Pennsylvania, all counties in the State of
Maryland, 21 counties in the State of West Virginia, 11 counties in the State of
New York, 6 counties in the State of Ohio and 5 counties in the Commonwealth of
Virginia (the "Flood Counties") were declared federal disaster areas eligible
for federal disaster assistance. As of the date of this Supplement, 49 Mortgage
Loans with a current aggregate unpaid principal balance of approximately
$14,046,036 were secured by Mortgaged Properties that are located in the Flood
Counties. In addition, other counties may have been and may become affected by
the Floods and such other counties may ultimately be declared federal disaster
areas. Neither the Company, PHMC nor any Other Servicer has undertaken the
physical inspection of any Mortgaged Properties. As a result, there can be no
assurance that material damage to any Mortgaged Property in the affected region
has not occurred.
(B) The paragraph captioned "Recent Developments" under "Risk Factors and
Special Considerations" set forth on page S-24 of the Prospectus Supplement
dated January 16, 1996 to the Prospectus dated January 16, 1996 is hereby
replaced in its entirety with the following:
The Seller, SASCOR and PHMC are each either a direct or indirect, wholly
owned subsidiary of Residential Services Corporation of America, which is a
direct, wholly owned subsidiary of Prudential Insurance Company of America, a
mutual insurance company organized under the laws of the State of New Jersey
("Prudential Insurance"). On January 29, 1996, Prudential Insurance announced
that it had entered into a definitive agreement (the "Sale Agreement") to sell a
substantial portion of its residential mortgage operations to Norwest Mortgage,
Inc., a California corporation ("Norwest Mortgage"), and Norwest Bank Minnesota
National Association, a national banking association ("Norwest Bank" and,
collectively with Norwest Mortgage, "Norwest"). In connection therewith, on the
closing date specified pursuant to the Sale Agreement (the "Sale Date"), which
is currently expected to be on or about April 30, 1996, Norwest Mortgage will
acquire from PHMC substantially all of its assets and businesses, other than
certain mortgage loans and PHMC's right to service mortgage loans underlying
series of mortgage pass-through certificates representing interests in trusts
formed by the Seller or by Securitized Asset Sales, Inc., an affiliate of the
Seller and the Servicer ("SASI"), including certain of the Mortgage Loans in the
Trust Estate (the "PHMC Serviced Mortgage Loans"), and certain other mortgage
servicing rights (all such servicing rights collectively, the "Retained
Servicing"). It is the present intention of PHMC to sell the Retained Servicing,
from time to time as market conditions warrant, in one or more transactions to
one or more purchasers, which may include Norwest Mortgage, and to effectively
exit the mortgage loan origination and servicing business as of the Sale Date.
In addition, pursuant to the Sale Agreement, Norwest Bank will also acquire on
the Sale Date substantially all of the assets of SASCOR.
In order to assure the performance of PHMC's obligations as servicer under
the PHMC Servicing Agreement as well as under pooling and servicing agreements
pursuant to which the various series of the Seller's mortgage pass-through
certificates were issued and other agreements pursuant to which PHMC performs
Retained Servicing with respect to mortgage loans underlying series of mortgage
pass-through certificates representing interests in trusts formed by the Seller
or SASI (each, a "Servicing Agreement") and under each other agreement pursuant
to which PHMC performs Retained Servicing with respect to mortgage loans not
underlying series of mortgage pass-through certificates representing interests
in trusts formed by the Seller or SASI (each, an "Other Servicing Agreement"),
PHMC, Prudential Insurance and Norwest intend to enter into a subservicing
agreement (the "Subservicing Agreement"), pursuant to which PHMC will delegate
to Norwest Mortgage, and Norwest Mortgage will agree to perform, all of PHMC's
duties and obligations as mortgage loan servicer under the PHMC Servicing
Agreement and each Servicing Agreement and Other Servicing Agreement, other than
PHMC's duties with respect to the administration and disposition of real estate
acquired upon foreclosure which latter duties will remain the responsibility of
PHMC, with the particular functions to be delegated by PHMC to Prudential Asset
Recovery, Inc. or other third party contractors. With respect to the Series
1996-1 Certificates, such duties include collection of mortgage payments,
maintenance of tax and insurance escrows, advancing for borrower delinquencies
and unpaid taxes, to the extent required by the PHMC Servicing Agreement and
foreclosure or other realization activities in connection with defaulted PHMC
Serviced Mortgage Loans.
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MORGAN STANLEY & CO.
Incorporated
January 29, 1996
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(CONTINUED FROM PREVIOUS PAGE)
Under the Subservicing Agreement, Norwest Mortgage will be obligated to make
any principal and interest or other advances required to be made by PHMC under
the PHMC Servicing Agreement as well as under each Servicing Agreement or Other
Servicing Agreement, provided that the aggregate unreimbursed amount of such
advances at any time does not exceed $100 million. PHMC will be obligated to
reimburse Norwest Mortgage for the amount of any such advances, plus interest,
from its own funds. PHMC will remain obligated under the PHMC Servicing
Agreement and each Servicing Agreement and Other Servicing Agreement for all
required advances which are not made by Norwest Mortgage for any reason. In
order to provide for its obligation to make advances after the Sale Date, PHMC
will enter into a Loan Agreement with Prudential Funding Corporation, an
affiliate of the Seller, PHMC and Prudential Insurance ("Funding"), pursuant to
which Funding will provide PHMC with a committed borrowing line (the "Loan
Facility") in an amount required by each rating agency which has assigned
ratings to mortgage pass-through certificates representing interests in trusts
formed by the Seller or SASI, for the sole purpose of supporting advances
required of PHMC under the PHMC Servicing Agreement and Servicing Agreements.
Although PHMC expects that the combination of Norwest Mortgage's advance
obligation under the Subservicing Agreement and the Loan Facility will be
adequate to provide for the continuation of all such advances, there can be no
assurance that such mechanisms will be sufficient, or that after the Sale Date
PHMC will have sufficient other assets, to ensure that all required advances
will be made.
PHMC will pay Norwest Mortgage a portion of PHMC's servicing compensation
under the PHMC Servicing Agreement for its activities as subservicer. The
Subservicing Agreement will have an initial term of five years from the Sale
Date and may be extended for consecutive three year terms by PHMC, at its
option, provided that PHMC and Norwest Mortgage agree, in the exercise of good
faith, on the subservicing compensation for each such renewal term. The
Subservicing Agreement will be terminable by PHMC, from time to time, with
respect to any Mortgage Loans as to which PHMC arranges to sell the Retained
Servicing.
The Subservicing Agreement will provide for the delegation of substantially
all of PHMC's duties and obligations under the PHMC Servicing Agreement. While
the PHMC Servicing Agreement provides that PHMC will remain liable for its
obligations thereunder until the related Retained Servicing is transferred in
the manner permitted thereby, from and after the Sale Date PHMC is not expected
to have any servicing capability or employees with which to perform such
obligations.
Under the Pooling and Servicing Agreement, the Seller is required, with
respect to any Mortgage Loan found to have defective documentation or in respect
of which the Seller has breached a representation or warranty, either to
repurchase such Mortgage Loan or to substitute a new mortgage loan therefor.
Each such Mortgage Loan was, in turn, acquired by the Seller from PHMC pursuant
to an agreement under which PHMC is required to repurchase or substitute for any
such Mortgage Loan so repurchased or substituted for by the Seller. Although
after the Sale Date PHMC will continue to own the Retained Servicing, PHMC
intends to sell the Retained Servicing as expeditiously as market conditions
permit. Accordingly, there can be no assurance that at any time after the Sale
Date PHMC will have any material assets with which to satisfy such obligations
to the Seller. In such event, the Seller would be unable to fulfill its
repurchase or substitution obligations under the Pooling and Servicing
Agreement. However with respect to any PHMC Serviced Mortgage Loan subserviced
pursuant to the Subservicing Agreement, Prudential Insurance will agree in the
Subservicing Agreement to provide the funds to repurchase such PHMC Serviced
Mortgage Loan.
At December 31, 1995, Norwest Mortgage, the nation's largest mortgage
company, had originated $33.9 billion in mortgage loans and had a servicing
portfolio of more than $107 billion. Headquartered in Des Moines, Iowa, Norwest
Mortgage has more than 700 stores in all 50 states.
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