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FURTHER SUPPLEMENT
(TO SUPPLEMENT DATED NOVEMBER 3, 1995 TO PROSPECTUS DATED JUNE 22, 1994 AND
PROSPECTUS SUPPLEMENT DATED JULY 22, 1994)
THE PRUDENTIAL HOME MORTGAGE SECURITIES COMPANY, INC. [LOGO]
SELLER
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1994-25
INTEREST PAYABLE MONTHLY, COMMENCING IN DECEMBER 1995
VARIABLE RATE1 CLASS A-9 CERTIFICATES
1ON THE CLASS A-9 NOTIONAL AMOUNT
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Prospective investors should be aware of the following:
(A)As of January 30, 1996, as a result of recent flooding (the "1996
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 "1996 Flood Counties") were declared federal
disaster areas eligible for federal disaster assistance. As of October 17, 1995,
49 Mortgage Loans having an aggregate Unpaid Principal Balance of approximately
$10,306,772 were secured by Mortgaged Properties that are located in the 1996
Flood Counties. In addition, other counties may have been and may become
affected by the 1996 Floods. Neither the Seller nor the 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 last paragraph under "Risk Factors and Special Considerations" set
forth on page S1-3 of the Supplement dated November 3, 1995 to the
Prospectus dated June 22, 1994 and the Prospectus Supplement dated July 22, 1994
is hereby replaced in its entirety with the following:
The Seller and the Servicer are each either a direct or indirect, wholly
owned subsidiary of Residential Services Corporation of America, which is a
direct, wholly owned subsidiary of The 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 the Servicer substantially all of its assets and businesses, other
than certain mortgage loans and the Servicer'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 the Mortgage Loans in the
Trust Estate, and certain other mortgage servicing rights (all such servicing
rights collectively, the "Retained Servicing"). It is the present intention of
the Servicer 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 order to assure the performance of the Servicer's obligations as servicer
under the Pooling and Servicing Agreement as well as under other pooling and
servicing agreements pursuant to which various series of the Seller's mortgage
pass-through certificates were issued and other agreements pursuant to which the
Servicer 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 the Servicer 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"), the Servicer, Prudential Insurance and
Norwest intend to enter into the following arrangements:
1. SUBSERVICING AGREEMENT. The Servicer, Prudential Insurance and Norwest
Mortgage will enter into a subservicing agreement (the "Subservicing
Agreement"), pursuant to which the Servicer will delegate to Norwest Mortgage,
and Norwest Mortgage will agree to perform, all of the Servicer's duties and
obligations as mortgage loan servicer under the Pooling and Servicing Agreement
and each Servicing Agreement and Other Servicing Agreement, other than the
Servicer's duties with respect to the administration and disposition of real
estate acquired upon foreclosure, which latter duties will remain the
responsibility of the Servicer with the particular functions to be delegated by
the Servicer to Prudential Asset Recovery, Inc., an affiliate of the Seller, the
Servicer, SASI and Prudential Insurance, or other third party contractors. With
respect to the Series 1994-25 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 Pooling
and Servicing Agreement, and foreclosure or other realization activities in
connection with defaulted Mortgage Loans.
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[LOGO]
January 31, 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 the Servicer
under the Pooling and 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. The Servicer
will be obligated to reimburse Norwest Mortgage for the amount of any such
advances, plus interest, from its own funds. The Servicer will remain obligated
under the Pooling and 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, the Servicer will enter into a Loan Agreement with
Prudential Funding Corporation, an affiliate of the Seller, the Servicer, SASI
and Prudential Insurance ("Funding"), pursuant to which Funding will provide the
Servicer 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 the Servicer
under the Pooling and Servicing Agreement and Servicing Agreements. Although the
Servicer 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 the
Servicer will have sufficient other assets, to ensure that all required advances
will be made.
The Servicer will pay Norwest Mortgage a portion of the Servicer's servicing
compensation under the Pooling and 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 the
Servicer, at its option, provided that the Servicer 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 the Servicer,
from time to time, with respect to any Mortgage Loans as to which the Servicer
arranges to sell the Retained Servicing.
2. CERTIFICATE ADMINISTRATION AGREEMENT. The Servicer and Norwest Bank
will enter into an agreement (the "Certificate Administration Agreement"),
pursuant to which the Servicer will delegate to Norwest Bank, and Norwest Bank
will agree to perform, all of the Servicer's obligations with respect to
administrative and reporting functions under the Pooling and Servicing
Agreement. Such duties include calculation of distributions, preparation and
filing of tax returns, preparation of reports to investors and preparation and
filing of periodic reports under the Securities Exchange Act of 1934, as
amended.
The Subservicing Agreement and the Certificate Administration Agreement will
collectively provide for the delegation of substantially all of the Servicer's
duties and obligations under the Pooling and Servicing Agreement. While the
Pooling and Servicing Agreement provides that the Servicer 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 the
Servicer 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 the Servicer
pursuant to an agreement under which the Servicer is required to repurchase or
substitute for any such Mortgage Loan so repurchased or substituted for by the
Seller. Although after the Sale Date the Servicer will continue to own the
Retained Servicing, the Servicer 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 the Servicer 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 Mortgage Loan subserviced pursuant to the Subservicing Agreement, Prudential
Insurance will agree in the Subservicing Agreement to provide the funds to
repurchase such Mortgage Loan.
According to information supplied by Norwest Mortgage, at December 31, 1995,
Norwest Mortgage was the nation's largest mortgage originator and had a
servicing portfolio of more than $107 billion. In 1995, Norwest Mortgage
originated over $33 billion of residential mortgage loans. Headquartered in Des
Moines, Iowa, Norwest Mortgage has more than 700 loan production offices in all
50 states.
