<PAGE>
SUPPLEMENT
(To Prospectus dated May 19, 1992 and Prospectus Supplement dated September 1,
1992)
THE PRUDENTIAL HOME MORTGAGE SECURITIES COMPANY, INC.
[LOGO OF PRUDENTIAL HOME
MORTGAGE SECURITY COMPANY,
INC. APPEARS HERE]
SELLER
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1992-32
PRINCIPAL AND INTEREST PAYABLE MONTHLY, COMMENCING IN SEPTEMBER 1997
VARIABLE RATE/1/ CLASS A-10 CERTIFICATES
/1/ ON THE CLASS A-10 NOTIONAL AMOUNT
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The Series 1992-32 Mortgage Pass-Through Certificates (the "Series 1992-32
Certificates") are the Series 1992-32 Certificates described in the
accompanying Prospectus Supplement dated September 1, 1992 (the "Prospectus
Supplement") and the accompanying Prospectus dated May 19, 1992 (the
"Prospectus"). The Series 1992-32 Certificates consist of one class of senior
certificates (the "Class A Certificates") and one class of subordinated
certificates (the "Class B Certificates"). The Class A Certificates consist of
twelve subclasses (each a "Subclass") of Certificates designated as the Class
A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6, Class A-7, Class A-
8, Class A-9, Class A-10, Class A-R and Class A-LR Certificates. The Class B
Certificates are not divided into subclasses. ONLY THE CLASS A-10 CERTIFICATES
ARE BEING OFFERED HEREBY. The Series 1992-32 Certificates evidence in the
aggregate the entire beneficial ownership interest in a trust fund (the "Trust
Estate") established by The Prudential Home Mortgage Securities Company, Inc.
(the "Seller") and consisting of a pool of fixed interest rate, conventional,
monthly pay, fully amortizing, one- to four-family, residential first mortgage
loans having original terms to stated maturity of approximately 30 years (the
"Mortgage Loans"), together with certain related property. The Mortage Loans
consist of mortgage loans originated in connection with the relocation of
employees of various corporate employers that participated in the relocation
program of The Prudential Home Mortgage Company, Inc. ("PHMC") and of various
non-participant employers ("Relocation Mortgage Loans"). See "Description of
the Mortgage Loans" herein and in the Prospectus Supplement. From the date of
the initial issuance of the Series 1992-32 Certificates until May 7, 1996, the
Mortgage Loans were serviced by PHMC. From May 7, 1996 until May 30, 1997, PHMC
continued to be the servicer of the Mortgage Loans under the Pooling and
Servicing Agreement, but the entity performing the actual servicing of the
Mortgage Loans was Norwest Mortgage, Inc. ("Norwest Mortgage"). On May 30,
1997, the servicing of the Mortgage Loans under the Pooling and Servicing
Agreement was sold to Citicorp Mortgage, Inc. (in its capacity as servicer, the
"Servicer," otherwise "CMI"), and although, as of the date of this Supplement,
Norwest Mortgage continues to subservice the Mortgage Loans, it is anticipated
that as a result of the sale, Norwest Mortgage will cease to subservice and CMI
will begin to service the Mortgage Loans some months hereafter. See "Risk
Factors--Recent Developments--Sale of the Servicing" herein.
PROSPECTIVE INVESTORS IN THE CLASS A-10 CERTIFICATES SHOULD CONSIDER THE
FACTORS DISCUSSED UNDER "RISK FACTORS" HEREIN BEGINNING ON PAGE S1-3.
The credit enhancement for the Series 1992-32 Certificates is provided through
the use of a "shifting interest" type subordination, which has the effect of
allocating all or a disproportionate amount of principal prepayments after the
date of the initial issuance of the Series 1992-32 Certificates and other
unscheduled receipts of principal to the Class A Certificates for at least nine
years beginning on the first Distribution Date. See "Summary Information--
Credit Enhancement" and "--Effects of Prepayments on Investment Expectations,"
"Description of the Certificates" and "Prepayment and Yield Considerations" in
the Prospectus Supplement.
THE YIELD TO MATURITY OF THE CLASS A-10 CERTIFICATES WILL BE HIGHLY SENSITIVE
TO THE RATE AND TIMING OF PRINCIPAL PAYMENTS (INCLUDING PREPAYMENTS) ON THE
MORTGAGE LOANS, WHICH MAY BE PREPAID AT ANY TIME WITHOUT PENALTY. INVESTORS
SHOULD CONSIDER THE ASSOCIATED RISKS THAT A FASTER THAN ANTICIPATED RATE OF
PRINCIPAL PAYMENTS (INCLUDING PREPAYMENTS) ON THE MORTGAGE LOANS, PARTICULARLY
THOSE MORTGAGE LOANS WITH HIGHER RATES OF INTEREST, COULD RESULT IN AN ACTUAL
YIELD THAT IS LOWER THAN ANTICIPATED AND COULD RESULT IN THE FAILURE OF
INVESTORS TO FULLY RECOVER THEIR INITIAL INVESTMENTS. See "Risk Factors--Yield
Considerations" and "Sensitivity of the Pre-Tax Yield to Maturity and Weighted
Average Life of the Class A-10 Certificates" herein and "Description of the
Certificates--Principal (including Prepayments)" and "Prepayment and Yield
Considerations" in the Prospectus Supplement and in the Prospectus.
(continued on next page)
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THESE SECURITIES DO NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF THE PRUDENTIAL
HOME MORTGAGE SECURITIES COMPANY, INC. OR ANY AFFILIATE THEREOF. NEITHER THESE
SECURITIES NOR THE UNDERLYING MORTGAGE LOANS WILL BE INSURED OR GUARANTEED BY
ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS SUPPLEMENT, THE PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------------
The Class A-10 Certificates will be purchased from the Seller by Salomon
Brothers Inc (the "Underwriter"), and will be offered by the Underwriter and
also by Lazard Freres & Co. LLC (the "Dealer") from time to time in negotiated
transactions or otherwise at varying prices to be determined at the time of
sale. Proceeds to the Seller are expected to be approximately 1.15% of the Pool
Scheduled Principal Balance as of the Distribution Date in September 1997
without giving effect to partial principal prepayments or partial liquidation
proceeds received on or after the Determination Date in August 1997, plus
accrued interest from August 1, 1997 to (but not including) August 20, 1997,
before deducting expenses payable by the Seller estimated to be $75,000. See
"Underwriting" herein.
The Class A-10 Certificates are offered by the Underwriter and the Dealer when,
as and if delivered to and accepted by the Underwriter, subject to prior sale,
withdrawal or modification of the offer without notice, the approval of counsel
and other conditions. It is expected that the Class A-10 Certificates will be
available for delivery at the offices of Salomon Brothers Inc, Seven World
Trade Center, New York, New York 10048 on or about August 20, 1997.
SALOMON BROTHERS INC LAZARD FRERES & CO. LLC
The date of this Supplement is August 13, 1997.
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(Continued from previous page)
The Class A-10 Certificates are generally not appropriate investments for
individual investors. The Class A-10 Certificates are offered as a single
certificate with a denomination equal to the Class A-10 Notional Amount upon
initial issuance of the Class A-10 Certificates as described herein under
"Description of the Certificates." The Class A-10 Certificates are not to be
directly or indirectly held or beneficially owned in amounts lower than such
denomination.
There is currently no secondary market for the Class A-10 Certificates and
there can be no assurance that a secondary market will develop or, if it does
develop, that it will provide Certificateholders with liquidity of investment
at any particular time or for the life of the Class A-10 Certificates. The
Underwriter intends to act as a market maker in the Class A-10 Certificates,
subject to applicable provisions of federal and state securities laws and other
regulatory requirements, but is under no obligation to do so and any such
market making may be discontinued at any time. There can be no assurance that
any investor will be able to sell a Class A-10 Certificate at a price equal to
or greater than the price at which such Certificate was purchased.
Distributions in respect of interest and of principal are made on the 25th day
of each month or the next succeeding business day to the holders of record of
the Class A-10 Certificates on the last business day of the preceding month, to
the extent that their allocable portion of the Pool Distribution Amount (as
defined herein) is sufficient therefor. On each Distribution Date (as defined
herein), to the extent funds are available therefor, the amount of interest
distributed in respect of the Class A-10 Certificates will equal the interest
accrued during the applicable month. Interest will accrue during each month on
the Class A-10 Certificates at a per annum rate equal to the weighted average
of the Net Mortgage Interest Rates (as defined herein) of the Mortgage Loans as
of the first day of such month minus 7.50% on the Class A-10 Notional Amount
(as defined herein), less any Non-Supported Interest Shortfall (as defined in
the Prospectus Supplement) and certain other shortfalls of interest and the
interest portion of certain losses allocable to the Class A-10 Certificates as
described herein and in the Prospectus Supplement under "Description of the
Certificates--Interest." The Subclass Principal Balance of the Class A-10
Certificates as of the Determination Date in August 1997 is expected to be
approximately $251. The Subclass Principal Balance as of the Determination Date
in September 1997 will be equal to such balance as of the Determination Date in
August 1997 reduced by the amount of distributions or other reductions of
principal on the Distribution Date in August 1997. Distributions in reduction
of the principal balance of the Class A Certificates will be made monthly on
each Distribution Date in an aggregate amount equal to the Class A Principal
Distribution Amount (as defined in the Prospectus Supplement) to the extent
funds are available therefor. Distributions in reduction of the principal
balance of the Class A Certificates each month will be allocated among the
Subclasses of Class A Certificates, including the Class A-10 Certificates, in
the manner described in the Prospectus Supplement under "Description of the
Certificates--Principal (including Prepayments)." Distributions to the Class A-
10 Certificates will be made pro rata among Certificateholders of such
Subclass.
This Supplement does not contain complete information regarding the Class A-10
Certificates and should be read only in conjunction with the Prospectus
Supplement and the Prospectus. Sales of the Class A-10 Certificates may not be
consummated unless the purchaser has received this Supplement, the Prospectus
Supplement and the Prospectus. Capitalized terms used herein that are not
otherwise defined shall have the meanings ascribed thereto in the Prospectus
Supplement or the Prospectus, as applicable.
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GENERAL
The following is supplemented by the information appearing in the Prospectus
Supplement and in the Prospectus, to the extent not superseded hereby. The
Prospectus Supplement and the Prospectus should be read in conjunction with
this Supplement. Capitalized terms used in this Supplement and not otherwise
defined herein have the meanings assigned in the Prospectus Supplement or in
the Prospectus. See "Index of Significant Prospectus Supplement Definitions" in
the Prospectus Supplement and "Index of Significant Definitions" in the
Prospectus.
The Series 1992-32 Certificates were issued on September 25, 1992. The Class
A-10 Certificates were not offered to the public at the time of the issuance of
the Series 1992-32 Certificates.
RISK FACTORS
YIELD CONSIDERATIONS
The yield to maturity of the Class A-10 Certificates will be directly related
to the rate of payments of principal on the Mortgage Loans in the Trust Estate,
and will be particularly sensitive to payments of principal on the Mortgage
Loans with higher rates of interest. The rate of principal payments on the
Mortgage Loans will in turn be affected by the amortization schedules of the
Mortgage Loans, the rate of principal prepayments (including partial
prepayments and those resulting from refinancing) thereon by mortgagors,
liquidations of defaulted Mortgage Loans, repurchases by the Seller of Mortgage
Loans as a result of defective documentation or breaches of representations and
warranties, optional repurchase by the Seller of defaulted Mortgage Loans and
optional purchase by the Servicer of all of the Mortgage Loans in connection
with the termination of the Trust Estate. See "Pooling and Servicing
Agreement--Optional Termination" herein, "Description of the Mortgage Loans--
Optional Repurchase of Defaulted Mortgage Loans" and "Pooling and Servicing
Agreement--Optional Termination" in the Prospectus Supplement and "The Trust
Estates--Mortgage Loans--Assignment of Mortgage Loans to the Trustee," "--
Optional Repurchases" and "The Pooling and Servicing Agreement--Termination;
Purchase of Mortgage Loans" in the Prospectus. Mortgagors are permitted to
prepay the Mortgage Loans, in whole or in part, at any time without penalty.
The rate of payments (including prepayments) on pools of mortgage loans is
influenced by a variety of economic, geographic, social and other factors. If
prevailing rates for similar mortgage loans fall below the Mortgage Interest
Rates on the Mortgage Loans, the rate of prepayment would generally be expected
to increase. Conversely, if interest rates on similar mortgage loans rise above
the Mortgage Interest Rates on the Mortgage Loans, the rate of prepayment would
generally be expected to decrease. In general, mortgagors may be expected to
refinance mortgage loans with mortgage interest rates higher than the then-
current mortgage interest rates on mortgage loans.
The yield to maturity on the Class A-10 Certificates may be affected by the
geographic concentration of the Mortgaged Properties securing the Mortgage
Loans. In recent periods, California, the New York metropolitan area, the mid-
Atlantic region and several other regions in the United States have experienced
significant declines in housing prices at varying times and adverse changes in
economic conditions. In addition, California and several other regions have
experienced natural disasters, including earthquakes, floods, wildfires and
hurricanes, which may have damaged properties and otherwise adversely affected
property values. See "Pooling and Servicing Agreement" herein. Any
deterioration in housing prices in California, New Jersey, Connecticut and the
other states in which Mortgaged Properties are located, and any deterioration
of economic conditions in states which adversely affects the ability of
borrowers to make payments on the Mortgage Loans, may increase the frequency of
delinquencies on and liquidations of Mortgage Loans. See "Description of the
Mortgage
S1-3
<PAGE>
Loans" herein. Increased liquidations and prepayments may have an adverse
effect on the yield to maturity of the Class A-10 Certificates.
AN INVESTOR THAT PURCHASES THE CLASS A-10 CERTIFICATES, WHICH ARE EXPECTED TO
BE OFFERED AT A SUBSTANTIAL PREMIUM, SHOULD CONSIDER THE RISK THAT A FASTER
THAN ANTICIPATED RATE OF PRINCIPAL PAYMENTS ON THE MORTGAGE LOANS WILL RESULT
IN AN ACTUAL YIELD THAT IS LOWER THAN SUCH INVESTOR'S EXPECTED YIELD AND MAY
RESULT IN THE FAILURE OF SUCH INVESTOR TO FULLY RECOVER ITS INITIAL INVESTMENT.
For a more detailed discussion of prepayment and yield considerations with
respect to the Class A-10 Certificates, see "Sensitivity of the Pre-Tax Yield
to Maturity and Weighted Average Life of the Class A-10 Certificates" herein
and "Prepayment and Yield Considerations" in the Prospectus Supplement.
DELINQUENT MORTGAGE LOANS
As of July 17, 1997, the Trust Estate included certain Mortgage Loans with
respect to which payments were past due more than 30 days. See "Description of
the Mortgage Loans" herein.
RECENT DEVELOPMENTS
Sale of the Servicing
On May 7, 1996, Norwest Mortgage and certain affiliated companies acquired
all of the mortgage origination, servicing and secondary marketing operations
of PHMC, and Norwest Bank Minnesota, National Association ("Norwest Bank")
acquired substantially all of the assets of PHMC Services Corporation (formerly
known as Securitized Asset Services Corporation) and succeeded to substantially
all of the obligations of PHMC Services Corporation (the "Asset Acquisition").
As a consequence of that transaction, PHMC effectively exited the mortgage loan
origination and servicing business. PHMC retained its right to service the
mortgage loans, including the Mortgage Loans, underlying mortgage pass-through
certificates created by the Seller pursuant to various pooling and servicing
agreements, including the Pooling and Servicing Agreement (the "Retained
Servicing"), but announced its intention to sell such servicing as
expeditiously as possible (such rights, duties and obligations under the
Pooling and Servicing Agreement, the "Servicing").
Under the Pooling and Servicing Agreement, the Servicer of the Mortgage Loans
may assign its rights and delegate its duties and obligations, and be released
from its duties and obligations, if (i) the purchaser or transferee is
qualified to service mortgage loans for the Federal National Mortgage
Association or the Federal Home Loan Mortgage Corporation, is satisfactory to
the Trustee in the reasonable exercise of its judgment and executes and
delivers to the Trustee an agreement, in form and substance reasonably
satisfactory to the Trustee, assuming the due and punctual performance and
observance of each covenant and condition to be performed by the Servicer under
the Pooling and Servicing Agreement, and (ii) each Rating Agency's rating of
the Certificates in effect immediately prior to the assignment, sale or
transfer would not be qualified, downgraded or withdrawn and the Certificates
would not be placed on credit review status as a result of such assignment,
sale or transfer.
The conditions of the Pooling and Servicing Agreement for assignment, sale
and transfer of the Servicing by PHMC to Citicorp Mortgage, Inc. ("CMI") were
met and, on May 30, 1997, PHMC sold to CMI, and CMI assumed, PHMC's rights,
duties and obligations under the Pooling and Servicing Agreement.
S1-4
<PAGE>
Since May 7, 1996, the Mortgage Loans have been subserviced for PHMC by
Norwest Mortgage pursuant to a subservicing agreement (the "Subservicing
Agreement") among PHMC, The Prudential Insurance Company of America
("Prudential Insurance") and Norwest Mortgage under which Norwest Mortgage
agreed to perform all of PHMC's duties and obligations as mortgage loan
servicer under the Pooling and Servicing Agreement other than certain duties
with respect to the administration and disposition of real estate acquired in
foreclosure, which duties were performed for PHMC by Prudential Residential
Services, Limited Partnership, an affiliate of PHMC, pursuant to a Servicing
and Subservicing Asset Recovery Agreement (the "PRS Agreement"). On May 30,
1997, CMI assumed the rights, duties and obligations of PHMC under the
Subservicing Agreement and the PRS Agreement with respect to the Mortgage
Loans. PHMSC has been advised that the Mortgage Loans are expected to be
subserviced by Norwest Mortgage pursuant to the Subservicing Agreement until at
least November 1997 and thereafter will be serviced by CMI; however, there can
be no assurance of the date on which CMI will begin performing the servicing
function with respect to the Mortgage Loans nor that CMI will service the
Mortgage Loans in a manner identical to that of PHMC prior to May 7, 1996 or
Norwest Mortgage from May 7, 1996 to the date of the transfer of the servicing
function. In addition, CMI's duties and obligations as Servicer under the
Pooling and Servicing Agreement may be assigned, sold and transferred under the
conditions set forth herein and under "Servicing of the Mortgage Loans--Certain
Matters Regarding the Servicer" in the Prospectus. The Mortgage Loans are
required to be serviced in accordance with the Pooling and Servicing Agreement.
Recent Litigation
In January 1997, the Seller, PHMC and others were served with a complaint in
a purported class action filed on November 18, 1996 in the Superior Court of
New Jersey, Essex County Law Division. The Capitol Life Insurance Co. v. The
Prudential Insurance Co. of America et al. Esx-L-13045-96. On March 26, 1997,
PHMC and others filed a motion to dismiss the complaint for failure to state a
claim on which relief can be granted. On June 2, 1997, an amended complaint was
filed, and American Investors Life Insurance Company joined The Capitol Life
Insurance Company as a named plaintiff in the action. As amended, the complaint
asserts claims against the Seller, PHMC, certain of their present and former
affiliates and certain former employees as well as Merrill Lynch & Co., Kidder,
Peabody & Co., Incorporated, Lehman Brothers Inc. and Salomon Brothers Inc for
common law fraud, negligent misrepresentation, violations of the New Jersey
RICO statute, violations of the New Jersey securities statute and negligence
arising out of the plaintiffs' purchase of Prudential Home Thirty-Year Mortgage
Trust 1992-A, Subordinated Mortgage Securities, Series 1992-A (the
"Securities") and seeks compensatory and punitive damages and injunctive
relief. PHMC originated or acquired the mortgage loans in the underlying trust
funds for the Securities and serviced the mortgage loans until May 7, 1996. The
complaint alleges that the defendants misrepresented and concealed material
facts relating to the quality and likely performance of the Securities,
including among other things the selection of assets underlying the Securities,
financial models and projections used, default and loss experience, sufficiency
of credit support, loan-to-value ratios, quality of the underwriting standards,
ability to affect the existence, timing, amount and reporting of defaults and
losses, and payment terms. PHMC, the Seller and affiliated defendants are
vigorously defending the lawsuit. The case is at a preliminary stage, and PHMC
is not now in a position to predict the outcome or effect of the litigation.
ADDITIONAL INFORMATION
Norwest Mortgage currently offers by subscription detailed mortgage loan
information in machine readable format updated on a monthly basis (the
"Detailed Information") with respect to each outstanding series of mortgage
certificates issued by trusts formed by the Seller, including the Series 1992-
32 Certificates. The Detailed Information reflects payments made on the
individual mortgage loans, including prepayments in full and in part made on
such mortgage loans, as well as the liquidation of any such mortgage loans, and
identifies various characteristics of the mortgage loans.
S1-5
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Among the subscribers of the Detailed Information are a number of major
investments brokerage firms as well as financial information service firms.
Some of such firms, including certain investments brokerage firms as well as
Bloomberg L.P. through the "The Bloomberg(R)" service and Merrill Lynch
Mortgage Capital Inc. through the "CMO Passport(R)" service, may, in accordance
with their individual business practices and fee schedules, if any, make
portions of, or summaries of portions of, the Detailed Information available to
their customers and subscribers. The Seller, PHMC, the Servicer and any
affiliates thereof and Norwest Mortgage take no responsibility for the actions
of such firms in processing, analyzing or disseminating such information.
DESCRIPTION OF THE CERTIFICATES
The Class A-10 Certificates will be offered in fully registered, certificated
form as a single certificate with a denomination equal to the Class A-10
Notional Amount upon initial issuance of the Class A-10 Certificates. The
Subclass Principal Balance of the Class A-10 Certificates as of the
Determination Date in August 1997 is expected to be approximately $251. The
Subclass Principal Balance as of the Determination Date in September 1997 will
be equal to such balance as of the Determination Date in August 1997 reduced by
the amount of distributions or other reductions of principal on the
Distribution Date in August 1997.
Distributions of interest and in reduction of principal balance to holders of
Class A-10 Certificates will be made monthly, to the extent of such Subclass's
entitlement thereto, and to the extent funds are available therefor, on the
25th day of each month or, if such day is not a business day, on the succeeding
business day (each, a "Distribution Date"), beginning in September 1997.
Distributions (other than the final distribution in retirement of the Class
A-10 Certificates, as described in the Prospectus Supplement) will be made on
each Distribution Date by check mailed to the address of the person entitled
thereto as it appears on the Certificate Register or, provided that the
Servicer, or the paying agent acting on behalf of the Servicer, shall have been
furnished with appropriate wiring instructions not less than seven business
days prior to the related Distribution Date, wire transfer in immediately
available funds.
The Class A-10 Certificates will be entitled to a distribution in respect of
interest accrued during each month in an amount up to such Subclass's Subclass
Interest Accrual Amount. The Subclass Interest Accrual Amount for the Class A-
10 Certificates will equal the product of (i) 1/12th of the difference between
(a) the weighted average of the Net Mortgage Interest Rates of the Mortgage
Loans (based on the Scheduled Principal Balances of the Mortgage Loans as of
such Distribution Date) and (b) 7.50% and (ii) the Class A-10 Notional Amount.
The Subclass Interest Accrual Amount for the Class A-10 Certificates will be
reduced by (i) the portion of any Non-Supported Interest Shortfall allocable to
such Subclass, (ii) on or after the Cross-Over Date, any interest shortfalls
resulting from the timing of the receipt of partial principal prepayments and
(iii) on or after the Cross-Over Date, the interest portion of any losses
realized on Liquidated Loans allocable to such Subclass, as described under
"Description of the Certificates--Interest" in the Prospectus Supplement.
The "Net Mortgage Interest Rate" on each Mortgage Loan is equal to the
Mortgage Interest Rate on such Mortgage Loan as stated in the related Mortgage
Note minus the Servicing Fee rate of 0.20% per annum. See "Pooling and
Servicing Agreement--Servicing Compensation and Payment of Expenses" in the
Prospectus Supplement.
The "Class A-10 Notional Amount" with respect to each Distribution Date will
be equal to the Pool Scheduled Principal Balance, as defined under "Description
of the Certificates--Principal (Including Prepayments)" in the Prospectus
Supplement, as of such Distribution Date. The Class A-10 Notional
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<PAGE>
Amount with respect to the Distribution Date in July 1997 was approximately
$76,062,507. The Class A-10 Notional Amount with respect to the Distribution
Date in September 1997 will be equal to the Class A-10 Notional Amount with
respect to the Distribution Date in July 1997, less scheduled principal
payments for July and August 1997, principal prepayments in full and other
unscheduled recoveries in full received in June and July 1997 and partial
principal prepayments and partial liquidation proceeds received in July and
August 1997. A notional amount does not entitle a holder to receive
distributions of principal on the basis of such notional amount, but is solely
used for the purpose of computing the amount of interest accrued on a subclass.
The Class A-10 Notional Amount upon initial issuance of the Class A-10
Certificates was approximately $254,635,286. See "Description of the
Certificates" in the Prospectus Supplement.
The aggregate amount available for distribution on each Distribution Date
will be the Pool Distribution Amount.
Notwithstanding anything contained in the Prospectus Supplement or the
Prospectus to the contrary, the "Pool Distribution Amount" for a Distribution
Date will be the sum of all previously undistributed payments or other receipts
on account of principal (including prepayments and Liquidation Proceeds in
respect of principal, if any) and interest on or in respect of the Mortgage
Loans received by the Servicer after the Cut-Off Date (except for amounts due
on or prior to the Cut-Off Date), or received by the Servicer on or prior to
the Cut-Off Date, but due after the Cut-Off Date, in either case received on or
prior to the business day preceding the Determination Date in the month in
which such Distribution Date occurs, plus (i) all Periodic Advances made by the
Servicer, (ii) all withdrawals from any reserve fund established to provide
support for the Servicer's obligation to make advances, as described under
"Description of the Certificates--Periodic Advances" in the Prospectus
Supplement and (iii) all other amounts required to be placed in the Certificate
Account by the Servicer pursuant to the Pooling and Servicing Agreement, but
excluding the following:
(a) amounts received as late payments of principal or interest respecting
which the Servicer previously has made one or more unreimbursed Periodic
Advances or an unreimbursed advance has been made from the Advance Reserve
Fund (as defined in the Prospectus Supplement), if established;
(b) that portion of net Liquidation Proceeds used to reimburse any
unreimbursed Periodic Advances or unreimbursed advances from the Advance
Reserve Fund, if established, with respect to Liquidated Loans;
(c) those portions of each payment of interest on a particular Mortgage
Loan which represent the applicable Servicing Fee, as adjusted in respect
of Prepayment Interest Shortfalls as described under "Description of the
Certificates--Interest" in the Prospectus Supplement;
(d) all amounts representing scheduled payments of principal and interest
due after the Due Date occurring in the month in which such Distribution
Date occurs;
(e) all principal prepayments in full and all proceeds of any Mortgage
Loans, or property acquired in respect thereof, liquidated, foreclosed,
purchased or repurchased pursuant to the Pooling and Servicing Agreement,
received on or after the Due Date occurring in the month in which such
Distribution Date occurs, and all partial principal prepayments received by
the Servicer on or after the Determination Date occurring in the month in
which such Distribution Date occurs, and all related payments of interest
on such amounts;
(f) to the extent permitted by the Pooling and Servicing Agreement, that
portion of Liquidation Proceeds or insurance proceeds with respect to a
Mortgage Loan which represents any unpaid Servicing Fee to which the
Servicer is entitled;
(g) all amounts representing certain expenses reimbursable to the
Servicer and other amounts permitted to be retained by the Servicer or
withdrawn by the Servicer from the Certificate Account pursuant to the
Pooling and Servicing Agreement;
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(h) all amounts in the nature of late fees, assumption fees, prepayment
fees and similar fees which the Servicer is entitled to retain as
additional servicing compensation;
(i) reinvestment earnings on payments received in respect of the Mortgage
Loans; and
(j) Net Foreclosure Profits.
Notwithstanding anything contained in the Prospectus Supplement or the
Prospectus to the contrary, if, on any Determination Date, payments of
principal and interest due on any Mortgage Loan in the Trust Estate on the
related Due Date have not been received as of the close of business on the
business day preceding such Determination Date, the Servicer will be obligated
to make Periodic Advances, to the extent they are deemed recoverable, on or
before the related Distribution Date for the benefit of holders of the Series
1992-32 Certificates.
The Pool Distribution Amount will be allocated among the Classes of Series
1992-32 Certificates as described in "Description of the Certificates" in the
Prospectus Supplement.
The Prospectus Supplement and the Prospectus contain significant additional
information concerning the characteristics of the Class A-10 Certificates.
Investors are urged to read "Description of the Certificates" in the Prospectus
Supplement and in the Prospectus.
DESCRIPTION OF THE MORTGAGE LOANS
Information with respect to the expected characteristics of the Mortgage
Loans as of September 1, 1992 is set forth in the Prospectus Supplement, which
contains substantial information relating to mortgage loans generally.
Investors are urged to consider the general information with respect to the
Mortgage Loans set forth under "Description of the Mortgage Loans" in the
Prospectus Supplement in addition to the statistical and numerical data set
forth below.
As of July 17, 1997, the Mortgage Loans in the Trust Estate consisted of
fixed interest rate, conventional, monthly pay, fully amortizing, one- to four-
family, residential first mortgage loans originated or acquired by PHMC for its
own account or for the account of an affiliate having original terms to stated
maturity of approximately 30 years. The "Unpaid Principal Balance" of a
Mortgage Loan as of July 17, 1997 is its unpaid principal balance as of such
date assuming no delinquencies and no prepayments in full between July 1, 1997
and July 17, 1997. As of July 17, 1997, the Mortgage Loans included 304
promissory notes, having an aggregate Unpaid Principal Balance (the "Aggregate
Unpaid Principal Balance") of approximately $75,417,874, secured by first liens
(the "Mortgages") on one- to four-family residential properties (the "Mortgaged
Properties"). However, as of July 17, 1997, three of such Mortgage Loans,
having an aggregate Unpaid Principal Balance of approximately $714,679, had
been prepaid in full even though such Mortgage Loans and their Unpaid Principal
Balances are included in the following statistics and tables.
No Mortgage Loan is a Buy-Down Loan. See "The Trust Estates--Mortgage Loans"
in the Prospectus.
Each of the Mortgage Loans is subject to a due-on-sale clause. See "Certain
Legal Aspects of the Mortgage Loans--"Due-on-Sale' Clause," and "Servicing of
the Mortgage Loans--Enforcement of Due-on-Sale Clauses; Realization Upon
Defaulted Mortgage Loans" in the Prospectus.
As of July 17, 1997, each Mortgage Loan had an Unpaid Principal Balance of
not less than approximately $36,675 or more than approximately $840,560, and
the average Unpaid Principal Balance of the Mortgage Loans was approximately
$248,085. The latest stated maturity date of any of the Mortgage Loans was
September 1, 2022, however, the actual date on which any Mortgage Loan is paid
in full may be earlier than the stated maturity date due to unscheduled
payments of principal.
S1-8
<PAGE>
Based on information supplied by the mortgagors in connection with their loan
applications at origination, all of the Mortgaged Properties were owner
occupied primary residences. See "PHMC--Mortgage Loan Underwriting" in the
Prospectus.
All of the Mortgage Loans are mortgage loans originated in connection with
the relocation of employees of various corporate employers that participated in
PHMC's relocation program and of employees of various non-participant employers
("Relocation Mortgage Loans").
Set forth below is a description of certain additional characteristics of the
Mortgage Loans as of July 17, 1997 (except as otherwise indicated).
MORTGAGE INTEREST RATES
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF AGGREGATE UNPAID AGGREGATE UNPAID
MORTGAGE INTEREST RATE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ---------------------- --------- ----------------- -----------------
<S> <C> <C> <C>
7.750%............................ 28 $ 7,132,880.34 9.46%
7.875%............................ 41 9,556,102.52 12.67
8.000%............................ 76 17,578,728.12 23.33
8.125%............................ 52 13,385,063.65 17.75
8.250%............................ 28 6,964,709.23 9.23
8.375%............................ 21 5,145,547.05 6.82
8.500%............................ 18 4,797,830.03 6.36
8.625%............................ 13 3,281,064.95 4.35
8.750%............................ 11 2,974,408.05 3.94
8.875%............................ 7 1,954,731.81 2.59
9.000%............................ 2 455,676.51 0.60
9.125%............................ 2 552,270.02 0.73
9.250%............................ 3 1,183,428.05 1.57
9.375%............................ 1 211,001.58 0.28
9.500%............................ 0 0.00 0.00
9.625%............................ 1 244,431.70 0.32
--- -------------- ------
Total......................... 304 $75,417,873.61 100.00%
=== ============== ======
</TABLE>
As of July 17, 1997, the weighted average Mortgage Interest Rate of the
Mortgage Loans was approximately 8.186% per annum. The Net Mortgage Interest
Rate of each Mortgage Loan is equal to the Mortgage Interest Rate of such
Mortgage Loan minus the Servicing Fee rate of 0.20% per annum. As of July 17,
1997, the weighted average Net Mortgage Interest Rate of the Mortgage Loans was
approximately 7.986% per annum.
S1-9
<PAGE>
REMAINING TERMS TO STATED MATURITY
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
MORTGAGE PERCENTAGE OF
REMAINING STATED NUMBER OF INTEREST AGGREGATE UNPAID AGGREGATE UNPAID
TERM (MONTHS) LOANS RATE PRINCIPAL BALANCE PRINCIPAL BALANCE
- ---------------- --------- -------- ----------------- -----------------
<S> <C> <C> <C> <C>
290..................... 1 9.625% $ 244,431.70 0.32%
292..................... 1 9.250 84,037.13 0.11
293..................... 1 8.500 194,398.16 0.26
294..................... 5 8.160 562.488.84 0.75
295..................... 7 8.091 1,430,974.21 1.90
296..................... 31 7.998 4,132,276.25 5.48
297..................... 31 8.106 6,295,630.63 8.35
298..................... 10 8.193 2,624,387.44 3.48
299..................... 11 8.412 2,635,327.69 3.49
300..................... 77 8.410 21,703,710.33 28.78
301..................... 90 8.099 24,498,298.15 32.48
302..................... 39 7.965 11,011,913.08 14.60
--- -------------- ------
Total................. 304 $75,417,873.61 100.00%
=== ============== ======
</TABLE>
As of July 17, 1997, the weighted average remaining term to stated maturity
of the Mortgage Loans was approximately 300 months.
YEARS OF ORIGINATION
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF AGGREGATE UNPAID AGGREGATE UNPAID
YEAR OF ORIGINATION LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
------------------- --------- ----------------- -----------------
<S> <C> <C> <C>
1991......................... 8 $ 1,085,355.83 1.44%
1992......................... 296 74,332,517.78 98.56
--- -------------- ------
Total...................... 304 $75,417,873.61 100.00%
=== ============== ======
</TABLE>
As of July 17, 1997, the earliest month and year of origination of any
Mortgage Loan was August 1991 and the latest month and year of origination was
August 1992.
ORIGINAL LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF AGGREGATE UNPAID AGGREGATE UNPAID
ORIGINAL LOAN-TO-VALUE RATIO LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
---------------------------- --------- ----------------- -----------------
<S> <C> <C> <C>
50.0% or less................ 13 $ 2,340,622.09 3.10%
50.1-55.0%................... 8 1,618,623.59 2.15
55.1-60.0%................... 10 2,376,732.95 3.15
60.1-65.0%................... 10 2,663,439.48 3.53
65.1-70.0%................... 28 8,224,917.95 10.91
70.1-75.0%................... 31 8,775,746.84 11.64
75.1-80.0%................... 149 35,971,971.17 47.69
80.1-85.0%................... 6 1,510,204.85 2.00
85.1-90.0%................... 49 11,935,614.69 15.83
--- -------------- ------
Total...................... 304 $75,417,873.61 100.00%
=== ============== ======
</TABLE>
S1-10
<PAGE>
As of July 17, 1997, the minimum and maximum Loan-to-Value Ratios at
origination of the Mortgage Loans were approximately 22.8% and approximately
90.0%, respectively, and the weighted average Loan-to-Value Ratio at
origination of the Mortgage Loans was approximately 76.1%. The Loan-to-Value
Ratio of a Mortgage Loan was calculated using the lesser of (i) the appraised
value of the related Mortgaged Property, as established by an appraisal
obtained by the originator from an appraiser in connection with the origination
of the Mortgage Loan and (ii) the sale price for such property. In some
instances, the Loan-to-Value Ratio may have been based on an appraisal that was
obtained by the originator more than four months prior to origination, provided
that (i) a recertification of the original appraisal was obtained and (ii) the
original appraisal was obtained no more than twelve months prior to
origination. For the purpose of calculating the Loan-to-Value Ratio of any
Mortgage Loan that was the result of the refinancing (including a refinancing
for "equity take out" purposes) of an existing mortgage loan, the appraised
value of the related Mortgaged Property was generally determined by reference
to an appraisal obtained in connection with the origination of the replacement
loan. There can be no assurance that the values determined by the appraisers as
of the dates of appraisal represent the prices at which the related Mortgaged
Properties can be sold, either as of the dates of appraisal or at foreclosure.
Further, there can be no assurance that the Loan-to-Value Ratio at origination
of any Mortgage Loan is representative of the ratio of the Unpaid Principal
Balance of such Mortgage Loan to the value of the related Mortgaged Property as
of the date hereof. The Seller has taken no action to establish the current
value of any Mortgaged Property. See "Pooling and Servicing Agreement" herein
and "PHMC--Mortgage Loan Underwriting" and "The Trust Estates--Mortgage Loans"
in the Prospectus.
S1-11
<PAGE>
MORTGAGE LOAN DOCUMENTATION LEVELS
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF AGGREGATE UNPAID AGGREGATE UNPAID
DOCUMENTATION LEVEL LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
------------------- --------- ----------------- -----------------
<S> <C> <C> <C>
Full Documentation......... 140 $38,124,553.32 50.55%
Asset & Income
Verification.............. 7 1,645,782.27 2.18
Asset & Mortgage
Verification.............. 18 5,606,297.48 7.43
Income & Mortgage
Verification.............. 1 95,021.22 0.13
Asset Verification......... 2 692,410.51 0.92
Income Verification........ 0 0.00 0.00
Mortgage Verification...... 101 23,343,174.29 30.95
Preferred Processing....... 35 5,910,634.52 7.84
--- -------------- ------
Total.................... 304 $75,417,873.61 100.00%
=== ============== ======
</TABLE>
Documentation levels, and the degree of review and evaluation of such
documents, vary depending upon several factors, including loan amount, Loan-to-
Value Ratio and the type and purpose of the Mortgage Loan. Asset, income and
mortgage verifications were obtained for Mortgage Loans processed with "full
documentation." In the case of "preferred processing," neither asset, income
nor mortgage verifications were obtained. In most instances, a verification of
the borrower's employment was obtained. However, for all of the Mortgage Loans,
a credit report on the borrower and a property appraisal were obtained. See
"PHMC--Mortgage Loan Underwriting" in the Prospectus and "Pooling and Servicing
Agreement" herein.
ORIGINAL MORTGAGE LOAN PRINCIPAL BALANCES
<TABLE>
<CAPTION>
PERCENTAGE OF
ORIGINAL MORTGAGE LOAN NUMBER OF AGGREGATE UNPAID AGGREGATE UNPAID
PRINCIPAL BALANCE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ---------------------- --------- ----------------- -----------------
<S> <C> <C> <C>
Less than or equal to $200,000... 54 $ 6,047,600.13 8.02%
$200,001-$250,000................ 93 20,002,004.51 26.52
$250,001-$300,000................ 83 21,419,808.32 28.40
$300,001-$350,000................ 31 9,475,791.21 12.56
$350,001-$400,000................ 19 6,622,580.37 8.78
$400,001-$450,000................ 8 3,157,720.42 4.19
$450,001-$500,000................ 6 2,728,517.32 3.62
$500,001-$550,000................ 2 987,077.85 1.31
$550,001-$600,000................ 5 2,638,631.57 3.50
$600,001-$650,000................ 0 0.00 0.00
$650,001-$700,000................ 0 0.00 0.00
$700,001-$750,000................ 1 713,768.30 0.95
$750,001-$800,000................ 0 0.00 0.00
$800,001-$850,000................ 1 783,813.60 1.04
$850,001-$900,000................ 1 840,560.01 1.11
$900,001-$950,000................ 0 0.00 0.00
$950,001-$1,000,000.............. 0 0.00 0.00
--- -------------- ------
Total.......................... 304 $75,417,873.61 100.00%
=== ============== ======
</TABLE>
As of July 17, 1997, the average Unpaid Principal Balance of the Mortgage
Loans was approximately $248,085. As of July 17, 1997, the weighted average
Loan-to-Value Ratio at origination and the maximum Loan-to-Value Ratio at
origination of the Mortgage Loans which had original
S1-12
<PAGE>
principal balances in excess of $600,000 were approximately 71.6% and 75.0%,
respectively. See "PHMC--Mortgage Loan Underwriting" in the Prospectus.
MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF AGGREGATE UNPAID AGGREGATE UNPAID
PROPERTY LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
- -------- --------- ----------------- -----------------
<S> <C> <C> <C>
Single-family detached........... 293 $73,165,525.49 97.01%
Two- to four-family units........ 0 0.00 0.00
Condominiums..................... 8 1,492,175.13 1.98
Townhouses....................... 0 0.00 0.00
Planned Unit Developments........ 3 760,172.99 1.01
Cooperative units................ 0 0.00 0.00
--- -------------- ------
Total.......................... 304 $75,417,873.61 100.00%
=== ============== ======
</TABLE>
GEOGRAPHIC DISTRIBUTION OF MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF AGGREGATE UNPAID AGGREGATE UNPAID
GEOGRAPHIC AREA LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
- --------------- --------- ----------------- -----------------
<S> <C> <C> <C>
Arizona........................... 1 $ 253,375.92 0.34%
California........................ 61 17,616,007.42 23.30
Colorado.......................... 5 1,251,327.71 1.66
Connecticut....................... 33 9,494,075.33 12.59
Delaware.......................... 4 880,317.30 1.17
Florida........................... 9 2,065,443.28 2.74
Georgia........................... 14 3,021,456.67 4.01
Hawaii............................ 1 262,006.92 0.35
Illinois.......................... 10 2,813,209.73 3.73
Indiana........................... 1 221,027.95 0.29
Iowa.............................. 2 164,175.31 0.22
Kentucky.......................... 1 119,434.06 0.16
Louisiana......................... 3 326,165.84 0.43
Maryland.......................... 9 2,042,884.44 2.71
Massachusetts..................... 5 1,302,026.05 1.73
Michigan.......................... 5 767,275.39 1.02
Minnesota......................... 4 760,739.82 1.01
Missouri.......................... 1 184,986.93 0.25
New Hampshire..................... 1 211,001.58 0.28
New Jersey........................ 58 14,321,180.93 18.99
New York.......................... 7 1,852,885.63 2.46
North Carolina.................... 5 1,044,808.23 1.39
Ohio.............................. 11 1,875,189.54 2.49
Oregon............................ 1 571,651.99 0.76
Pennsylvania...................... 12 3,244,939.63 4.30
Rhode Island...................... 1 200,529.42 0.27
South Carolina.................... 1 118,459.56 0.16
Tennessee......................... 2 436,685.94 0.58
Texas............................. 18 3,618,911.26 4.80
Virginia.......................... 11 2,938,455.69 3.90
Washington........................ 7 1,437,238.14 1.91
--- -------------- ------
Total........................... 304 $75,417,873.61 100.00%
=== ============== ======
</TABLE>
S1-13
<PAGE>
As of July 17, 1997, no more than approximately 2.13% of the Aggregate Unpaid
Principal Balance of the Mortgage Loans was secured by Mortgaged Properties
located in any one five digit zip code.
ORIGINATORS OF MORTGAGE LOANS
<TABLE>
<CAPTION>
AGGREGATE UNPAID PERCENTAGE OF
NUMBER OF PRINCIPAL AGGREGATE UNPAID
ORIGINATOR LOANS BALANCE PRINCIPAL BALANCE
- ---------- --------- ---------------- -----------------
<S> <C> <C> <C>
PHMC or Affiliate.................. 256 $62,017,936.35 82.23%
Other Originators.................. 48 13,399,937.26 17.77
--- -------------- ------
Total............................ 304 $75,417,873.61 100.00%
=== ============== ======
</TABLE>
PURPOSE OF MORTGAGE LOANS
<TABLE>
<CAPTION>
AGGREGATE UNPAID PERCENTAGE OF
NUMBER OF PRINCIPAL AGGREGATE UNPAID
LOAN PURPOSE LOANS BALANCE PRINCIPAL BALANCE
- ------------ --------- ---------------- -----------------
<S> <C> <C> <C>
Purchase........................... 304 $75,417,873.61 100.00%
Rate/term refinance................ 0 0.00 0.00
Equity take out.................... 0 0.00 0.00
--- -------------- ------
Total............................ 304 $75,417,873.61 100.00%
=== ============== ======
</TABLE>
In general, in the case of a Mortgage Loan made for "rate/term" refinance
purposes, substantially all of the proceeds are used to pay in full the
principal balance of a previous mortgage loan of the mortgagor with respect to
a Mortgaged Property and to pay origination and closing costs associated with
such refinancing. However, in the case of a Mortgage Loan made for "equity take
out" refinance purposes, all or a portion of the proceeds are generally
retained by the mortgagor for uses unrelated to the Mortgaged Property. The
amount of such proceeds retained by the mortgagor may be substantial. See
"PHMC--Mortgage Loan Underwriting" in the Prospectus.
DELINQUENCY STATUS
<TABLE>
<CAPTION>
ACTUAL PERCENTAGE OF
NUMBER OF AGGREGATE UNPAID AGGREGATE UNPAID
STATUS LOANS(1) PRINCIPAL BALANCE(1) PRINCIPAL BALANCE(2)
- ------ --------- --------------------- --------------------
<S> <C> <C> <C>
30 to 59 days............. 3 $552,412.51 0.73%
60 to 89 days............. 0 0.00 0.00
90 days or more........... 0 0.00 0.00
Loans in Foreclosure...... 0 0.00 0.00
REO Mortgage Loans........ 0 0.00 0.00
--- ----------- ----
Total................. 3 $552,412.51 0.73%
=== =========== ====
</TABLE>
- -------
(1) Reflects the number of delinquent Mortgage Loans and the actual unpaid
principal balances of such Mortgage Loans based on information available to
Norwest Mortgage, as subservicer, as of July 17, 1997.
(2) As of July 17, 1997.
The indicated periods of delinquency are based on the number of days past due,
based on a 30-day month. No Mortgage Loan is considered delinquent for these
purposes until one month has passed since its contractual due date.
S1-14
<PAGE>
As of April 29, 1997, as a result of recent flooding (the "Midwest Floods"),
all counties in the State of North Dakota, all counties in the State of South
Dakota and 46 counties in the State of Minnesota were declared federal disaster
areas eligible for federal disaster assistance. Approximately 1.01% (by
Aggregate Unpaid Principal Balances) of the Mortgaged Properties are located in
North Dakota, South Dakota or Minnesota (the "Midwest Flood States"). Based on
information available to Norwest Mortgage, as subservicer, on July 17, 1997,
none of the Mortgage Loans secured by Mortgaged Properties located in the
Midwest Flood States is delinquent.
Neither the Seller, PHMC, the Servicer nor Norwest Mortgage 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 a region
affected by a natural disaster (including, without limitation, the Midwest
Floods) has not occurred. See "Pooling and Servicing Agreement" herein.
DELINQUENCY AND FORECLOSURE EXPERIENCE
The following tables set forth certain information concerning recent
delinquency, foreclosure and loan loss experience (i) on the conventional
mortgage loans included in various mortgage pools underlying all series of the
Seller's mortgage pass-through certificates and other mortgage loans owned by
third parties (the "Program Loans") and (ii) on the Program Loans which are
fixed interest rate mortgage loans (the "Fixed Program Loans"), including in
both clause (i) and this clause (ii) Relocation Mortgage Loans. See
"Description of the Mortgage Loans" in the Prospectus Supplement and PHMC--
General" and "--Mortgage Loan Underwriting" and "Servicing of the Mortgage
Loans" in the Prospectus. The delinquency, foreclosure and loan loss experience
represents the experience of PHMC and The Prudential Mortgage Capital Company,
Inc., an affiliate of PHMC which serviced the Program Loans prior to June 30,
1989. There can be no assurance that the delinquency, foreclosure and loan loss
experience set forth with respect to PHMC's total servicing portfolio of
Program Loans, which includes both fixed and adjustable interest rate mortgage
loans and loans having a variety of original terms to stated maturity including
Relocation Mortgage Loans and PHMC's servicing portfolio of Fixed Program
Loans, which includes loans having a variety of payment characteristics such as
Subsidy Loans and Balloon Loans, will be representative of the results that
have been or may be experienced with respect to the Mortgage Loans.
The following tables reflect rapid growth during certain periods in PHMC's
mortgage loan servicing portfolio as a result of the substantially higher
volume of new loan originations and acquisitions of mortgage loans which were
originated at or shortly prior to the acquisition thereof. Delinquencies,
foreclosures and loan losses generally are expected to occur more frequently
after the first full year of the life of mortgage loans. Accordingly, because a
large number of mortgage loans which were serviced by PHMC prior to the Asset
Acquisition have been originated recently, the current level of delinquencies,
foreclosures and loan losses may not be representative of the levels which may
be experienced over the lives of such mortgage loans. In addition, because PHMC
ceased the mortgage loan origination and acquisition business subsequent to the
Asset Acquisition, the levels of delinquencies, foreclosures and loan losses as
percentages of PHMC's Retained Servicing portfolio prior to the Asset
Acquisition could rise significantly above the rates indicated in the following
tables.
On May 30, 1997, the servicing of the Mortgage Loans under the Pooling and
Servicing Agreement was sold to CMI. There can be no assurance that the
servicing experience of CMI with respect to the Mortgage Loans will be
comparable to the experience of PHMC and Norwest Mortgage with respect to the
Total Program Loans or the Fixed Program Loans. See "Risk Factors--Recent
Developments--Sale of the Servicing" herein.
S1-15
<PAGE>
TOTAL PROGRAM LOANS
<TABLE>
<CAPTION>
AS OF AS OF AS OF
DECEMBER 31, 1995 DECEMBER 31, 1996 JUNE 30, 1997
-------------------- ------------------------------ --------------------
BY NO. BY DOLLAR BY DOLLAR BY NO. BY DOLLAR
OF AMOUNT BY NO. AMOUNT OF AMOUNT
LOANS OF LOANS OF LOANS OF LOANS LOANS OF LOANS
------- ----------- ------------- ---------------- ------- -----------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total Portfolio of
Program Loans.......... 147,478 $36,537,000 134,499 $32,515,000 127,522 $30,356,000
======= =========== ============ ================ ======= ===========
Period of Delinquency(1)
30 to 59 days......... 1,502 $ 359,137 1,532 $ 354,102 1,312 $ 284,799
60 to 89 days......... 310 75,162 307 72,637 301 67,341
90 days or more....... 277 77,103 361 93,783 330 85,978
------- ----------- ------------ ---------------- ------- -----------
Total Delinquent Loans.. 2,089 $ 511,402 2,200 $ 520,522 1,943 $ 438,118
======= =========== ============ ================ ======= ===========
Percent of Portfolio.... 1.42% 1.40% 1.64% 1.60% 1.52% 1.44%
<CAPTION>
AS OF AS OF AS OF
DECEMBER 31, 1995 DECEMBER 31, 1996 JUNE 30, 1997
-------------------- ------------------------------ --------------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Foreclosures(2)......... $346,096 $295,307 $254,692
Foreclosure Ratio(3).... 0.95% 0.91% 0.84%
<CAPTION>
YEAR ENDED YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 DECEMBER 31, 1996 JUNE 30, 1997
-------------------- ------------------------------ --------------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net Gain (Loss)(4)...... $(150,948) $(112,877) $(51,088)
Net Gain Loss Ratio(5).. (0.41)% (0.32)% (0.17)%
</TABLE>
- -------------------
(1) The indicated periods of delinquency are based on the number of days past
due, based on a 30-day month. No mortgage loan is considered delinquent for
these purposes until one month has passed since its contractual due date. A
mortgage loan is no longer considered delinquent once foreclosure
proceedings have commenced.
(2) Includes loans in the applicable portfolio for which foreclosure
proceedings had been instituted or with respect to which the related
property had been acquired as of the dates indicated.
(3) Foreclosures as a percentage of total loans in the applicable portfolio at
the end of each period.
(4) Does not include gain or loss with respect to loans in the applicable
portfolio for which foreclosure proceedings had been instituted but not
completed as of the dates indicated, or for which the related properties
have been acquired in foreclosure proceedings but not yet sold.
(5) Net gain (loss) as a percentage of total loans in the applicable portfolio
at the end of each period.
S1-16
<PAGE>
FIXED PROGRAM LOANS
<TABLE>
<CAPTION>
AS OF AS OF AS OF
DECEMBER 31, 1995 DECEMBER 31, 1996 JUNE 30, 1997
--------------------- --------------------- ---------------------
BY DOLLAR BY DOLLAR BY DOLLAR
BY NO. AMOUNT BY NO. AMOUNT BY NO. AMOUNT
OF LOANS OF LOANS OF LOANS OF LOANS OF LOANS OF LOANS
-------- ----------- -------- ----------- -------- -----------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total Portfolio of Fixed
Program Loans.......... 119,734 $29,152,000 113,528 $27,083,000 109,161 $25,675,000
======= =========== ======= =========== ======= ===========
Period of Delinquency(1)
30 to 59 days......... 1,073 $ 241,975 1,116 $ 243,152 1,009 $ 208,137
60 to 89 days......... 200 44,225 215 46,517 218 47,373
90 days or more....... 171 46,094 218 55,706 204 52,696
------- ----------- ------- ----------- ------- -----------
Total Delinquent Loans.. 1,444 $ 332,294 1,549 $ 345,375 1,431 $ 308,206
======= =========== ======= =========== ======= ===========
Percent of Fixed Program
Loan Portfolio......... 1.21% 1.14% 1.36% 1.28% 1.31% 1.20%
<CAPTION>
AS OF AS OF AS OF
DECEMBER 31, 1995 DECEMBER 31, 1996 JUNE 30, 1997
--------------------- --------------------- ---------------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Foreclosures(2)......... $186,359 $161,724 $137,520
Foreclosure Ratio(3).... 0.64% 0.60% 0.54%
<CAPTION>
YEAR ENDED YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 DECEMBER 31, 1996 JUNE 30, 1997
--------------------- --------------------- ---------------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net Gain (Loss)(4)...... $(115,100) $(80,740) $(34,876)
Net Gain (Loss)
Ratio(5)............... (0.39)% (0.28)% (0.14)%
</TABLE>
- -------------------
(1) The indicated periods of delinquency are based on the number of days past
due, based on a 30-day month. No mortgage loan is considered delinquent for
these purposes until one month has passed since its contractual due date. A
mortgage loan is no longer considered delinquent once foreclosure
proceedings have commenced.
(2) Includes loans in the applicable portfolio for which foreclosure
proceedings had been instituted or with respect to which the related
property had been acquired as of the dates indicated.
(3) Foreclosures as a percentage of total loans in the applicable portfolio at
the end of each period.
(4) Does not include gain or loss with respect to loans in the applicable
portfolio for which foreclosure proceedings had been instituted but not
completed as of the dates indicated, or for which the related properties
have been acquired in foreclosure proceedings but not yet sold.
(5) Net gain (loss) as a percentage of total loans in the applicable portfolio
at the end of each period.
S1-17
<PAGE>
The likelihood that a mortgagor will become delinquent in the payment of his
or her mortgage loan, the rate of any subsequent foreclosures, and the severity
of any loan loss experience, may be affected by a number of factors related to
a borrower's personal circumstances, including, but not limited to,
unemployment or change in employment (or in the case of self-employed
mortgagors or mortgagors relying on commission income, fluctuations in income),
marital separation and the mortgagor's equity in the related mortgaged
property. In addition, delinquency, foreclosure and loan loss experience may be
sensitive to adverse economic conditions, either nationally or regionally, may
exhibit seasonal or cyclical variations and may be influenced by the level of
interest rates and servicing decisions on the applicable mortgage loans.
Regional economic conditions (including declining real estate values and the
effect of natural disasters) may particularly affect delinquency, foreclosure
and loan loss experience on mortgage loans to the extent that mortgaged
properties are concentrated in certain geographic areas. Furthermore, the level
of foreclosure is affected by the length of time (which will vary from time to
time and from jurisdiction to jurisdiction) to complete the foreclosure process
and take title to the related property. The Seller believes that the changes in
the delinquency, foreclosure and loan loss experience of PHMC's respective
servicing portfolios during the periods set forth in the preceding tables may
be attributable to factors such as those described above, although the Seller
is unable to assess to what extent these changes are the result of any
particular factor or a combination of factors. The delinquency, foreclosure and
loan loss experience on the Mortgage Loans may be particularly affected to the
extent that the related Mortgaged Properties are concentrated in areas which
experience adverse economic conditions or declining real estate values. See
"Risk Factors--Yield Considerations" and "Description of the Mortgage Loans"
herein and "Yield and Prepayment Considerations" in the Prospectus Supplement
and the Prospectus.
S1-18
<PAGE>
HISTORICAL PREPAYMENTS
The prepayment model used in this Supplement is a conditional (also known as
a constant) prepayment rate ("CPR"). CPR represents a rate of payment of
unscheduled principal on mortgage loans, expressed as an annualized percentage
of the outstanding principal balance of such mortgage loans at the beginning of
each period. CPR does not purport to be a historical description of prepayment
experience or a prediction of the anticipated rate of prepayment of any pool of
mortgage loans, including the Mortgage Loans. See "Prepayment and Yield
Considerations" in the Prospectus Supplement.
The Series 1992-32 Certificates were issued on September 25, 1992. Set forth
below are the approximate prepayment rates as a percentage of CPR as of the
Distribution Dates occurring in the indicated months.
HISTORICAL PREPAYMENT RATES
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
MONTH OF CPR MONTH OF CPR
- ----- ---------- ----- ----------
<S> <C> <C> <C>
October 1992............ 1.58% March 1995.............. 10.40%
November 1992........... 1.02% April 1995.............. 10.87%
December 1992........... 0.21% May 1995................ 6.73%
January 1993............ 7.36% June 1995............... 0.96%
February 1993........... 2.79% July 1995............... 20.85%
March 1993.............. 0.15% August 1995............. 16.69%
April 1993.............. 2.63% September 1995.......... 16.11%
May 1993................ 5.55% October 1995............ 22.53%
June 1993............... 15.54% November 1995........... 20.54%
July 1993............... 20.39% December 1995........... 16.73%
August 1993............. 16.68% January 1996............ 12.36%
September 1993.......... 33.58% February 1996........... 13.14%
October 1993............ 55.27% March 1996.............. 22.28%
November 1993........... 68.09% April 1996.............. 7.72%
December 1993........... 79.93% May 1996................ 17.27%
January 1994............ 68.17% June 1996............... 20.29%
February 1994........... 40.41% July 1996............... 29.74%
March 1994.............. 38.85% August 1996............. 23.96%
April 1994.............. 34.34% September 1996.......... 16.15%
May 1994................ 27.98% October 1996............ 5.84%
June 1994............... 28.03% November 1996........... 14.84%
July 1994............... 7.35% December 1996........... 21.51%
August 1994............. 12.94% January 1997............ 15.52%
September 1994.......... 25.34% February 1997........... 11.83%
October 1994............ 17.38% March 1997.............. 12.30%
November 1994........... 13.44% April 1997.............. 21.94%
December 1994........... 3.95% May 1997................ 16.38%
January 1995............ 14.66% June 1997............... 10.67%
February 1995........... 9.16% July 1997............... 8.61%
</TABLE>
The prepayment rates described above were calculated based upon the weighted
average Mortgage Interest Rate of the Mortgage Loans for the applicable month
and an assumed weighted average remaining term to maturity for the Mortgage
Loans equal to the weighted average remaining term to maturity at the date of
the initial issuance of the Series 1992-32 Certificates with respect to
S1-19
<PAGE>
October 1992, reduced by one-month for each month thereafter. The prepayment
history of the Mortgage Loans underlying the Series 1992-32 Certificates cannot
be relied upon as an indicator of the future rate of prepayments on the
Mortgage Loans. Further, the rate of prepayment of a pool of mortgage loans
during any period should be considered in light of the amount of time elapsed
since the origination of such mortgage loans, the remaining terms to stated
maturity of such mortgage loans and the absolute levels of, and changes in,
prevailing market interest rates during such period. For a further discussion
of the factors affecting the rate of prepayments on mortgage loans, see "Risk
Factors--Yield Considerations" herein and "Summary Information--Effects of
Prepayments on Investment Expectations" and "Prepayment and Yield
Considerations" in the Prospectus Supplement. INVESTORS ARE URGED TO MAKE AN
INDEPENDENT DECISION AS TO THE APPROPRIATE PREPAYMENT ASSUMPTIONS TO BE USED IN
DECIDING WHETHER TO PURCHASE THE CLASS A-10 CERTIFICATES.
SENSITIVITY OF THE PRE-TAX YIELD TO MATURITY AND WEIGHTED
AVERAGE LIFE OF THE CLASS A-10 CERTIFICATES
The Prospectus Supplement and the Prospectus contain important information
concerning factors that will affect the yield and weighted average life of the
Class A-10 Certificates. Investors are urged to read "Risk Factors--Yield
Considerations" herein and "Prepayment and Yield Considerations" in the
Prospectus Supplement and the Prospectus particularly carefully.
THE YIELD TO AN INVESTOR IN THE CLASS A-10 CERTIFICATES, WHICH ARE EXPECTED
TO BE OFFERED AT A SUBSTANTIAL PREMIUM, WILL BE HIGHLY SENSITIVE TO BOTH THE
TIMING OF RECEIPT AND THE OVERALL RATE OF PRINCIPAL PREPAYMENTS (FOR THIS
PURPOSE, THE TERM "PREPAYMENT" INCLUDES FULL AND PARTIAL PREPAYMENTS BY
MORTGAGORS, LIQUIDATIONS DUE TO DEFAULT, CASUALTY, CONDEMNATION AND THE LIKE,
REPURCHASES DUE TO BREACH OF REPRESENTATIONS AND OPTIONAL PURCHASES) ON THE
MORTGAGE LOANS, PARTICULARLY WITH RESPECT TO THOSE MORTGAGE LOANS WITH HIGHER
RATES OF INTEREST, WHICH OVERALL RATE MAY FLUCTUATE SIGNIFICANTLY FROM TIME TO
TIME. AN INVESTOR IN THE CLASS A-10 CERTIFICATES SHOULD FULLY CONSIDER THE
ASSOCIATED RISKS, INCLUDING THE RISK THAT A RAPID RATE OF PRINCIPAL PAYMENTS
(INCLUDING PREPAYMENTS) COULD RESULT IN THE FAILURE OF SUCH INVESTOR TO FULLY
RECOVER ITS INITIAL INVESTMENT.
For purposes of the table set forth below, the weighted average life of a
Class A-10 Certificate is the average amount of time that will elapse from
August 20, 1997 until the Adjusted Unpaid Principal Balances (as defined below)
of the Mortgage Loans are reduced to zero. The weighted average life of the
Class A-10 Certificates will be influenced by, among other things, the rate and
timing of principal payments on the Mortgage Loans, which may be in the form of
scheduled amortization, payments at maturity, prepayments or liquidation
proceeds.
The following table has been prepared on the basis of the characteristics of
the Mortgage Loans that are included in the Trust Estate as of July 17, 1997,
as described above under "Description of the Mortgage Loans" adjusted to
reflect calculated payments of principal on August 1, 1997 assuming a constant
prepayment rate equal to 15% CPR for the month of July 1997. This adjustment
has the effect of reducing the remaining terms to stated maturity of each
Mortgage Loan by one month from the table shown on page S1-9. The Unpaid
Principal Balances of the Mortgage Loans adjusted as described above are
referred to herein as the "Adjusted Unpaid Principal Balances." The following
table indicates the sensitivity to various rates of prepayment on the Mortgage
Loans of the pre-tax yield to maturity, on a corporate bond equivalent ("CBE")
basis, and of the weighted average life of the Class A-10 Certificates at
various percentages of CPR. Such calculations are based on distributions made
in accordance with "Description of the Certificates" herein and in the
Prospectus Supplement, on the assumptions described in clauses (i) and (iii) of
the first paragraph on page S-44 of the Prospectus Supplement, and on the
further assumptions that (i) the Class A-10 Certificates will be purchased on
August 20, 1997 for an aggregate purchase price equal to approximately $872,006
which includes
S1-20
<PAGE>
accrued interest from August 1, 1997 to (but not including) August 20, 1997,
(ii) distributions to holders of Class A-10 Certificates will be made on the
25th day of each month commencing in September 1997, (iii) scheduled monthly
payments of principal and interest on the Mortgage Loans will be timely
received on the first day of each month (with no defaults), commencing in
September 1997, (iv) principal prepayments on the Mortgage Loans will be
received on the last day of each month commencing in August 1997 at the
respective percentages of CPR set forth in the table and there are no
Prepayment interest Shortfalls, (v) the Class A-10 Notional Amount applicable
to the Distribution Date occurring in September 1997 will be approximately
$74,327,252 and (vi) the Class A Subclass Principal Balance of the Class A-10
Certificates as of the Determination Date occurring in September 1997 will be
approximately $246.
SENSITIVITY OF THE PRE-TAX YIELD TO MATURITY AND WEIGHTED AVERAGE LIFE
OF THE CLASS A-10 CERTIFICATES TO PREPAYMENTS
<TABLE>
<CAPTION>
PERCENTAGES OF CPR
---------------------------------------
10% 15% 20% 25% 30% 34%
----- ----- ----- ----- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Pre-Tax Yield to Maturity.......... 31.03% 24.77% 18.33% 11.67% 4.78% (0.92)%
Weighted Average Life (years)...... 7.35 5.40 4.16 3.33 2.73 2.37
</TABLE>
The pre-tax yields to maturity set forth in the preceding table were
calculated by (i) determining the monthly discount rates which, when applied to
the assumed stream of cash flows to be paid on the Class A-10 Certificates,
would cause the discounted present value of such assumed stream of cash flows
to equal an assumed purchase price for the Class A-10 Certificates equal to
approximately $872,006, which includes accrued interest from August 1, 1997 to
(but not including) August 20, 1997, and (ii) converting such monthly rates to
corporate bond equivalent rates. Such calculation does not take into account
the interest rates at which an investor may be able to reinvest funds received
by such investor as distributions on the Class A-10 Certificates and
consequently does not purport to reflect the return on any investment in the
Class A-10 Certificates when such reinvestment rates are considered.
The weighted average lives of the Class A-10 Certificates set forth in the
preceding table were determined by (i) multiplying the amount of net reduction
of the Adjusted Unpaid Principal Balances of the Mortgage Loans by the number
of years from August 20, 1997 to the related Distribution Date, (ii) adding the
results and (iii) dividing the sum by the aggregate net reduction of the
Adjusted Unpaid Principal Balances of the Mortgage Loans referred to in clause
(i).
The assumptions set forth above and reflected in the above table are for
illustrative purposes only and vary considerably in terms of likelihood of
occurrence on an individual basis, but the likelihood of all occurring is
extremely remote. The Seller makes no representation with respect to the
reasonableness of such assumptions or that the actual rates of prepayments will
in any way correspond to any of the percentages of CPR assumed for purposes of
the table. It is highly unlikely that the Mortgage Loans will prepay at the
constant rate or combination of rates, or that all of the Mortgage Loans will
prepay at the same rate. It is also unrealistic to assume that there will be no
losses with respect to the Mortgage Loans. As a result of these factors, the
pre-tax yield to maturity and weighted average life of the Class A-10
Certificates are likely to differ from those shown in such table, even if all
of the Mortgage Loans prepay at the indicated percentages of CPR.
S1-21
<PAGE>
POOLING AND SERVICING AGREEMENT
REPRESENTATIONS AND WARRANTIES
At the time of the initial issuance of the Series 1992-32 Certificates, the
Seller made certain representations and warranties to the Trustee relating to
the Mortgage Loans. Those representations and warranties were made as of the
date of such initial issuance, and are not made as of any date or with respect
to any period after such issuance, or in connection with the sale of the Class
A-10 Certificates. See "The Trust Estates--Mortgage Loans--Representations and
Warranties" in the Prospectus.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Elections have been made to treat the Trust Estate as two REMICs (the "Upper-
Tier REMIC" and the "Lower-Tier REMIC") for federal income tax purposes. The
Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6, Class A-7,
Class A-8, Class A-9 and Class A-10 Certificates and the Class B Certificates
are designated as the regular interests in the Upper-Tier REMIC and the Class
A-R and Class A-LR Certificates are designated as the residual interests in the
Upper-Tier REMIC and Lower-Tier REMIC, respectively.
The Class A-10 Certificates are treated as "loans . . . secured by an
interest in real property which is . . . residential real property" for
domestic building and loan associations and "real estate assets" for real
estate investment trusts to the extent described in the Prospectus.
The Class A-10 Certificates generally are treated as debt instruments
originated on the date of original issuance of the Series 1992-32 Certificates
for federal income tax purposes. Holders of the Class A-10 Certificates will be
required to report income thereon in accordance with the accrual method of
accounting. Final and temporary Treasury regulations regarding original issue
discount (the "OID Regulations") were issued on February 2, 1994, indicating
that either the OID Regulations or the Proposed OID Regulations (as defined and
discussed in the Prospectus) may be relied upon as authority with respect to
debt instruments issued on the date of original issuance of the Series 1992-32
Certificates. Although not free from doubt, the Seller believes that, under
both the OID Regulations (as subsequently amended effective June 14, 1996) and
the Proposed OID Regulations, the Class A-10 Certificates are considered to
have been issued with original issue discount in an amount equal to the excess
of all distributions of principal and interest expected to be received thereon
over their issue price (including accrued interest). Any "negative" amounts of
original issue discount on the Class A-10 Certificates attributable to rapid
prepayments will not be deductible currently, but may be offset against future
positive accruals of original issue discount, if any. The holder of a Class A-
10 Certificate may be entitled to a loss deduction to the extent it becomes
certain that such holder will not recover a portion of its basis in such
Certificate, assuming no further prepayments. The Seller makes no
representation as to the timing or amount of such losses, if any, or how any
such losses will be reported to the holders. See "Certain Federal Income Tax
Consequences--Federal Income Tax Consequences for REMIC Certificates--Taxation
of Regular Certificates--Original Issue Discount and "--Treatment of Losses" in
the Prospectus. The adjusted issue price of a Class A-10 Certificate as of the
date of purchase by an investor is its original issue price, plus original
issue discount accrued since the date of original issuance of the Series 1992-
32 Certificates, less distributions made, and losses, if any, incurred, on the
Class A-10 Certificates since the date of original issuance of the Series 1992-
32 Certificates. A purchase price for a Class A-10 Certificate that is less
than or greater than the adjusted issue price of such Class A-10 Certificate
will result in market discount or acquisition premium, respectively, to the
beneficial owner thereof, as discussed in the Prospectus under "Certain Federal
Income Tax Consequences--Federal Income Tax Consequences for REMIC
Certificates--Taxation of Regular Certificates--Market Discount" and "--
Acquisition Premium."
S1-22
<PAGE>
The Prepayment Assumption that is to be used in determining the rate of
accrual of original issue discount is set forth in the Prospectus Supplement
under "Federal Income Tax Considerations--Regular Certificates." No
representation is made as to the actual rate at which the Mortgage Loans will
prepay.
The Taxpayer Relief Act of 1997 reduced the maximum rate of tax of
individuals on the sale of certain capital assets held for more than 18 months
and significantly amended the Code in certain other respects. Investors should
consult their tax advisers regarding the consequences to them of the Taxpayer
Relief Act of 1997. As stated on page S1-2 hereof, the Class A-10 Certificates
are generally not appropriate investments for individual investors.
See "Summary Information--Federal Income Tax Status" and "Federal Income Tax
Considerations" in the Prospectus Supplement and "Certain Federal Income Tax
Consequences--Federal Income Tax Consequences for REMIC Certificates" in the
Prospectus.
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement dated as of
June 17, 1997, and the terms agreement dated as of August 12, 1997 (together,
the "Underwriting Agreement") among the Seller, Prudential Insurance and
Salomon Brothers Inc, as underwriter (the "Underwriter"), the Class A-10
Certificates offered hereby are being purchased from the Seller by the
Underwriter on or about August 20, 1997. The Underwriter is committed to
purchase all of the Class A-10 Certificates offered hereby if any Class A-10
Certificates are purchased. The Underwriter has advised the Seller that it
proposes to offer the Class A-10 Certificates, from time to time, for sale in
negotiated transactions or otherwise at prices determined at the time of sale
and that Lazard Freres & Co. LLC (the "Dealer") also proposes to offer the
Class A-10 Certificates, from time to time, for sale in negotiated transactions
or otherwise at prices determined at the time of sale. Proceeds to the Seller
from the sale of the Class A-10 Certificates are expected to be approximately
1.15% of the Pool Scheduled Principal Balance as of the Distribution Date in
September 1997 without giving effect to partial principal prepayments or
partial liquidation proceeds received on or after the Determination Date in
August 1997, plus accrued interest from August 1, 1997 to (but not including)
August 20, 1997. The Underwriter, the Dealer and any other dealers that
participate with the Underwriter in the distribution of the Class A-10
Certificates may be deemed to be underwriters, and any discounts or commissions
received by them and any profit on the resale of Class A-10 Certificates by
them may be deemed to be underwriting discounts or commissions, under the
Securities Act of 1933, as amended (the "Securities Act").
The Underwriting Agreement provides that the Seller and Prudential Insurance
will indemnify the Underwriter against certain civil liabilities under the
Securities Act or contribute to payments which the Underwriter may be required
to make in respect thereof.
SECONDARY MARKET
There will not be any market for the Class A-10 Certificates offered hereby
prior to the offering thereof. The Underwriter intends to act as a market maker
in the Class A-10 Certificates, subject to applicable provisions of federal and
state securities laws and other regulatory requirements, but is under no
obligation to do so. There can be no assurance that a secondary market in the
Class A-10 Certificates will develop or, if such a market does develop, that it
will provide holders of Class A-10 Certificates with liquidity of investment at
any particular time or for the life of the Class A-10 Certificates. As a source
of information concerning the Class A-10 Certificates and the Mortgage Loans,
prospective investors may obtain copies of the reports included in monthly
statements to
S1-23
<PAGE>
Certificateholders described under "Description of Certificates--Reports" in
the Prospectus Supplement upon written request to the Trustee at the Corporate
Trust Office.
ERISA CONSIDERATIONS
As described in the Prospectus under "ERISA Considerations," ERISA and the
Code impose certain duties and restrictions on any person which is an employee
benefit plan or other retirement plan or arrangement subject to Title I of
ERISA and/or Code Section 4975 (each, an "ERISA Plan") or is utilizing the
assets of an ERISA Plan and on certain persons who perform services for ERISA
Plans. Comparable duties and restrictions may exist under federal, state or
local laws ("Similar Law"), which are, to a material extent, similar to the
foregoing sections of ERISA or the Code, on governmental plans and certain
persons who perform services for governmental plans. For example, unless
exempted, investment by an ERISA Plan in the Class A-10 Certificates may
constitute a prohibited transaction under ERISA or the Code. There are certain
exemptions issued by the United States Department of Labor (the "DOL") that may
be applicable to an investment by an ERISA Plan in the Class A-10 Certificates,
including the individual administrative exemption described below and
Prohibited Transaction Class Exemption 83-1 ("PTE 83-1"). For a further
discussion of PTE 83-1, including the necessary conditions to its
applicability, and other important factors to be considered by an ERISA Plan
contemplating investing in the Class A-10 Certificates, see "ERISA
Considerations" in the Prospectus.
On October 17, 1989, the DOL issued to the Underwriter an individual
administrative exemption, Prohibited Transaction Exemption 89-89, 54 Fed. Reg.
42589 (the "Exemption"), from certain of the prohibited transaction rules of
ERISA and corresponding provisions of Code Section 4975 with respect to the
initial purchase, the holding and the subsequent resale by an ERISA Plan of
certificates in pass-through trusts that meet the considerations and
requirements of the Exemption. The Exemption might apply to the acquisition,
holding and resale of the Class A-10 Certificates by an ERISA Plan, provided
that specified conditions are met.
Among the conditions which would have to be satisfied for the Exemption to
apply to the acquisition by an ERISA Plan of the Class A-10 Certificates is the
condition that the ERISA Plan investing in the Class A-10 Certificates be an
"accredited investor" as defined in Rule 501(a)(1) of Regulation D of the
Securities and Exchange Commission under the Securities Act.
Before purchasing a Class A-10 Certificate, a fiduciary of an ERISA Plan
should make its own determination as to the availability of the exemptive
relief provided in the Exemption or the availability of any other prohibited
transaction exemptions (including PTE 83-1), and whether the conditions of any
such exemption will be applicable to the Class A-10 Certificates; a fiduciary
of a governmental plan should make its own determination as to the need for and
the availability of any exemptive relief under Similar Law. A fiduciary of an
ERISA Plan considering whether to purchase a Class A-10 Certificate should also
carefully review with its own legal advisors the applicability of the fiduciary
duty and prohibited transaction provisions of ERISA and the Code to such
investment. See "ERISA Considerations" in the Prospectus.
LEGAL INVESTMENT
The Class A-10 Certificates will constitute "mortgage related securities" for
purposes of the Secondary Mortgage Market Enhancement Act of 1984 (the
"Enhancement Act") so long as they are rated in one of the two highest rating
categories by at least one nationally recognized statistical rating
organization. As such, the Class A-10 Certificates are legal investments for
certain entities to the extent provided in the Enhancement Act. However,
institutions subject to the jurisdiction of the Office
S1-24
<PAGE>
of the Comptroller of the Currency, the Board of Governors of the Federal
Reserve System, the Federal Deposit Insurance Corporation, the Office of Thrift
Supervision, the National Credit Union Administration or state banking or
insurance authorities should review applicable rules, supervisory policies and
guidelines of these agencies before purchasing a Class A-10 Certificate, as
such Certificates may be deemed to be unsuitable investments under one or more
of these rules, policies and guidelines and certain restrictions may apply to
investments in the Class A-10 Certificates. It should also be noted that
certain states have enacted, or have proposed enacting, legislation limiting to
varying extents the ability of certain entities (in particular insurance
companies) to invest in mortgage related securities. Investors should consult
with their own legal advisors in determining whether and to what extent the
Class A-10 Certificates constitute legal investments for such investors. See
"Legal Investment" in the Prospectus.
LEGAL MATTERS
The validity of the Class A-10 Certificates and certain tax matters with
respect thereto will be passed upon for the Seller by Cadwalader, Wickersham &
Taft, New York, New York. Certain legal matters will be passed upon for the
Underwriter by Brown & Wood LLP, New York, New York.
USE OF PROCEEDS
The net proceeds to be received from the sale of the Class A-10 Certificates
will be applied by the Seller to the purchase from an affiliate of the Class A-
10 Certificates.
RATINGS
The Class A-10 Certificates have been rated "Aaa" by Moody's and "AAAr" by
S&P. See "Ratings" in the Prospectus Supplement for a further discussion of the
ratings of the Certificates. S&P assigns the additional rating of "r" to
highlight classes of securities that S&P believes may experience high
volatility or high variability in expected returns due to non-credit risks.
The ratings of Moody's on mortgage pass-through certificates address the
likelihood of the receipt by certificateholders of all distributions of
principal and interest to which such certificateholders are entitled. Moody's
rating opinions address the structural, legal and issuer aspects associated
with the certificates, including the nature of the underlying mortgage loans
and the credit quality of the credit support provider, if any. Moody's ratings
on pass-through certificates do not represent any assessment of the likelihood
that principal prepayments may differ from those originally anticipated and
consequently any adverse effect the timing of such prepayments could have on an
investor's anticipated yield.
S&P's ratings on mortgage pass-through certificates address the likelihood of
receipt by certificateholders of timely payments of interest and ultimate
return of principal. S&P's 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 of the mortgage pool is adequate to make payment required under
the certificates. S&P's ratings on the certificates do not, however, constitute
a statement regarding the 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, it should be noted that in some structures a default on a mortgage is
treated as a prepayment and may have the same effect on yield as a prepayment.
S1-25
<PAGE>
The ratings of Moody's and S&P do not address the possibility that, as a
result of principal prepayments, Certificateholders may receive a lower than
anticipated yield or the possibility that, as a result of prepayments,
investors in the Class A-10 Certificates may fail to fully recoup their initial
investment.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
There are incorporated herein by reference all documents and reports filed or
caused to be filed by the Seller with respect to the Trust Estate pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination
of the offering of the Class A-10 Certificates. PHMSC will provide or cause to
be provided without charge to each person to whom this Supplement is delivered
in connection with the offering of the Class A-10 Certificates, a list
identifying all filings with respect to a Trust Estate pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act, since the Seller's latest fiscal
year covered by its annual report on Form 10-K and a copy of any or all
documents or reports incorporated herein by reference, in each case to the
extent such documents or reports relate to the Class A-10 Certificates, other
than the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Requests to the Seller should be
directed to: The Prudential Home Mortgage Securities Company, Inc., 7470 New
Technology Way, Frederick, Maryland 21703, telephone number (301) 624-1700.
S1-26
<PAGE>
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT AND PROSPECTUS IN CONNEC-
TION WITH THE OFFER MADE BY THIS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
SUPPLEMENT AND PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESEN-
TATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE SELLER OR BY
THE UNDERWRITER. NEITHER THIS SUPPLEMENT NOR THE ACCOMPANYING PROSPECTUS SUP-
PLEMENT OR PROSPECTUS CONSTITUTES AN OFFER TO SELL OR THE SOLICITATION OF ANY
OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS SUPPLE-
MENT AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT AND PROSPECTUS, NOR DO THEY
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY SUCH SECURI-
TIES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS SUPPLEMENT OR PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
--------------
INDEX
SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
General................................................................. S1-3
Risk Factors............................................................ S1-3
Additional Information.................................................. S1-5
Description of the Certificates......................................... S1-6
Description of the Mortgage Loans....................................... S1-8
Delinquency and Foreclosure Experience.................................. S1-15
Historical Prepayments.................................................. S1-19
Sensitivity of the Pre-Tax Yield to Maturity and Weighted Average Life
of the Class A-10 Certificates......................................... S1-20
Pooling and Servicing Agreement......................................... S1-22
Certain Federal Income Tax Consequences................................. S1-22
Underwriting............................................................ S1-23
Secondary Market........................................................ S1-23
ERISA Considerations.................................................... S1-24
Legal Investment........................................................ S1-24
Legal Matters........................................................... S1-25
Use of Proceeds......................................................... S1-25
Ratings................................................................. S1-25
Incorporation of Certain Information by Reference....................... S1-26
PROSPECTUS SUPPLEMENT
Table of Contents....................................................... S-3
Summary Information..................................................... S-4
Description of the Certificates......................................... S-16
Description of the Mortgage Loans....................................... S-30
Origination, Delinquency and Foreclosure Experience..................... S-38
Prepayment and Yield Considerations..................................... S-41
Pooling and Servicing Agreement......................................... S-48
Federal Income Tax Considerations....................................... S-49
ERISA Considerations.................................................... S-52
Legal Investment........................................................ S-53
Secondary Market........................................................ S-53
Underwriting............................................................ S-53
Legal Matters........................................................... S-54
Use of Proceeds......................................................... S-54
Ratings................................................................. S-54
Index of Significant Prospectus Supplement Definitions.................. S-55
PROSPECTUS
Reports................................................................. 2
Additional Information.................................................. 2
Table of Contents....................................................... 3
Summary of Prospectus................................................... 7
The Trust Estates....................................................... 12
Description of the Certificates......................................... 21
Credit Support.......................................................... 34
Prepayment and Yield Considerations..................................... 39
The Seller.............................................................. 41
PHMC.................................................................... 42
Use of Proceeds......................................................... 48
Servicing of the Mortgage Loans......................................... 48
The Pooling and Servicing Agreement..................................... 58
Certain Legal Aspects of the Mortgage Loans............................. 61
Certain Federal Income Tax Consequences................................. 67
ERISA Considerations.................................................... 90
Legal Investment........................................................ 94
Plan of Distribution.................................................... 95
Legal Matters........................................................... 97
Rating.................................................................. 97
Index of Significant Definitions........................................ 98
</TABLE>
--------------
UNTIL NOVEMBER 14, 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE SECURITIES
DESCRIBED IN THIS SUPPLEMENT, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBU-
TION, MAY BE REQUIRED TO DELIVER THIS SUPPLEMENT, THE PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
THIS SUPPLEMENT, THE PROSPECTUS SUPPLEMENT AND THE PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
THE PRUDENTIAL HOME
MORTGAGE SECURITIES
COMPANY, INC.
SELLER
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1992-32
VARIABLE RATE/1/
CLASS A-10 CERTIFICATES
/1/ON THE CLASS A-10 NOTIONAL AMOUNT
SALOMON BROTHERS INC
LAZARD FRERES & CO. LLC
SUPPLEMENT
DATED AUGUST 13, 1997
