<PAGE>
SUPPLEMENT
(To Prospectus dated November 16, 1994 and Prospectus Supplement dated November
18, 1994)
THE PRUDENTIAL HOME MORTGAGE SECURITIES COMPANY, INC.
SELLER
[LOGO OF PRUDENTIAL HOME MORTGAGE SECURITIES COMPANY, INC. APPEARS HERE]
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1994-33
INTEREST PAYABLE MONTHLY, COMMENCING IN SEPTEMBER 1997
VARIABLE RATE/1/ CLASS A-8 CERTIFICATES
/1/ ON THE CLASS A-8 NOTIONAL AMOUNT
-----------------
The Series 1994-33 Mortgage Pass-Through Certificates (the "Series 1994-33
Certificates") are the Series 1994-33 Certificates described in the
accompanying Prospectus Supplement dated November 18, 1994 (the "Prospectus
Supplement") and the accompanying Prospectus dated November 16, 1994 (the
"Prospectus"). The Series 1994-33 Certificates consist of two classes of senior
certificates (the "Class A Certificates" and the "Class AP Certificates,"
respectively) and two classes of subordinated certificates (the "Class M
Certificates" and the "Class B Certificates," respectively). The Class A
Certificates consist of nine 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 and Class A-R Certificates. The Class AP, Class M and
Class B Certificates are not divided into subclasses. ONLY THE CLASS A-8
CERTIFICATES ARE BEING OFFERED HEREBY. The Series 1994-33 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
20 years to approximately 30 years (the "Mortgage Loans"), together with
certain related property. See "Description of the Mortgage Loans" herein and in
the Prospectus Supplement. From the date of the initial issuance of the Series
1994-33 Certificates until May 7, 1996, the Mortgage Loans were serviced by The
Prudential Home Mortgage Company, Inc. ("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-8 CERTIFICATES SHOULD CONSIDER THE FACTORS
DISCUSSED UNDER "RISK FACTORS" HEREIN BEGINNING ON PAGE S1-3.
The credit enhancement for the Series 1994-33 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 and other
unscheduled receipts of principal to the Class A Certificates for at least nine
years beginning on the first Distribution Date after the date of the initial
issuance of the Series 1994-33 Certificates. 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.
DISTRIBUTIONS ON THE CLASS A-8 CERTIFICATES ARE DIRECTLY RELATED TO PAYMENTS ON
THE MORTGAGE LOANS THAT HAVE NET MORTGAGE INTEREST RATES (AS DEFINED HEREIN)
GREATER THAN 8.625% (THE "PREMIUM MORTGAGE LOANS"). THE YIELD TO MATURITY OF
THE CLASS A-8 CERTIFICATES, WHICH ARE INTEREST-ONLY CERTIFICATES AND HAVE NO
PRINCIPAL BALANCE, WILL THEREFORE BE HIGHLY SENSITIVE TO THE RATE AND TIMING OF
PRINCIPAL PAYMENTS (INCLUDING PREPAYMENTS) ON THE PREMIUM 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 PREMIUM MORTGAGE LOANS, PARTICULARLY THOSE
PREMIUM 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
(continued on next page)
-----------------
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-8 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 0.70% of the
aggregate Scheduled Principal Balance of the Premium Mortgage Loans 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-8 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-8 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.
<PAGE>
(Continued from previous page)
INVESTORS TO FULLY RECOVER THEIR INITIAL INVESTMENTS. IN ADDITION, ALTHOUGH
DISTRIBUTIONS ON THE CLASS A-8 CERTIFICATES ARE DIRECTLY RELATED TO PAYMENTS ON
THE PREMIUM MORTGAGE LOANS, THE AMOUNT OF INTEREST TO BE DISTRIBUTED TO THE
CLASS A-8 CERTIFICATES ON ANY DISTRIBUTION DATE WILL BE REDUCED BY THEIR PRO
RATA SHARE OF CERTAIN INTEREST SHORTFALLS AND LOSSES ON THE MORTGAGE LOANS. See
"Risk Factors--Yield Considerations," "Sensitivity of the Pre-Tax Yield to
Maturity and Weighted Average Life of the Class A-8 Certificates" and
"Description of the Certificates" herein, "Description of the Certificates--
Subordination of Class M and Class B Certificates--Allocation of Losses" in the
Prospectus Supplement and "Description of the Certificates--Principal
(including Prepayments)" and "Prepayment and Yield Considerations" in the
Prospectus Supplement and in the Prospectus.
The Class A-8 Certificates are generally not appropriate investments for
individual investors. The Class A-8 Certificates are offered as a single
certificate with a denomination equal to the Class A-8 Notional Amount upon
initial issuance of the Class A-8 Certificates as described herein under
"Description of the Certificates." The Class A-8 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-8 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-8 Certificates. The
Underwriter intends to act as a market maker in the Class A-8 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-8 Certificate at a price equal to
or greater than the price at which such Certificate was purchased.
Distributions in respect of interest are made on the 25th day of each month or
the next succeeding business day to the holders of record of the Class A-8
Certificates on the last business day of the preceding month, to the extent
that their allocable portion of the Pool Distribution Amount (as defined in the
Prospectus Supplement) 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-8 Certificates will equal the
interest accrued during the applicable month. Interest will accrue during each
month on the Class A-8 Certificates at a per annum rate equal to the weighted
average of the Net Mortgage Interest Rates of the Premium Mortgage Loans as of
the first day of such month minus 8.625% on the Class A-8 Notional Amount (as
defined herein), less any Non-Supported Interest Shortfall (as defined in the
Prospectus Supplement) and the interest portion of certain other losses
allocable to the Class A-8 Certificates as described herein and in the
Prospectus Supplement under "Description of the Certificates--Interest."
This Supplement does not contain complete information regarding the Class A-8
Certificates and should be read only in conjunction with the Prospectus
Supplement and the Prospectus. Sales of the Class A-8 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 1994-33 Certificates were issued on November 29, 1994. The Class
A-8 Certificates were not offered to the public at the time of the issuance of
the Series 1994-33 Certificates.
RISK FACTORS
YIELD CONSIDERATIONS
The yield to maturity of the Class A-8 Certificates will be directly related
to the rate of payments of principal on the Premium Mortgage Loans in the Trust
Estate, and will be particularly sensitive to payments of principal on the
Premium Mortgage Loans with higher rates of interest. The rate of principal
payments on the Premium Mortgage Loans will in turn be affected by the
amortization schedules of the Premium Mortgage Loans, the rate of principal
prepayments (including partial prepayments and those resulting from
refinancing) thereon by mortgagors, liquidations of defaulted Premium Mortgage
Loans, repurchases by the Seller of Premium Mortgage Loans as a result of
defective documentation or breaches of representations and warranties, optional
repurchase by the Seller of defaulted Premium 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 Premium
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 Premium 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 Premium 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-8 Certificates may be affected by the
geographic concentration of the Mortgaged Properties securing the Premium
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 New York, California 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 Premium Mortgage Loans, may
LOGO
S1-3
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increase the frequency of delinquencies on and liquidations of the Premium
Mortgage Loans. See "Description of the Mortgage Loans" herein. Increased
liquidations and prepayments may have an adverse effect on the yield to
maturity of the Class A-8 Certificates.
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 has not occurred. See "Pooling and Servicing
Agreement" herein.
AN INVESTOR THAT PURCHASES THE CLASS A-8 CERTIFICATES, WHICH ARE INTEREST-
ONLY CERTIFICATES AND HAVE NO PRINCIPAL BALANCE, SHOULD CONSIDER THE RISK THAT
A FASTER THAN ANTICIPATED RATE OF PRINCIPAL PAYMENTS ON THE PREMIUM 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. IN ADDITION, ALTHOUGH DISTRIBUTIONS ON THE CLASS A-8
CERTIFICATES ARE DIRECTLY RELATED TO PAYMENTS ON THE PREMIUM MORTGAGE LOANS,
THE AMOUNT OF INTEREST TO BE DISTRIBUTED TO THE CLASS A-8 CERTIFICATES ON ANY
DISTRIBUTION DATE WILL BE REDUCED BY THEIR PRO RATA SHARE OF CERTAIN INTEREST
SHORTFALLS AND LOSSES. SEE "DESCRIPTION OF THE CERTIFICATES" HEREIN AND
"DESCRIPTION OF THE CERTIFICATES--SUBORDINATION OF THE CLASS M AND CLASS B
CERTIFICATES--ALLOCATION OF LOSSES" IN THE PROSPECTUS SUPPLEMENT.
For a more detailed discussion of prepayment and yield considerations with
respect to the Class A-8 Certificates, see "Sensitivity of the Pre-Tax Yield to
Maturity and Weighted Average Life of the Class A-8 Certificates" herein and
"Prepayment and Yield Considerations" in the Prospectus Supplement.
DELINQUENT AND FORECLOSED PREMIUM MORTGAGE LOANS
As of July 17, 1997, the Trust Estate included certain Premium Mortgage Loans
with respect to which payments were past due more than 30 days and Premium
Mortgage Loans for which foreclosure proceedings have been instituted. 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
S1-4
<PAGE>
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.
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.
S1-5
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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 1994-
33 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. 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-8 Certificates will be offered in fully registered, certificated
form as a single certificate with a denomination equal to the Class A-8
Notional Amount upon initial issuance of the Class A-8 Certificates. The Class
A-8 Certificates are interest-only certificates and are not entitled to
distribution in respect of principal.
Distributions of interest to holders of Class A-8 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-8 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-8 Certificates will be entitled to a distribution in respect of
interest accrued during each month in an amount up to such Subclass's Class A
Subclass Interest Accrual Amount. The Class A Subclass Interest Accrual Amount
for the Class A-8 Certificates will equal the difference between (a) the
product of (i) 1/12th of the difference between (A) the weighted average of the
Net Mortgage Interest Rates of the Premium Mortgage Loans (based on the
Scheduled Principal Balances of the Premium Mortgage Loans as of such
Distribution Date) and (B) 8.625% and (ii) the Class A-8 Notional Amount and
(b) the portion of (i) any Non-Supported Interest Shortfall allocable to such
Subclass, (ii) the interest portion of Excess Special Hazard Losses, Excess
Fraud Losses and Excess Bankruptcy Losses allocable to such Subclass, and (iii)
the interest portion of any Realized Losses, other than the interest portion of
Excess Special Hazard Losses, Excess Fraud Losses and Excess Bankruptcy Losses
allocable to such Subclass on or after the Cross-Over Date (as defined in the
Prospectus Supplement) as described under "Description of the Certificates--
Interest" in the Prospectus Supplement.
The "Net Mortgage Interest Rate" on each Premium Mortgage Loan is equal to
the Mortgage Interest Rate on such Premium 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.
S1-6
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The "Class A-8 Notional Amount" with respect to each Distribution Date will
be equal to the aggregate Scheduled Principal Balance of the Premium Mortgage
Loans, as defined under "Description of the Certificates--Principal (Including
Prepayments)" in the Prospectus Supplement, as of such Distribution Date. The
Class A-8 Notional Amount with respect to the Distribution Date in July 1997
was approximately $84,531,334. The Class A-8 Notional Amount with respect to
the Distribution Date in September 1997 will be equal to the Class A-8 Notional
Amount with respect to the Distribution Date in July 1997, less scheduled
principal payments on the Premium Mortgage Loans for July and August 1997,
principal prepayments in full on the Premium Mortgage Loans received on and
after the Determination Date in June 1997 and prior to the Determination Date
in August 1997, other unscheduled recoveries in full on the Premium Mortgage
Loans received in June and July 1997 and partial principal prepayments and
partial liquidation proceeds on the Premium Mortgage Loans 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-8 Notional Amount upon initial issuance of the Class A-8
Certificates was approximately $142,664,508. 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. The Pool Distribution Amount will be
allocated among the Classes of Series 1994-33 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-8 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 November 1, 1994 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 20 years to 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 673 promissory notes, having an aggregate Unpaid
Principal Balance of approximately $135,795,469, secured by first liens (the
"Mortgages") on one- to four-family residential properties (the "Mortgaged
Properties"). As of July 17, 1997, the Premium Mortgage Loans included 464
promissory notes, having an aggregate Unpaid Principal Balance (the "Aggregate
Unpaid Principal Balance") of approximately $83,764,348.
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 Premium Mortgage Loan had an Unpaid Principal
Balance of not less than approximately $1,452 or more than approximately
$765,363, and the average Unpaid Principal Balance of the Premium Mortgage
Loans was approximately $180,527. The latest stated maturity date
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of any of the Premium Mortgage Loans was November 1, 2024, however, the actual
date on which any Premium Mortgage Loan is paid in full may be earlier than the
stated maturity date due to unscheduled payments of principal. 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.
Set forth below is a description of certain additional characteristics of the
Premium Mortgage Loans as of July 17, 1997 (except as otherwise indicated).
MORTGAGE INTEREST RATES
OF THE PREMIUM MORTGAGE LOANS
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
PREMIUM AGGREGATE UNPAID AGGREGATE UNPAID
MORTGAGE INTEREST RATE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ---------------------- -------------- ----------------- -----------------
<S> <C> <C> <C>
8.875%....................... 114 $26,357,913.59 31.48%
9.000%....................... 64 12,818,059.90 15.30
9.125%....................... 48 8,589,546.48 10.25
9.250%....................... 61 10,741,478.75 12.82
9.375%....................... 56 7,773,483.97 9.28
9.500%....................... 56 8,447,216.29 10.08
9.625%....................... 36 5,365,863.93 6.41
9.750%....................... 16 2,117,341.20 2.53
9.875%....................... 9 919,625.78 1.10
10.000%...................... 3 512,964.92 0.61
10.125%...................... 1 120,853.00 0.14
--- -------------- ------
Total.................... 464 $83,764,347.81 100.00%
=== ============== ======
</TABLE>
As of July 17, 1997, the weighted average Mortgage Interest Rate of the
Premium Mortgage Loans was approximately 9.167% 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 Premium
Mortgage Loans was approximately 8.967% per annum.
REMAINING MONTHS TO STATED MATURITY
OF THE PREMIUM MORTGAGE LOANS
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE
PREMIUM MORTGAGE PERCENTAGE OF
REMAINING STATED MORTGAGE INTEREST AGGREGATE UNPAID AGGREGATE UNPAID
TERM (MONTHS)(/1/) LOANS RATE PRINCIPAL BALANCE PRINCIPAL BALANCE
- ------------------ --------- -------- ----------------- -----------------
<S> <C> <C> <C> <C>
203..................... 1 9.375% $ 120,192.78 0.14%
205..................... 2 9.281 218,635.32 0.26
206..................... 1 8.875 200,511.69 0.24
322..................... 2 8.965 621,711.20 0.74
323..................... 6 8.973 1,204,772.54 1.44
324..................... 11 9.201 2,257,360.39 2.69
325..................... 45 9.225 8,935,321.08 10.67
326..................... 170 9.168 29,006,221.75 34.63
327..................... 171 9.154 30,563,197.55 36.49
328..................... 55 9.182 10,636,423.51 12.70
--- -------------- ------
Total................. 464 $83,764,347.81 100.00%
=== ============== ======
</TABLE>
As of July 17, 1997, the weighted average remaining term to stated maturity
of the Premium Mortgage Loans was approximately 326 months.
S1-8
<PAGE>
YEARS OF ORIGINATION
OF THE PREMIUM MORTGAGE LOANS
<TABLE>
<CAPTION>
NUMBER OF
PREMIUM PERCENTAGE OF
MORTGAGE AGGREGATE UNPAID AGGREGATE UNPAID
YEAR OF ORIGINATION LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
------------------- --------- ----------------- -----------------
<S> <C> <C> <C>
1993......................... 1 $ 271,794.88 0.32%
1994......................... 463 83,492,552.93 99.68
--- -------------- ------
Total...................... 464 $83,764,347.81 100.00%
=== ============== ======
</TABLE>
As of July 17, 1997, the earliest month and year of origination of any
Premium Mortgage Loan was November 1993 and the latest month and year of
origination was October 1994.
ORIGINAL LOAN-TO-VALUE RATIOS
OF THE PREMIUM MORTGAGE LOANS
<TABLE>
<CAPTION>
NUMBER OF
PREMIUM PERCENTAGE OF
MORTGAGE AGGREGATE UNPAID AGGREGATE UNPAID
ORIGINAL LOAN-TO-VALUE RATIO LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
---------------------------- --------- ----------------- -----------------
<S> <C> <C> <C>
50.0% or less................ 28 $ 2,727,585.29 3.26%
50.1-55.0%................... 14 2,709,582.29 3.23
55.1-60.0%................... 16 2,410,717.42 2.88
60.1-65.0%................... 24 4,836,296.36 5.77
65.1-70.0%................... 50 8,051,161.30 9.61
70.1-75.0%................... 92 15,457,198.05 18.45
75.1-80.0%................... 187 33,330,139.02 39.80
80.1-85.0%................... 5 1,358,546.38 1.62
85.1-90.0%................... 48 12,883,121.70 15.38
--- -------------- ------
Total...................... 464 $83,764,347.81 100.00%
=== ============== ======
</TABLE>
As of July 17, 1997, the minimum and maximum Loan-to-Value Ratios at
origination of the Premium Mortgage Loans were approximately 19.0% and
approximately 90.0%, respectively, and the weighted average Loan-to-Value Ratio
at origination of the Premium Mortgage Loans was approximately 75.5%. 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.
S1-9
<PAGE>
PREMIUM MORTGAGE LOAN DOCUMENTATION LEVELS
<TABLE>
<CAPTION>
NUMBER OF
PREMIUM PERCENTAGE OF
MORTGAGE AGGREGATE UNPAID AGGREGATE UNPAID
DOCUMENTATION LEVEL LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
------------------- --------- ----------------- -----------------
<S> <C> <C> <C>
Full Documentation......... 132 $36,992,830.99 44.16%
Asset & Income
Verification.............. 0 0.00 0.00
Asset & Mortgage
Verification.............. 275 37,277,021.60 44.50
Income & Mortgage
Verification.............. 0 0.00 0.00
Asset Verification......... 0 0.00 0.00
Income Verification........ 0 0.00 0.00
Mortgage Verification...... 54 9,044,496.00 10.80
Preferred Processing....... 3 449,999.22 0.54
--- -------------- ------
Total.................... 464 $83,764,347.81 100.00%
=== ============== ======
</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 PRINCIPAL BALANCES OF THE PREMIUM MORTGAGE LOANS
<TABLE>
<CAPTION>
NUMBER OF
PREMIUM PERCENTAGE OF
ORIGINAL MORTGAGE LOAN MORTGAGE AGGREGATE UNPAID AGGREGATE UNPAID
PRINCIPAL BALANCE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ---------------------- --------- ----------------- -----------------
<S> <C> <C> <C>
Less than or equal to $200,000... 261 $26,258,746.84 31.36%
$200,001-$250,000................ 91 19,929,597.91 23.79
$250,001-$300,000................ 47 12,348,506.56 14.74
$300,001-$350,000................ 26 8,200,291.73 9.79
$350,001-$400,000................ 15 5,615,143.16 6.70
$400,001-$450,000................ 11 4,631,973.48 5.53
$450,001-$500,000................ 8 3,746,079.86 4.47
$500,001-$550,000................ 2 996,237.39 1.19
$550,001-$600,000................ 0 0.00 0.00
$600,001-$650,000................ 2 1,272,408.24 1.52
$650,001-$700,000................ 0 0.00 0.00
$700,001-$750,000................ 0 0.00 0.00
$750,001-$800,000................ 1 765,362.64 0.91
$800,001-$850,000................ 0 0.00 0.00
$850,001-$900,000................ 0 0.00 0.00
$900,001-$950,000................ 0 0.00 0.00
$950,001-$1,000,000.............. 0 0.00 0.00
--- -------------- ------
Total.......................... 464 $83,764,347.81 100.00%
=== ============== ======
</TABLE>
As of July 17, 1997, the average Unpaid Principal Balance of the Premium
Mortgage Loans was approximately $180,527. 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 Premium Mortgage Loans which had original principal
balances in excess of $600,000 were approximately 62.9% and 71.4%,
respectively. See "PHMC--Mortgage Loan Underwriting" in the Prospectus.
S1-10
<PAGE>
MORTGAGED PROPERTIES
SECURING THE PREMIUM MORTGAGE LOANS
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
PREMIUM AGGREGATE UNPAID AGGREGATE UNPAID
PROPERTY MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
- -------- -------------- ----------------- -----------------
<S> <C> <C> <C>
Single-family detached...... 413 $77,301,480.32 92.28%
Two- to four-family units... 1 268,538.88 0.32
Condominiums................ 45 5,650,132.44 6.75
Townhouses.................. 4 468,948.75 0.56
Planned Unit Developments... 1 75,247.42 0.09
Cooperative units........... 0 0.00 0.00
--- -------------- ------
Total..................... 464 $83,764,347.81 100.00%
=== ============== ======
</TABLE>
GEOGRAPHIC DISTRIBUTION OF MORTGAGED PROPERTIES SECURING THE PREMIUM MORTGAGE
LOANS
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
PREMIUM AGGREGATE UNPAID AGGREGATE UNPAID
GEOGRAPHIC AREA MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
- --------------- -------------- ----------------- -----------------
<S> <C> <C> <C>
Arizona...................... 4 $ 851,870.65 1.02%
California................... 85 20,509,427.30 24.48
Colorado..................... 9 1,898,436.23 2.27
Connecticut.................. 9 2,090,136.29 2.50
Delaware..................... 1 196,264.60 0.23
District of Columbia......... 1 220,305.07 0.26
Florida...................... 48 6,052,150.67 7.23
Georgia...................... 5 653,300.42 0.78
Hawaii....................... 8 2,900,621.33 3.46
Illinois..................... 11 1,505,722.01 1.80
Indiana...................... 1 127,473.94 0.15
Kansas....................... 2 678,250.19 0.81
Louisiana.................... 1 92,038.41 0.11
Maryland..................... 10 1,750,462.02 2.09
Massachusetts................ 10 2,372,852.22 2.83
Michigan..................... 11 1,692,140.89 2.02
Montana...................... 2 348,217.36 0.42
Nevada....................... 11 1,678,341.22 2.00
New Hampshire................ 3 239,081.60 0.29
New Jersey................... 52 7,886,603.83 9.42
New Mexico................... 4 657,052.03 0.78
New York..................... 120 21,002,876.15 25.06
North Carolina............... 4 621,050.00 0.74
Ohio......................... 3 590,149.80 0.70
Oklahoma..................... 1 128,471.70 0.15
Oregon....................... 8 1,020,835.15 1.22
Pennsylvania................. 12 1,372,579.68 1.64
Rhode Island................. 1 116,359.61 0.14
Tennessee.................... 1 48,510.74 0.06
Texas........................ 12 1,832,535.82 2.19
Utah......................... 4 516,281.89 0.62
Vermont...................... 2 141,660.35 0.17
Virginia..................... 5 1,288,374.57 1.54
Washington................... 3 683,914.07 0.82
--- -------------- ------
Total...................... 464 $83,764,347.81 100.00%
=== ============== ======
</TABLE>
S1-11
<PAGE>
As of July 17, 1997, no more than approximately 1.30% of the Aggregate Unpaid
Principal Balance of the Premium Mortgage Loans was secured by Mortgaged
Properties located in any one five digit zip code.
ORIGINATORS OF THE PREMIUM MORTGAGE LOANS
<TABLE>
<CAPTION>
NUMBER OF
PREMIUM AGGREGATE UNPAID PERCENTAGE OF
MORTGAGE PRINCIPAL AGGREGATE UNPAID
ORIGINATOR LOANS BALANCE PRINCIPAL BALANCE
- ---------- --------- ---------------- -----------------
<S> <C> <C> <C>
PHMC or Affiliate.................. 163 $30,464,510.41 36.37%
Other Originators.................. 301 53,299,837.40 63.63
--- -------------- ------
Total............................ 464 $83,764,347.81 100.00%
=== ============== ======
</TABLE>
PURPOSE OF THE PREMIUM MORTGAGE LOANS
<TABLE>
<CAPTION>
NUMBER OF
PREMIUM AGGREGATE UNPAID PERCENTAGE OF
MORTGAGE PRINCIPAL AGGREGATE UNPAID
LOAN PURPOSE LOANS BALANCE PRINCIPAL BALANCE
- ------------ --------- ---------------- -----------------
<S> <C> <C> <C>
Purchase........................... 372 $64,763,049.30 77.31%
Rate/term refinance................ 45 10,291,425.52 12.29
Equity take out.................... 47 8,709,872.99 10.40
--- -------------- ------
Total............................ 464 $83,764,347.81 100.00%
=== ============== ======
</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 OF THE
PREMIUM MORTGAGE LOANS
<TABLE>
<CAPTION>
NUMBER OF
PREMIUM PERCENTAGE OF
MORTGAGE ACTUAL AGGREGATE UNPAID AGGREGATE UNPAID
STATUS LOANS(1) PRINCIPAL BALANCE(1) PRINCIPAL BALANCE(2)
- ------ --------- ----------------------- --------------------
<S> <C> <C> <C>
30 to 59 days........... 7 $1,410,980.34 1.68%
60 to 89 days........... 1 129,358.04 0.15
90 days or more......... 0 0.00 0.00
Loans in Foreclosure.... 4 979,722.64 1.17
REO Mortgage Loans...... 0 0.00 0.00
--- ------------- ----
Total................. 12 $2,520,061.02 3.00%
=== ============= ====
</TABLE>
- -------
(1) Reflects the number of delinquent Premium Mortgage Loans and the actual
unpaid principal balances of such Premium 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.
S1-12
<PAGE>
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"), (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) mortgage loans originated in connection with
the purchases of residences by relocated employees of various corporate
employers that participated in PHMC's relocation program and by employees of
various non-participating employers ("Relocation Mortgage Loans") and (iii) on
the Fixed Program Loans, other than Relocation Mortgage Loans (the "Fixed Non-
Relocation Program 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 non-
relocation mortgage loans, and PHMC's servicing portfolios of Fixed Program
Loans and Fixed Non-Relocation Program Loans, each of 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.
Historically, Relocation Mortgage Loans have experienced a significantly
lower rate of delinquency and foreclosure than other mortgage loans included in
the portfolios of total Program Loans, Fixed Program Loans and Fixed Non-
Relocation Program Loans. There can be no assurance that the future experience
on the Mortgage Loans, all of which are fixed interest rate mortgage loans
having original terms to stated maturity of approximately 20 years to
approximately 30 years and none of which are Relocation Mortgage Loans, will be
comparable to that of the total Program Loans, the Fixed Program Loans or the
Fixed Non-Relocation Program 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, the Fixed Program Loans or the Fixed Non-Relocation
Program Loans. See "Risk Factors--Recent Developments--Sale of the Servicing"
herein.
S1-13
<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 DOLLAR
OF AMOUNT BY NO. AMOUNT BY NO. AMOUNT
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
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>
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>
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.
S1-14
<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>
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>
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.
S1-15
<PAGE>
FIXED NON-RELOCATION 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
Non-Relocation Program
Loans.................. 112,145 $27,137,000 103,736 $24,438,000 99,991 $23,221,000
======= =========== ======= =========== ====== ===========
Period of Delinquency(1)
30 to 59 days......... 1,029 $ 231,426 1,065 $ 229,462 950 $ 194,282
60 to 89 days......... 197 43,488 209 45,044 211 45,870
90 days or more....... 167 44,974 213 54,415 200 51,559
------- ----------- ------- ----------- ------ -----------
Total Delinquent Loans.. 1,393 $ 319,888 1,487 $ 328,921 1,361 $ 291,711
======= =========== ======= =========== ====== ===========
Percent of Fixed Non-
Relocation Program Loan
Portfolio.............. 1.24% 1.18% 1.43% 1.35% 1.26% 1.36%
<CAPTION>
AS OF AS OF AS OF
DECEMBER 31, 1995 DECEMBER 31, 1996 JUNE 30, 1997
--------------------- --------------------- --------------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Foreclosures(2)......... $183,856 $158,267 $125,537
Foreclosure Ratio(3).... 0.68% 0.65% 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>
Net Gain (Loss)(4)...... $(114,306) $(78,454) $(34,748)
Net Gain (Loss)
Ratio(5)............... (0.42)% (0.32)% (0.15)%
</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>
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.
S1-17
<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 1994-33 Certificates were issued on November 29, 1994. 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
MONTH OF CPR
- ----- ----------
<S> <C>
December 1994........................................................ 9.10%
January 1995......................................................... 5.87%
February 1995........................................................ 2.28%
March 1995........................................................... 0.26%
April 1995........................................................... 0.36%
May 1995............................................................. 3.32%
June 1995............................................................ 4.27%
July 1995............................................................ 22.37%
August 1995.......................................................... 36.72%
September 1995....................................................... 31.06%
October 1995......................................................... 9.28%
November 1995........................................................ 25.30%
December 1995........................................................ 19.14%
January 1996......................................................... 18.91%
February 1996........................................................ 34.40%
March 1996........................................................... 31.80%
April 1996........................................................... 42.61%
May 1996............................................................. 23.16%
June 1996............................................................ 17.95%
July 1996............................................................ 4.70%
August 1996.......................................................... 3.53%
September 1996....................................................... 7.64%
October 1996......................................................... 4.16%
November 1996........................................................ 8.39%
December 1996........................................................ 12.53%
January 1997......................................................... 19.02%
February 1997........................................................ 5.46%
March 1997........................................................... 14.38%
April 1997........................................................... 14.80%
May 1997............................................................. 7.08%
June 1997............................................................ 7.80%
July 1997............................................................ 14.26%
</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 1994-33 Certificates with respect to
December 1994, reduced by one-month for each month thereafter. The prepayment
history of the Mortgage Loans underlying the Series 1994-33 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-8 CERTIFICATES.
S1-18
<PAGE>
SENSITIVITY OF THE PRE-TAX YIELD TO MATURITY AND WEIGHTED
AVERAGE LIFE OF THE CLASS A-8 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-8 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-8 CERTIFICATES, WHICH ARE INTEREST-
ONLY CERTIFICATES AND HAVE NO PRINCIPAL BALANCE, 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
PREMIUM MORTGAGE LOANS, PARTICULARLY WITH RESPECT TO THOSE PREMIUM MORTGAGE
LOANS WITH HIGHER RATES OF INTEREST, WHICH OVERALL RATE MAY FLUCTUATE
SIGNIFICANTLY FROM TIME TO TIME. AN INVESTOR IN THE CLASS A-8 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-8 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 Premium Mortgage Loans are reduced to zero. The weighted average life of
the Class A-8 Certificates will be influenced by, among other things, the rate
and timing of principal payments on the Premium 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 Premium 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
Premium Mortgage Loan by one month from the table shown on page S1-8. The
Unpaid Principal Balances of the Premium 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
Premium 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-8
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 last paragraph beginning on page S-53 of the Prospectus
Supplement, and on the further assumptions that (i) the Class A-8 Certificates
will be purchased on August 20, 1997 for an aggregate purchase price equal to
approximately $596,050 which includes accrued interest from August 1, 1997 to
(but not including) August 20, 1997, (ii) distributions to holders of Class A-8
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 Premium
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 and, (v) the Class A-8 Notional
Amount applicable to the Distribution Date occurring in September 1997 will be
approximately $82,579,316.
S1-19
<PAGE>
SENSITIVITY OF THE PRE-TAX YIELD TO MATURITY AND WEIGHTED AVERAGE LIFE
OF THE CLASS A-8 CERTIFICATES TO PREPAYMENTS
<TABLE>
<CAPTION>
PERCENTAGES OF CPR
----------------------------------------
10% 15% 20% 25% 30% 35% 38%
----- ----- ----- ----- ----- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Pre-Tax Yield to Maturity......... 38.40 31.98 25.36 18.52 11.44 4.09 (0.46)
Weighted Average Life (years)..... 7.74 5.58 4.26 3.38 2.77 2.32 2.10
</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-8 Certificates,
would cause the discounted present value of such assumed stream of cash flows
to equal an assumed purchase price for the Class A-8 Certificates equal to
approximately $596,050, 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-8 Certificates and
consequently does not purport to reflect the return on any investment in the
Class A-8 Certificates when such reinvestment rates are considered.
The weighted average lives of the Class A-8 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 Premium 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 Premium 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 Premium Mortgage Loans will prepay at
the constant rate or combination of rates, or that all of the Premium Mortgage
Loans will prepay at the same rate. It is also unrealistic to assume that there
will be no losses with respect to the Premium Mortgage Loans. As a result of
these factors, the pre-tax yield to maturity and weighted average life of the
Class A-8 Certificates are likely to differ from those shown in such table,
even if all of the Premium Mortgage Loans prepay at the indicated percentages
of CPR.
POOLING AND SERVICING AGREEMENT
REPRESENTATIONS AND WARRANTIES
At the time of the initial issuance of the Series 1994-33 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-8 Certificates. See "The Trust Estates--Mortgage Loans--Representations and
Warranties" in the Prospectus.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
An election has been made to treat the Trust Estate as a REMIC (the "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 and Class A-8 Certificates, the Class AP
Certificates, the Class M Certificates and the Class B Certificates
S1-20
<PAGE>
are designated as the regular interests in the REMIC and the Class A-R
Certificate is designated as the residual interest in the REMIC.
The Class A-8 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-8 Certificates generally are treated as debt instruments
originated on the date of original issuance of the Series 1994-33 Certificates
for federal income tax purposes. Holders of the Class A-8 Certificates will be
required to report income thereon in accordance with the accrual method of
accounting. Although not free from doubt, the Seller believes that, under the
OID Regulations (as amended effective June 14, 1996), the Class A-8
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-8
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-8 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-8 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 1994-33 Certificates, less distributions
made, and losses, if any, incurred, on the Class A-8 Certificates since the
date of original issuance of the Series 1994-33 Certificates. A purchase price
for a Class A-8 Certificate that is less than or greater than the adjusted
issue price of such Class A-8 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."
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-8 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.
S1-21
<PAGE>
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-8
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-8 Certificates offered hereby if any Class A-8
Certificates are purchased. The Underwriter has advised the Seller that it
proposes to offer the Class A-8 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-8 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-8 Certificates are expected to be approximately
0.70% of the aggregate Scheduled Principal Balance of the Premium Mortgage
Loans 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-8 Certificates may be deemed to be underwriters, and any discounts
or commissions received by them and any profit on the resale of Class A-8
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-8 Certificates offered hereby
prior to the offering thereof. The Underwriter intends to act as a market maker
in the Class A-8 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-8 Certificates will develop or, if such a market does develop, that it
will provide holders of Class A-8 Certificates with liquidity of investment at
any particular time or for the life of the Class A-8 Certificates. As a source
of information concerning the Class A-8 Certificates and the Mortgage Loans,
prospective investors may obtain copies of the reports included in monthly
statements to 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-8 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
S1-22
<PAGE>
Class A-8 Certificates, including the individual administrative exemption
described below. For a further discussion of factors to be considered by an
ERISA Plan contemplating investing in the Class A-8 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-8 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-8 Certificates is the
condition that the ERISA Plan investing in the Class A-8 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-8 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, and whether the conditions of any such exemption will
be applicable to the Class A-8 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-8 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-8 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-8 Certificates are legal investments for
certain entities to the extent provided in the Enhancement Act. However,
institutions subject to the jurisdiction of the Office 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-8 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-8
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-8 Certificates constitute
legal investments for such investors. See "Legal Investment" in the Prospectus.
LEGAL MATTERS
The validity of the Class A-8 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.
S1-23
<PAGE>
USE OF PROCEEDS
The net proceeds to be received from the sale of the Class A-8 Certificates
will be applied by the Seller to the purchase from an affiliate of the Class A-
8 Certificates.
RATINGS
The Class A-8 Certificates have been rated "Aaa" by Moody's and "AAA" by
Fitch. See "Ratings" in the Prospectus Supplement for a further discussion of
the ratings of the Certificates.
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.
The ratings of Fitch on mortgage pass-through certificates address the
likelihood of the receipt by certificateholders of all distributions to which
such certificateholders are entitled. Fitch's rating opinions address the
structural and legal aspects associated with the certificates, including the
nature of the underlying mortgage loans. Fitch's ratings on pass-through
certificates do not represent any assessment of the likelihood or rate of
principal prepayments and consequently any adverse effect the timing of such
prepayments could have on an investor's anticipated yield.
The ratings of Fitch and Moody's also do not address the possibility that, as
a result of prepayments, investors in the Class A-8 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-8 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-8 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-8 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.
S1-24
<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.................................................. S1-6
Description of the Certificates......................................... S1-6
Description of the Mortgage Loans....................................... S1-7
Delinquency and Foreclosure Experience.................................. S1-13
Historical Prepayments.................................................. S1-18
Sensitivity of the Pre-Tax Yield to Maturity and Weighted Average Life
of the Class A-8 Certificates.......................................... S1-19
Pooling and Servicing Agreement......................................... S1-20
Certain Federal Income Tax Consequences................................. S1-20
Underwriting............................................................ S1-22
Secondary Market........................................................ S1-22
ERISA Considerations.................................................... S1-22
Legal Investment........................................................ S1-23
Legal Matters........................................................... S1-23
Use of Proceeds......................................................... S1-24
Ratings................................................................. S1-24
Incorporation of Certain Information by Reference....................... S1-24
PROSPECTUS SUPPLEMENT
Table of Contents....................................................... S-3
Summary Information..................................................... S-4
Description of the Certificates......................................... S-18
Description of the Mortgage Loans....................................... S-19
Origination, Delinquency and Foreclosure Experience..................... S-39
Prepayment and Yield Considerations..................................... S-51
Pooling and Servicing Agreement......................................... S-57
Federal Income Tax Considerations....................................... S-59
ERISA Considerations.................................................... S-60
Legal Investment........................................................ S-61
Secondary Market........................................................ S-62
Underwriting............................................................ S-62
Legal Matters........................................................... S-62
Use of Proceeds......................................................... S-62
Ratings................................................................. S-64
Index of Significant Prospectus Supplement Definitions.................. S-65
PROSPECTUS
Reports................................................................. 2
Additional Information.................................................. 2
Additional Detailed Information......................................... 2
Table of Contents....................................................... 3
Summary of Prospectus................................................... 7
The Trust Estates....................................................... 13
Description of the Certificates......................................... 21
Credit Support.......................................................... 33
Prepayment and Yield Considerations..................................... 36
The Seller.............................................................. 39
PHMC.................................................................... 39
Use of Proceeds......................................................... 46
Servicing of the Mortgage Loans......................................... 48
The Pooling and Servicing Agreement..................................... 55
Certain Legal Aspects of the Mortgage Loans............................. 58
Certain Federal Income Tax Consequences................................. 64
ERISA Considerations.................................................... 88
Legal Investment........................................................ 91
Plan of Distribution.................................................... 92
Legal Matters........................................................... 93
Rating.................................................................. 93
Index of Significant Definitions........................................ 94
</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 1994-33
VARIABLE RATE/1/
CLASS A-8 CERTIFICATES
/1/ON THE CLASS A-8 NOTIONAL AMOUNT
SALOMON BROTHERS INC
LAZARD FRERES & CO. LLC
SUPPLEMENT
DATED AUGUST 13, 1997
