SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report: June 30, 1997
CHASE FUNDING, INC.
(formerly known as 'Chemical Mortgage Securities, Inc.')
--------------------------------------------------------
(Exact name of registrant as
specified in its charter)
New York 33-18640 13-3436103
-------- -------- ----------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
270 Park Avenue, New York, New York 10017
---------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 834-5316
<PAGE>
Item 5. Other Events.
On or about April 14, 1997, in accordance with Section 3.21 of the
Pooling and Servicing Agreement, dated as of January 1, 1996 (the "Pooling and
Servicing Agreement") among Chase Funding, Inc. (formerly known as "Chemical
Mortgage Securities, Inc.") (the "Seller"), Chase Manhattan Mortgage Corporation
(the "Master Servicer") and The First National Bank of Chicago (the "Trustee"),
the Master Servicer delivered to the Trustee a certificate (the "Master
Servicer's Certificate").
On or about March 28, 1997, in accordance with Section 3.22 of the
Pooling and Servicing Agreement, Price Waterhouse LLP furnished to the Trustee
and the Seller a report (the "Accountant's Report").
A copy of each of the Master Servicer's Certificate and the
Accountant's Report is being filed as Exhibits 20.1 and 20.2, respectively.
Item 7(c). Exhibits.
Exhibit Nos. Description
------------ -----------
20.1 Master Servicer's Certificate
20.2 Accountant's Report
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Date: June 30, 1997
CHASE FUNDING, INC.
By: /s/ Michael D. Katz
-------------------
Michael D. Katz
Senior Vice President
<PAGE>
INDEX TO EXHIBITS
-----------------
Exhibit Nos. Description
------------ -----------
20.1 Master Servicer's Certificate
20.2 Accountant's Report
Exhibit 20.1
------------
OFFICERS' CERTIFICATE
Multiclass-Mortgage Pass Through Certificates Series 1996-1
Pursuant to Section 3.21 of the Pooling and Servicing Agreement dated January 1,
1996 between Chase Funding, Inc. (formerly known as "Chemical Mortgage
Securities, Inc."), as Seller, Chase Manhattan Mortgage Corporation (formerly
known as "Chemical Residential Mortgage Corporation"), as Master Servicer and
The First National Bank of Chicago, as Trustee, hereby provides the following
Officers' Certificate:
(i) A review of the activities of the Master Servicer during
the preceding calendar year and of performance under the
related Pooling and Servicing Agreement has been made under
such officers' supervision; and
(ii) to the best of such officers' knowledge, based on such
review, the Master Servicer has fulfilled all of its
obligations under the related Pooling and Serving Agreement
throughout the preceding calendar year, or if there has been a
default in the fulfillment of any such obligation, specifying
each such default known to such default known to such officers
and the nature and status thereof.
/s/Theresa M. McCue
- -------------------
Theresa M. McCue
Vice President
/s/Judith A. Wolfe
- ------------------
Judith A. Wolfe
Assistant Treasurer
April 14, 1997
Exhibit 20.2
------------
Price Waterhouse LLP
Report of Independent Accountants
March 28, 1997
The Board of Directors and Shareholder
of Chase Manhattan Mortgage Corporation
We have audited, in accordance with generally accepted auditing standards, the
consolidated balance sheet of Chase Manhattan Mortgage Corporation (the
"Corporation") as of December 31, 1996 and the related consolidated statements
of operations and retained earnings and of cash flows for the year then ended,
and have issued our report thereon dated March 28, 1997.
This report is furnished pursuant to the Pooling and Servicing Agreement (the
"Agreement") for the Series 1996-1 Multi-Class Mortgage Pass-Through
Certificates entered into by Chase Funding, Inc. (formerly known as Chemical
Mortgage Securities, Inc.), as Seller, the Corporation, as Master Servicer, and
First National Bank of Chicago, as Trustee.
We have examined management's assertion about the Corporation's compliance with
the minimum servicing standards identified in the Mortgage Bankers Association
of America's Uniform Single Attestation Program for Mortgage Bankers (USAP) as
of and for the year ended December 31, 1996 included in the accompanying
management assertion (see Exhibit I). The Corporation performs loan servicing
functions for the residential loan portfolios of Chase Funding, Inc. Management
is responsible for the Corporation's compliance with the minimum servicing
standards. Our responsibility is to express an opinion on management's assertion
about the entity's compliance based on our examination.
Our examination was made in accordance with standards established by the
American Institute of Certified Public Accountants and, accordingly, included
examining, on a test basis, evidence about the Corporation's compliance with the
minimum servicing standards and performing such other procedures as we
considered necessary in the circumstances. We believe that our examination
provides a reasonable basis for our opinion. Our examination does not provide a
legal determination on the Corporation's compliance with the minimum servicing
standards.
In our opinion, management's assertion that, except for instances of
noncompliance described in management's assertion, the Corporation complied with
the aforementioned minimum servicing standards as of and for the year ended
December 31, 1996 is fairly stated, in all material respects.
Instances of noncompliance which occurred during 1996 are more fully discussed
in management's assertion which is set forth in Exhibit I.
/s/ Price Waterhouse LLP
<PAGE>
Exhibit I
Management's Assertion
As of and for the year ended December 31, 1996, except as specifically noted
below, Chase Manhattan Mortgage Corporation ("CMMC"), Chase Mortgage Services
Incorporated ("CMSI") and Chemical Mortgage Company ("CMC") and their
subsidiaries (collectively, the "Group") has complied in all material respects
with the minimum servicing standards (the "Standard(s)") set forth in the
Mortgage Bankers Association of America's Uniform Single Attestation Program for
Mortgage Bankers (USAP). During the year ended December 31, 1996, certain
instances of non-compliance with the Standards occurred. Except as specifically
noted, the following instances of non-compliance have been remedied and
procedural enhancements have been implemented.
Bank Accounts
Standard Custodial bank accounts and related bank clearing accounts
reconciliation shall be prepared within forty-five (45) days after the
cutoff date and documented reconciling items shall be resolved from
these reconciliations within ninety (90) calendar days of their
original identification.
Certain of the Group's custodial accounts and related bank clearing
accounts were not consistently reconciled within 45 days during the
year. In addition, reconciling items documented on the reconciliations
were not always resolved within 90 days after identification. Weekly
management reviews have been initiated for the higher volume accounts
to ensure reconciliations are performed and reconciling items are
cleared in accordance with the Standards and new company policy.
Specific project plans have been placed in operation to ensure that the
population of reconciling items is worked and eventually cleared.
Additionally, work orders for technological enhancements to facilitate
the reconciliation process are being developed.
Disbursements
Standard: Unissued checks shall be safeguarded so as to prevent
unauthorized access.
Controls surrounding the Corporation's safeguarding of unissued checks
were determined to be inadequate. There was limited accountability for
checks printed and issued, and multiple employees had system access to
reprint checks. In addition, blank checks for various disbursing
amounts do not have pre-printed serial numbers which would enable area
management to effectively track missing and voided checks. Management
has requested new checks with preprinted serial numbers on them.
Additionally, management has placed into operation new scanners to be
installed on the Corporation's check printers, which will enable
management to print detailed reports on check printing, handling and
reconciliation via the printer account logs.
Mortgagor Loan Accounting
Standard: Escrow accounts shall be analyzed, in accordance with the
mortgagor's loan documents, at least on an annual basis.
During 1996, there were instances in which an escrow analysis was not
performed on certain loans within the required 12-month cycle. These
exceptions were primarily attributed to missing tax or insurance
details required by area management to effectively perform an escrow
analysis. Management is currently utilizing tracking worksheets to
accelerate the information gathering process and is investigating
system upgrades to enable it to more efficiently perform the required
escrow analyses within the established timeframe.
<PAGE>
Management believes it has taken definitive actions and implemented controls and
procedures to address and correct the instances of noncompliance which occurred
during 1996.
As of and for the year ended December 31, 1996, the Corporation had in effect
fidelity bond and errors and omissions policies in the amounts of $200,000,000
and $25,000,000, respectively.
/s/ Thomas Jacob 3/25/97
- ------------------ -------
Thomas Jacob Date
Chief Executive Officer
/s/ Stephen J. Rotalla 3/24/97
- ------------------------ -------
Steve Rotella Date
Executive Vice President
/s/ Glenn Mouridy 3/25/97
- ------------------ -------
Glenn Mouridy Date
Executive Vice President
Chief Financial Officer
/s/ Lucy P. Gambino 3/24/97
- -------------------- -------
Lucy Gambino Date
Assistant Vice President - Risk Management
