<PAGE>
PROSPECTUS SUPPLEMENT
(To Prospectus dated February 25, 2000)
$464,637,631 (Approximate)
RESECURITIZATION MORTGAGE TRUST CERTIFICATES,
SERIES 2000-A
$ 54,265,000 Class A-1 6.50% Certificates
$ 19,480,941 Class A-2 6.50% Certificates
$ 55,646,371 Class A-3 6.50% Certificates
$ 56,275,462 Class A-4 6.50% Certificates
$ 32,524,402 Class A-5 6.50% Certificates
$ 22,000,000 Class A-6 6.50% Certificates
$ 91,611,289 Class A-7 6.50% Certificates
$111,411,000 Class A-8 6.50% Certificates
$ 21,423,065 Class A-9 6.50% Certificates
$ 101 Class A-R 6.50% Certificate
GREENWICH CAPITAL ACCEPTANCE, INC.
Depositor
---------------
- --------------------------------------------------------------------------------
Consider carefully the risk factors beginning on page S-6 in this prospectus
supplement and on page 5 in the prospectus.
The certificates represent obligations of the trust only and do not represent an
interest in or obligation of Greenwich Capital Acceptance, Inc., Greenwich
Capital Markets, Inc. or any of their affiliates.
This prospectus supplement may be used to offer and sell the certificates only
if accompanied by the prospectus.
- --------------------------------------------------------------------------------
The trust will issue eleven classes of certificates. Only the ten classes of
certificates identified above are being offered by this prospectus supplement
and the accompanying prospectus.
The Certificates
o The certificates represent ownership interests in assets of the trust.
o The trust assets consist primarily of three previously issued mortgage
pass-through securities representing senior ownership interests in three
respective mortgage loan groups.
o Distributions on the certificates will be made on the 19th day of each
month, or if such day is not a business day, the first business day
immediately following such 19th day.
Credit Enhancement
o Certain interests issued from the three underlying trust funds are
subordinate in right of payment to the underlying mortgage pass-through
securities.
o Certain losses on the mortgage loans in the underlying mortgage groups
will be allocated to the related subordinate interests before they are
allocated to the related underlying mortgage pass-through securities.
o Each class of offered certificates will receive the benefits of the
subordination feature available to the underlying mortgage pass-through
securities.
Neither the SEC nor any state securities commission has approved these
securities or determined that this prospectus supplement or the prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.
The offered certificates are being offered by Greenwich Capital Markets, Inc.
from time to time in negotiated transactions or otherwise at varying prices to
be determined at the time of sale. Proceeds to the depositor with respect to the
offered certificates are expected to be approximately 93.05714%, before
deducting issuance expenses payable by the depositor, estimated to be
approximately $335,000. See "Method of Distribution" in this prospectus
supplement.
Delivery of the offered certificates will be made in book-entry form through the
facilities of The Depository Trust Company, Clearstream and the Euroclear System
on or about February 28, 2000.
--------------------
GREENWICH CAPITAL
==========----------------------------------------------------------------------
February 25, 2000
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Page
----
Summary of Terms ........................................................ S-3
Risk Factors ............................................................ S-6
Description of the Certificates ......................................... S-10
Description of the Underlying Securities ................................ S-20
Description of the Underlying Mortgage Loans ............................ S-24
The Depositor ........................................................... S-28
Yield, Prepayment and Maturity Considerations ........................... S-28
Use of Proceeds ......................................................... S-42
Certain Material Federal Income Tax Consequences ........................ S-42
ERISA Considerations .................................................... S-44
Legal Investment Considerations ......................................... S-46
Method of Distribution .................................................. S-47
Legal Matters ........................................................... S-47
Ratings ................................................................. S-47
Index of Defined Terms .................................................. S-49
Appendix I .............................................................. I-1
Appendix II ............................................................. II-1
Exhibit A -Excerpts from the Underlying Supplement ...................... A-1
Exhibit B - Remittance Date Statements .................................. B-1
Exhibit C - Global Clearance, Settlement and Tax Documentation
Procedures ............................................................ C-1
PROSPECTUS
Page
----
Table of Contents........................................................ 2
Important Notice about Information....................................... 4
Risk Factors............................................................. 5
The Trust Fund........................................................... 12
Use of Proceeds.......................................................... 22
The Depositor............................................................ 22
Mortgage Loan Program.................................................... 23
Description of The Certificates ......................................... 25
Credit Enhancement....................................................... 31
Yield and Prepayment Considerations...................................... 38
The Pooling and Servicing Agreement...................................... 39
Certain Legal Aspects of the Loans....................................... 50
Certain Federal Income Tax Consequences.................................. 59
State Tax Considerations................................................. 84
ERISA Considerations..................................................... 85
Legal Investment......................................................... 87
Method of Distribution................................................... 88
Legal Matters............................................................ 89
Financial Information.................................................... 90
Available Information.................................................... 90
Rating................................................................... 90
Index of Defined Terms................................................... 91
S-2
<PAGE>
SUMMARY OF TERMS
o This summary highlights selected information from this document and does
not contain all of the information that you need to consider in making
your investment decision. To understand all of the terms of an offering of
the offered certificates, read carefully this entire document and the
accompanying prospectus.
o This summary provides an overview of certain calculations, cash flow
priorities and other information to aid your understanding and is
qualified by the full description of these calculations, cash flow
priorities and other information in this prospectus supplement and the
accompanying prospectus. Some of the information consists of
forward-looking statements relating to future economic performance or
projections and other financial items. Forward-looking statements are
subject to a variety of risks and uncertainties that could cause actual
results to differ from the projected results. Those risks and
uncertainties include, among others, general economic and business
conditions, regulatory initiatives and compliance with governmental
regulations, and various other matters, all of which are beyond our
control. Accordingly, what actually happens may be very different from
what we project in our forward-looking statements.
The Certificates
On the closing date, Resecuritization Mortgage Trust 2000-A will issue eleven
classes of certificates: Class A-1, Class A-2, Class A-3, Class A-4, Class A-5,
Class A-6, Class A-7, Class A-8, Class A-9, Class T and Class A-R. The
certificates will represent the beneficial ownership interests in the trust
assets and will be issued pursuant to a trust agreement between the depositor
and the trustee. All of the certificates, except for the Class T Certificate,
are offered pursuant to this prospectus supplement and the accompanying
prospectus. 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-9 Certificates will be book-entry
securities clearing through DTC (in the United States) or Clearstream or
Euroclear (in Europe) in minimum denominations of $25,000. The Class T and the
Class A-R Certificates will be issued in fully registered certificated form.
See "Description of the Certificates-- General" and "--Book-Entry Registration
and Definitive Certificates" in this prospectus supplement.
The Depositor
Greenwich Capital Acceptance, Inc.
600 Steamboat Road
Greenwich, Connecticut 06830
(203) 625-2700
The Trustee
Bank One, National Association, a national banking association.
The Trust Assets
The assets of the trust will consist primarily of three previously issued
mortgage pass-through securities. The underlying mortgage pass-through
securities represent senior ownership interests in three respective underlying
trust funds. The assets of the underlying trust funds consist primarily of
fixed-rate, fully amortizing mortgage loans secured by mortgages, deeds of trust
or other security instruments creating first liens on one- to four-family
residential properties.
The following table identifies the mortgage pass-through securities held in the
trust.
Class Principal
Designations Balances of
of Underlying Underlying
Mortgage Mortgage Principal Balances
Underlying Pass-Through Pass-Through of Underlying
Trust Funds+ Securities Securities* Mortgage Loans*
- ------------ ---------- ----------- ---------------
First Class IPP-A-1 $489,898,902 $510,086,746
Nationwide
Trust Series
1998-3
First Class IPP-A-1 $173,640,285 $246,800,890
Nationwide
Trust Series
1999-2
First Class IPP-A $383,124,218 $398,894,500
Nationwide
Trust Series
1999-3
- ----------
* Approximate. Ending balances as of February 19, 2000.
S-3
<PAGE>
+ Each of the underlying trust funds contains multiple mortgage loan groups.
Given for each underlying trust fund is the aggregate principal balance of the
mortgage loans included in the mortgage loan group directly backing the
underlying mortgage pass-through security specified.
Cut-off Date
February 1, 2000
Closing Date
On or about February 28, 2000
Distribution Dates
The trustee will make monthly distributions on the certificates on the 19th day
of each calendar month, or if such 19th day is not a business day, on the first
business day immediately following such 19th day, beginning in March 2000.
Distributions will be made to the holders of record of the certificates as of
the close of business on the last business day of the month preceding the month
of such distribution.
Distributions on the Certificates
Interest Distributions
On each distribution date, interest payable on each class of offered
certificates will be calculated based on the pass-through rate specified on the
cover, subject to the limitations described under "Description of the
Certificates - Allocation of Available Funds" in this prospectus supplement.
Interest payable on the offered certificates on a distribution date will accrue
during the calendar month preceding the month in which such distribution date
occurs. Interest will be calculated on the basis of an assumed 360-day year
consisting of twelve 30-day months.
Principal Distributions
On each distribution date, principal of the classes of offered certificates will
be paid from available funds in the trust in the order of priority described
under "Description of the Certificates--Allocation of Available Funds" in this
prospectus supplement.
See "Description of the Certificates" in this prospectus supplement.
Advances
The servicer of the mortgage loans held in the underlying trust funds will make
cash advances to cover delinquent payments of principal and interest to the
extent the servicer reasonably believes that the cash advances are recoverable
from future payments on the related mortgage loans.
See "Description of the Underlying Securities--Advances" in this prospectus
supplement.
Optional Termination of the Trust
The depositor may purchase the remaining assets of the trust when the aggregate
principal balance of the underlying mortgage pass-through securities is less
than 5% of their aggregate principal balance as of the cut-off date.
See "Description of the Certificates --Termination of the Trust" in this
prospectus supplement.
Optional Termination of the Underlying Trust Funds
The depositor of the mortgage loans held in any of the underlying trust funds
may terminate that trust fund on and after the distribution date for the related
underlying mortgage pass-through security on which the aggregate outstanding
principal amount of all mortgage loans in that trust fund is less than 5% of the
aggregate principal amount of those mortgage loans as of their cut-off date.
See "Description of The Underlying Securities --Optional Termination of the
Underlying Trust Funds" in this prospectus supplement.
Ratings
It is a condition of the issuance of the offered certificates that they be
assigned a rating of "AAA" by Standard & Poor's, a division of The McGraw-Hill
Companies, Inc. and by Duff & Phelps Credit Rating Company.
A rating is not a recommendation to buy, sell or hold securities. These ratings
may be lowered or withdrawn at any time by either of the rating agencies.
See "Ratings" in this prospectus supplement.
Tax Status
An election will be made to treat the trust as a "real estate mortgage
investment conduit" or "REMIC". The Class A-1, Class A-2, Class A-3, Class A-4,
Class A-5, Class A-6, Class A-7, Class A-8, Class A-9 and Class T Certificates
will represent "regular interests" in the REMIC. The Class A-R Certificate will
represent the sole class of "residual interests" in the REMIC. The holder of the
Class A-R Certificate will be subject to special federal income tax rules that
may significantly reduce the after-tax yield of such certificate.
S-4
<PAGE>
See "Certain Material Federal Income Tax Consequences" in this prospectus
supplement and "Certain Federal Income Tax Considerations" in the prospectus.
ERISA Considerations
Assuming the accuracy of certain statements included in the disclosure
documentation prepared in connection with the public offering of the underlying
mortgage pass-through securities, the offered certificates (other than the Class
A-R Certificate) may be purchased by a pension or other employee benefit plan
subject to the Employee Retirement Income Security Act of 1974 or Section 4975
of the Internal Revenue Code of 1986, as amended, so long as certain conditions
are met. A fiduciary of an employee benefit plan must determine that the
purchase of a certificate is consistent with its fiduciary duties under
applicable law and does not result in a nonexempt prohibited transaction.
See "ERISA Considerations" in this prospectus supplement and in the prospectus.
Legal Investment
Assuming the accuracy of certain representations contained in the agreements
under which the underlying trust funds were created (which information is not
subject to independent verification) and on the basis of certain assumptions
derived from statements included in the disclosure documentation prepared in
connection with the public offering of the underlying mortgage pass-through
securities, the offered certificates will be "mortgage related securities" for
purposes of the Secondary Mortgage Market Enhancement Act of 1984 as long as
they are rated in one of the two highest rating categories by at least one
nationally recognized statistical rating organization.
See Legal Investment Considerations" in this prospectus supplement "and "Legal
Investment" in the prospectus.
S-5
<PAGE>
RISK FACTORS
Only Limited Information is Available about the Underlying Mortgage Pass-Through
Securities and Underlying Mortgage Loans
The information about the underlying mortgage pass-through securities and
the related mortgage loans disclosed in this prospectus supplement has been
obtained from the disclosure documentation prepared in connection with the
initial offerings of the underlying mortgage pass-through securities as well as
from reports and other information supplied by the trustees of the underlying
trust funds. Such information has not been independently verified or represented
to the trust as being accurate and complete. Additionally, the agreements under
which the underlying mortgage pass-through securities were issued and the
disclosure documentation prepared in connection with those public offerings
contain information only as of the dates of such documents. You should be aware,
however, that material changes may have occurred since the preparation of those
documents and the composition of the related mortgage pools may have changed
significantly. As a result, there may be considerable differences between the
current mortgage loan characteristics and the characteristics described in
connection with the issuance of the underlying mortgage pass-through securities,
and the underlying mortgage pass-through securities may not have performed as
originally anticipated. The depositor did not prepare such underlying agreements
or disclosure documentation and neither the depositor nor the underwriter makes
any representation as to the accuracy or completeness of information provided in
such documents. Prospective investors are advised to consider the limited nature
of such available information when evaluating the suitability of any investment
in the offered certificates.
The Effect of Prepayments on Yields is Unpredictable
Borrowers may prepay their mortgage loans in whole or in part at any time.
However, the mortgage loans are subject to certain penalties for prepayments
generally during the first five years after origination. For a description of
such prepayment penalties, see "The Mortgage Pool--General" on Exhibit A.
We cannot predict the rate at which borrowers will repay their mortgage
loans. A prepayment of a mortgage loan may result in a prepayment on the related
underlying mortgage pass-through security, which in turn would result in a
prepayment on the offered certificates.
o If you purchase your certificates at a discount and principal is
repaid slower than you anticipate, then your yield may be lower than you
anticipate.
o If you purchase your certificates at a premium and principal is
repaid faster than you anticipate, then your yield may be lower than you
anticipate.
o The rate of prepayments on the mortgage loans will be sensitive to
prevailing interest rates. Generally, if prevailing interest rates decline
significantly below the interest rates on the mortgage loans, those
mortgage loans are more likely to prepay than if prevailing rates remain
above the interest rates on such mortgage loans. Conversely, if prevailing
interest rates rise significantly, the prepayments on the mortgage loans
are likely to decrease.
o The seller of a mortgage loan to an underlying trust fund may be
required to purchase such mortgage loan from such trust fund due to
certain breaches of representations and warranties made by such seller
that have not been cured. These purchases will have the same effect on the
related offered certificates as a prepayment of a mortgage loan.
o So long as the subordinate interests in an underlying trust fund
are outstanding, liquidations of defaulted mortgage loans in such trust
fund generally will have the same effect on the offered certificates as a
prepayment of a mortgage loan.
S-6
<PAGE>
o If the rate of default and the amount of losses on the mortgage
loans in an underlying trust fund is higher than you expect, then your
yield may be lower than you expect.
Although Principal Distributions on the Class A-8 Certificates Generally Are
Expected to Follow a Schedule, the Rate of Prepayments on the Mortgage Loans May
Still Affect The Rate of Principal Distributions on Those Certificates
The Class A-8 Certificates, which is a planned amortization class, will
generally be less affected by the rate of principal prepayments than certain
other classes of certificates. This is because on each distribution date, the
Class A-8 Certificates receive principal distributions according to a schedule
set forth in Appendix II. The schedule assumes that the rate of prepayment on
the mortgage loans remains at a constant rate between 90% and 262% of a standard
prepayment assumption, as described in "Yield, Prepayment and Maturity
Considerations" in this prospectus supplement. However, there is no guarantee
that the rate of prepayment on the mortgage loans will stay at a constant rate
between these levels. If the mortgage loans prepay at a rate faster or slower
than such levels, or do not prepay at a constant rate, distributions of
principal on the Class A-8 Certificates may no longer be made according to
schedule. Moreover, once the Class A-7 Certificates and Class A-6 Certificates
have been paid in full, the Class A-8 Certificates will become very sensitive to
the rate of prepayments and will no longer be paid according to the schedule.
See "Yield, Prepayment and Maturity Considerations" for tables showing the
expected rate of return of principal at different prepayment rates.
The Class A-7 Certificates and Class A-6 Certificates Will be Very Sensitive to
the Rate of Prepayments on the Mortgage Loans
The Class A-7 Certificates and Class A-6 Certificates will be especially
sensitive to the rate of prepayment on the mortgage loans. The Class A-7
Certificates and Class A-6 Certificates act as a prepayment cushion for the
Class A-8 Certificates as described above, absorbing excess principal
prepayments. On each distribution date, the Class A-7 Certificates and Class A-6
Certificates receive principal only if the Class A-8 Certificates have been paid
according to their schedule. If the rate of prepayments on the mortgage loans on
any distribution date is slow enough so that the Class A-8 Certificates are not
paid to schedule, then the Class A-7 Certificates and Class A-6 Certificates
will receive no distributions of principal from the Mortgage Loans on that
distribution date. However, if the rate of prepayments is high enough so that
the Class A-8 Certificates are paid according to schedule, then the Class A-7
Certificates and Class A-6 Certificates will receive all of the remaining
principal available for distribution. This may cause wide variations in the
amount of principal the Class A-7 Certificates and Class A-6 Certificates will
receive from distribution date to distribution date. See "Yield, Prepayment and
Maturity Considerations" for tables showing the expected rate of return of
principal at different rates of prepayment.
Interest Payments May be Insufficient
When a mortgage loan is prepaid in full, the borrower is charged interest
only up to the date on which payment is made, rather than for an entire month.
This may result in a shortfall in interest collections available for payment on
the related underlying mortgage pass-through security. The servicer is required
to cover the shortfall in interest collections that are attributable to
prepayments in full, but only up to the amount of the servicer's fee for the
related period. If the aggregate amount of this shortfall is in excess of the
servicing fee, it may adversely affect the yield on your investment.
Credit Enhancement is Potentially Inadequate to Prevent Losses on the Offered
Certificates
Credit enhancement is provided for the offered certificates first by the
right of the holders of the underlying mortgage pass-through securities to
receive certain payments prior to the related subordinate interests. This form
of credit enhancement is provided solely from collections on the mortgage loans
otherwise payable to the holders of such subordinate interests. Credit
enhancement also is provided by the allocation of realized losses on mortgage
loans first to the related subordinate interests. Accordingly, if the aggregate
principal balance of the subordinate interests with respect to any underlying
trust fund were to be reduced to zero, delinquencies and defaults on the
S-7
<PAGE>
related mortgage loans would reduce the amount of funds available for payments
to holders of the senior interests in the related underlying trust fund,
including the related underlying mortgage pass-through security. This reduction
in funds available for payment to the underlying mortgage pass-through security
would in turn reduce the amount of funds available for distributions on the
offered certificates.
High Concentration of Mortgaged Properties in California May Increase the Risk
of Losses
Approximately 91.51%, 86.18% and 90.77% of the mortgaged properties
securing the mortgage loans included in the respective mortgage loan groups held
in the underlying trust funds are located in California (measured by aggregate
principal amount of the related mortgage loans as of the cut-off date). Property
in California may be particularly susceptible to certain types of hazards that
may be uninsurable, such as earthquakes, floods, mudslides and other natural
disasters.
In addition, the conditions described below will have a disproportionate
impact on the mortgage loans.
o Economic conditions in California that may or may not affect real
property values may affect the ability of borrowers to repay their
loans on time.
o Declines in the residential real estate markets in California may
reduce the values of properties located in California, which would
result in an increase in the loan-to-value ratios.
o Any increase in the market values of properties located in
California would reduce the loan-to-value ratios. Lower
loan-to-value ratios could make alternative sources of financing
available to the borrowers at lower interest rates, which could
result in an increased rate of prepayment of the mortgage loans.
Losses on Mortgage Loans in the Underlying Trust Funds Other Than Those Directly
Backing the Underlying Mortgage Pass-Through Securities May Increase the Risk of
Losses on the Offered Certificates
Realized losses, other than any excess losses, experienced by mortgage
loans included in a particular mortgage loan group will be allocated first to
the subordinate interests in the related underlying trust fund before being
allocated to the senior interests directly backed by that mortgage loan group.
However, the underlying subordinate interests provide protection against losses
on mortgage loans in more than one mortgage loan group. As a result, the
subordinate interests could be reduced or eliminated as a result of
disproportionate realized losses on the mortgage loans included in a mortgage
loan group other than the group directly backing an underlying mortgage
pass-through security. Although realized losses, other than excess losses, on
the mortgage loans in a mortgage loan group may be allocated only to the
underlying senior interest directly backed by that mortgage loan group, the
allocation to such subordinate interests of realized losses on the underlying
mortgage loans in another mortgage loan group will increase the likelihood that
losses ultimately may be allocated to an underlying mortgage pass-through
security and, in turn, to the offered certificates. Generally, the
characteristics of the mortgage loans included in the mortgage loan group
directly backing each underlying mortgage pass-through security are
substantially similar to those of the other mortgage loan group whose losses are
covered by the same subordinate interests.
Excess Losses on Mortgage Loans in the Underlying Trust Funds Will Reduce Yields
on the Offered Certificates
Realized losses on mortgage loans in the underlying trust funds that
exceed the applicable coverage amounts for special hazard losses, fraud losses
and bankruptcy losses are referred to as "excess losses." Excess losses on
underlying mortgage loans included in the mortgage loan group directly backing
an underlying mortgage pass-through security or in the other mortgage loan group
held in the same underlying trust fund whose losses are covered by the same
subordinate interests will be allocated on a pro rata basis to all senior
interests relating to those mortgage loans groups, including the applicable
underlying mortgage pass-through security. As a result, any excess losses on
those mortgage loans will have a direct effect on the offered certificates and
will reduce their yields.
S-8
<PAGE>
Optional Termination of the Trust May Shorten the Weighted Average Lives of the
Offered Certificates
The depositor may purchase the assets in the trust, in whole but not in
part, on and after the distribution date on which the aggregate principal
balance of the underlying mortgage pass-through securities is less than 5% of
their aggregate principal balance as of the cut-off date. The purchase of such
assets will result in the receipt by you of principal payments that could affect
the yield to maturity on your certificates and have the effect of shortening the
weighted average life of your certificates.
Optional Termination of the Underlying Trust Funds May Shorten the Weighted
Average Lives of the Offered Certificates
The depositor of the mortgage loans held in any of the underlying trust
funds may terminate the related trust fund on and after the distribution date
for that trust fund on which the aggregate outstanding principal amount of all
mortgage loans in that trust fund is less than 5% of their aggregate principal
amount on their cut-off date. As a result, it is possible for an underlying
trust fund to be terminated in this manner although the aggregate outstanding
principal amount of the mortgage loans in the mortgage loan group directly
backing the related underlying mortgage pass-through security is greater than 5%
of the aggregate principal amount of those mortgage loans as of their cut-off
date. For the holder of an offered certificate, any such termination of an
underlying trust fund may result in the receipt by such holder of principal
payments that could affect the yield to maturity on its certificates and have
the effect of shortening the weighted average life of its certificates.
S-9
<PAGE>
DESCRIPTION OF THE CERTIFICATES
General
Set forth below are summaries of the specific terms and provisions
pursuant to which the Certificates will be issued. The following summaries do
not purport to be complete and are subject to, and are qualified in their
entirety by reference to, the provisions of the Trust Agreement. When particular
provisions or terms used in the Trust Agreement are referred to, the actual
provisions (including definitions of terms) are incorporated by reference.
The Certificates will be issued pursuant to a trust agreement (the "Trust
Agreement"), dated as of February 1, 2000 between the Depositor and Bank One,
National Association (the "Trustee") and will represent the entire beneficial
ownership interest in Resecuritization Mortgage Trust, Series 2000-A (the
"Trust"). The assets of the Trust will consist primarily of three previously
issued mortgage pass-through certificates representing senior ownership
interests in three respective underlying trust funds. The Certificates will
consist of the Class A-1 Certificates, the Class A-2 Certificates, the Class A-3
Certificates, the Class A-4 Certificates, the Class A-5 Certificates, the Class
A-6 Certificates, the Class A-7 Certificates, the Class A-8 Certificates, the
Class A-9 Certificates, the Class T Certificate and the Class A-R Certificate
(the "Class A-R Certificate" or "Residual Certificate" and together with 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-9 Certificates, the "Offered Certificates"). The Offered
Certificates and the Class T Certificate are collectively referred to herein as
the "Certificates". Only the Offered Certificates are offered hereby.
The Class T Certificate represents the Trustee's fee and has an initial
principal balance of $137,109.
The Offered Certificates (other than the Class A-R Certificate) will be
issuable in denominations of not less than $25,000 principal amount and in
integral multiples of $1,000 in excess thereof, with the exception of one
Certificate of each Class which may be issued in a lesser amount. The Class A-R
Certificate will be issued in fully registered certificated form as a single
Certificate in a denomination of approximately $100.67.
The Offered Certificates (other than the Class A-R Certificate) initially
will be Book-Entry Certificates (the "Book-Entry Certificates"). Persons
acquiring beneficial ownership interests in the Book-Entry Certificates
("Beneficial Owners") will hold such Certificates through The Depository Trust
Company ("DTC"), in the United States, or Clearstream Banking, societe anonyme
("Clearstream") or The Euroclear System ("Euroclear"), in Europe, if they are
participants of such systems, or indirectly through organizations that are
participants in such systems. The Book-Entry Certificates initially will be
registered in the name of Cede & Co., the nominee of DTC.
Assignment of the Underlying Securities
On the Closing Date, the Depositor will deliver the Underlying Securities
to the Trustee. The Underlying Securities will be registered in the name of the
Trustee or its nominee, and all monthly distributions on each Underlying
Remittance Date for each Underlying Security will be made to the Trustee.
Distributions - General
Distributions on the Offered Certificates will be made by the Trustee on
the 19th day of each month, or if the 19th day is not a Business Day, on the
first Business Day following the 19th day, beginning in March 2000 (each a
"Distribution Date"). A "Business Day" is any day that is an Underlying Business
Day with respect to each of the Underlying Securities. Distributions will be
made to the persons in whose names such Certificates are registered at the close
of business on the last Business Day of the month preceding the month of such
Distribution Date (each, a "Record Date").
S-10
<PAGE>
Deposits to the Certificate Account
The Trustee will establish and maintain a separate trust account (the
"Certificate Account") for the benefit of the holders of the Certificates. The
Certificate Account will be an Eligible Account (as defined herein). Upon
receipt by the Trustee of amounts in respect of the Underlying Securities, the
Trustee will deposit such amounts in the Certificate Account. Amounts so
deposited may be invested in Permitted Investments (as described and defined in
the Trust Agreement) maturing no later than one Business Day prior to the
Distribution Date unless such Permitted Investments are invested in investments
managed or advised by the Trustee or an affiliate thereof, in which case such
Permitted Investments may mature on the related Distribution Date.
An Eligible Account is a segregated account that is (i) an account or
accounts maintained with a federal or state chartered depository institution or
trust company the short-term unsecured debt obligations of which (or, in the
case of a depository institution or trust company that is the principal
subsidiary of a holding company, the short-term unsecured debt obligations of
such holding company) are rated "A-1" by Standard & Poor's, a division of the
McGraw-Hill Companies, Inc. ("S&P") and "D-1" by Duff & Phelps Credit Rating
Company ("DCR") at the time any amounts are held on deposit therein, (ii) an
account or accounts the deposits in which are fully insured by the Federal
Deposit Insurance Corporation (to the limits established by such corporation),
the uninsured deposits in which account are otherwise secured such that, as
evidenced by an opinion of counsel delivered to the Trustee and to each Rating
Agency, the Certificateholders will have a claim with respect to the funds in
such account or a perfected first priority security interest against such
collateral (which will be limited to Permitted Investments) securing such funds
that is superior to claims of any other depositors or creditors of the
depository institution with which such account is maintained, (iii) a trust
account or accounts maintained with the trust department of a federal or state
chartered depository institution, national banking association or trust company
acting in its fiduciary capacity or (iv) otherwise acceptable to each Rating
Agency without reduction or withdrawal of their then current ratings of the
Certificates as evidenced by a letter from each Rating Agency to the Trustee.
Permitted Investments are specified in the Trust Agreement and are limited to
investments which meet the criteria of the Rating Agencies from time to time as
being consistent with their then current ratings of the Certificates.
Withdrawals From the Certificate Account
The Trustee is permitted from time to time to withdraw funds from the
Certificate Account for the following purposes:
(i) to make payments to Certificateholders in the amounts and in
the manner as described under "--Allocation of Available
Funds" below;
(ii) to reimburse the Depositor for any expenses incurred by and
reimbursable to the Depositor pursuant to the Trust Agreement;
(iii) to pay any taxes imposed on the Trust; and
(iv) to clear and terminate the Certificate Account upon
termination of the Trust Agreement.
Allocation of Available Funds
On each Distribution Date, the Trustee will withdraw from the Certificate
Account an amount (the "Available Funds") equal to (a) the amount received by
the Trustee on and prior to such Distribution Date as a distribution on the
Underlying Security, reduced by (b) the sum of any expenses reimbursable to the
Depositor and any taxes imposed upon the Trust.
On each Distribution Date, the Trustee will distribute the Available Funds
in the following order of priority:
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(i) to the holders of the Classes of Offered Certificates and the Class T
Certificate, pro rata, interest accrued on the respective Certificate Principal
Balances thereof during the preceding Interest Accrual Period at their
respective Pass-Through Rates (less any Net Prepayment Interest Shortfalls
allocated to such Classes as provided below), together with any accrued and
unpaid interest thereon from prior Distribution Dates; provided, however, that
prior to the Class A-6 Accretion Termination Date, the amount of interest
accrued on the Certificate Principal Balances of the Class A-6 Certificates
during the preceding Interest Accrual Period will not be distributed as interest
thereon but instead will be distributed in reduction of the Certificate
Principal Balances of the Class A-7 Certificates as set forth in clause (iv)
below; and further provided that prior to the Class A-4 Accretion Termination
Date, the amount of interest accrued on the Certificate Principal Balances of
the Class A-4 Certificates during the preceding Interest Accrual Period will not
be distributed as interest thereon but instead will be distributed in reduction
of the Certificate Principal Balances of the Class A-3 and Class A-9
Certificates, in that order, as set forth in clause (v) below;
(ii) as principal, to the holders of the Class T Certificate, the Class T
Pro Rata Distribution Amount;
(iii) as principal, to the holders of the Class A-5 Certificates, the
Class A-5 Priority Distribution Amount, until the Certificate Principal Balances
thereof are reduced to zero;
(iv) as principal, to the holders of the Class A-7 Certificates, the Class
A-6 Accrual Distribution Amount, until the Certificate Principal Balances of the
Class A-7 Certificates have been reduced to zero, and then to the holders of the
Class A-6 Certificates;
(v) as principal, sequentially, to the holders of the Class A-3 and Class
A-9 Certificates, in that order, the Class A-4 Accrual Distribution Amount,
until the respective Certificate Principal Balances thereof have been reduced to
zero, and then to the holders of the Class A-4 Certificates;
(vi) as principal, to the holder of the Class A-R Certificate, until the
Certificate Principal Balance thereof has been reduced to zero;
(vii) as principal, to (A) the holders of the Class A-8, Class A-7 and
Class A-6 Certificates according to the priorities set forth in clause (x) below
and (B) the holders of the Class A-1 and Class A-2 Certificates according to the
priorities set forth in clause (y) below, as follows:
(x) 75.3166723918% of the remaining amount (after giving effect to
the distributions specified in clauses (i) through (vi) above):
first, to the holders of the Class A-8 Certificates until the
Certificate Principal Balances thereof are reduced to the Class A-8
Planned Balance for such Distribution Date;
second, sequentially, to the holders of the Class A-7 and
Class A-6 Certificates, in that order, until the respective
Certificate Principal Balances thereof are reduced to zero; and
third, to the holders of the Class A-8 Certificates, without
regard to the Class A-8 Planned Balance for such Distribution Date
and until the Certificate Principal Balances thereof are reduced to
zero; and
(y) 24.6833276082% of such remaining amount (after giving effect to
the distributions specified in clauses (i) through (vi) above),
sequentially, to the holders of the Class A-1 and Class A-2
Certificates, in that order, until their respective Certificate
Principal Balances have been reduced to zero; and
(viii) as principal, sequentially, to the holders of the Class A-3, Class
A-9, Class A-4 and Class A-5 Certificates, in that order, until their respective
Certificate Principal Balances have been reduced to zero.
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On each Distribution Date, any Net Prepayment Interest Shortfalls will be
allocated, pro rata, to the Certificates on the basis of their Certificate
Principal Balances.
On each Distribution Date preceding the Class A-4 Accretion Termination
Date, the Class A-4 Accrual Distribution Amount will be added to the Certificate
Principal Balances of the Class A-4 Certificates on a pro rata basis. On each
Distribution Date preceding the Class A-6 Accretion Termination Date, the Class
A-6 Accrual Distribution Amount will be added to the Certificate Principal
Balances of the Class A-6 Certificates on a pro rata basis.
The "Basic Principal Distribution Amount" for any Distribution Date will
be the portion of Available Funds attributable to principal received with
respect to the Underlying Mortgage Loans.
The "Certificate Principal Balance" with respect to any Certificate and
any date of determination is the initial principal balance of such Certificate
less all distributions made in respect of principal of such Certificate on all
Distribution Dates preceding such date of determination and further reduced by
all losses allocated to such Certificate on any such Distribution Date.
The "Class A-4 Accretion Termination Date" will be the Distribution Date
following the Distribution Date on which the Certificate Principal Balances of
the Class A-9 Certificates are reduced to zero.
The "Class A-4 Accrual Distribution Amount" for any Distribution Date will
be equal to the current interest allocated but not distributed with respect to
the Class A-4 Certificates on such Distribution Date in accordance with clause
(i) of "--Allocation of Available Funds" above.
The "Class A-5 Pro Rata Distribution Amount" for any Distribution Date
will be the product of (a) the Class A-5 Pro Rata Percentage and (b) the
Scheduled Principal Distribution Amount.
The "Class A-5 Pro Rata Percentage" for any Distribution Date will equal a
fraction, the numerator of which is the aggregate of the Certificate Principal
Balances of the Class A-5 Certificates on such Distribution Date and the
denominator of which is the aggregate of the Certificate Principal Balances of
all Classes of Certificates on such Distribution Date.
The "Class A-5 Prepayment Distribution Amount" for any Distribution Date
will be the product of (a) the Principal Prepayment Distribution Amount, (b) the
Class A-5 Pro Rata Percentage and (c) the Shift Percentage.
The "Class A-5 Priority Distribution Amount" for any Distribution Date
will be the sum of (i) the Class A-5 Pro Rata Distribution Amount and (ii) the
Class A-5 Prepayment Distribution Amount.
The "Class A-6 Accretion Termination Date" will be the Distribution Date
following the Distribution Date on which the Certificate Principal Balances of
the Class A-7 Certificates are reduced to zero.
The "Class A-6 Accrual Distribution Amount" for any Distribution Date will
be equal to the current interest allocated but not distributed with respect to
the Class A-6 Certificates on such Distribution Date in accordance with clause
(i) of "--Allocation of Available Funds" above.
The "Class A-8 Planned Balance" for any Distribution Date will be as set
forth in Appendix II attached hereto.
The "Class T Pro Rata Distribution Amount" for any Distribution Date will
be the product of (a) the Class T Pro Rata Percentage and (b) the Basic
Principal Distribution Amount.
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The "Class T Pro Rata Percentage" for any Distribution Date will equal a
fraction, the numerator of which is the Certificate Principal Balance of the
Class T Certificate on such Distribution Date and the denominator of which is
the aggregate of the Certificate Principal Balances of all Classes of
Certificates on such Distribution Date.
The "Pass-Through Rate" with respect to each Class and any Distribution
Date is 6.50%.
The "Principal Prepayment Distribution Amount" for any Distribution Date
will be the portion of Available Funds attributable to unscheduled principal
received with respect to the Underlying Mortgage Loans.
The "Scheduled Principal Distribution Amount" for any Distribution Date
will be the portion of Available Funds attributable to scheduled principal
received with respect to the Underlying Mortgage Loans.
The "Shift Percentage" for any Distribution Date will be the percentage
indicated below:
Distribution Date occurring in Shift Percentage
------------------------------ ----------------
March 2000 through February 2005 0%
March 2005 through February 2006 30%
March 2006 through February 2007 40%
March 2007 through February 2008 60%
March 2008 through February 2009 80%
March 2009 and thereafter 100%
In the event that on any Underlying Remittance Date, the Trustee shall not
have received the cash distribution, if any, required to be made in respect of
an Underlying Security, the Trustee shall effect the distribution set forth
above on the business day immediately following the date on which the cash
distribution so required shall have been received by the Trustee.
Allocation of Losses
Losses allocated to any of the Underlying Securities will in turn be
allocated to the Classes of Offered Certificates, pro rata, based upon their
respective Certificate Principal Balances.
Statements to Certificateholders
Concurrently with each distribution on a Distribution Date, the Trustee
will forward to the holder of each Certificate a statement generally setting
forth the following information:
(i) the Available Funds, the Class A-6 Accrual Distribution Amount,
the Class A-4 Accrual Distribution Amount and the Class A-5 Priority
Distribution Amount for such Distribution Date;
(ii) with respect to such Distribution Date, the aggregate amount of
principal and interest, stated separately, distributed to holders of each
Class of Certificates;
(iii) with respect to such Distribution Date, the amount of any
interest shortfall (including any Net Prepayment Interest Shortfalls) for
each Class of Certificates, together with the amount of any unpaid
interest shortfall for such Class immediately following such Distribution
Date;
(iv) with respect to each Class of Certificates, the losses
allocated to such Class with respect to such Distribution Date;
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(v) the aggregate Certificate Principal Balance of each Class of
Certificates, after giving effect to (a) distributions of principal of
such Certificates on such Distribution Date, (b) any losses allocated to
such Certificates and (c) in the case of the Class A-4 Certificates, any
addition to the aggregate Certificate Principal Balance thereof; and
(vi) any additional amount distributed to the holder of the Residual
Certificate on such Distribution Date.
In addition, the Trustee upon written request will furnish to
Certificateholders copies of the statements received by the Trustee for each
Underlying Remittance Date as the holder of the Underlying Securities on behalf
of the Trust.
Within a reasonable period of time after the end of each calendar year,
the Trustee will prepare and deliver to each person who at any time during the
previous calendar year was a Certificateholder of record a statement containing
the information required to satisfy any requirements of the Code, the REMIC
Provisions and regulations thereunder as from time to time are in force.
Representations and Warranties
The Depositor will represent and warrant to the Trustee as of the Closing
Date that (i) the Depositor was the sole owner of the Underlying Securities free
and clear of any lien, pledge, charge or encumbrance of any kind; (ii) the
Depositor had not assigned any interest in the Underlying Securities or any
distributions thereon, except as contemplated in the Trust Agreement; and (iii)
the endorsements and other documents furnished to the Trustee in connection with
the Underlying Securities are sufficient to effect the transfer of the
Underlying Securities to the Trustee. Upon discovery of a breach of any of the
foregoing representations and warranties which materially and adversely affects
the interests of the Certificateholders in any of the Underlying Securities, the
Depositor or the Trustee shall give prompt written notice to the other and to
the Certificateholders. On or prior to the Distribution Date in June 2000, the
Depositor will be obligated to cure such breach in all material respects or, if
such breach cannot be cured, repurchase each affected Underlying Security if so
directed in writing by holders of at least 51% of the Percentage Interests (the
"Majority in Interest") of each Class of Offered Certificates. The "Percentage
Interest" for any Class of Offered Certificates will equal the percentage
obtained by dividing the Certificate Principal Balance of such Certificate by
the aggregate Certificate Principal Balance of such Class of Certificates.
Termination of the Trust
The Depositor may at its option purchase the Underlying Securities, in
whole but not in part, on and after the Distribution Date on which the aggregate
principal balance of the Underlying Securities is less than 5% of the aggregate
principal balance thereof as of the Cut-off Date. The purchase price for each
Underlying Security will be equal to the balance of the Underlying Security
(after giving effect to all distributions thereon on such Distribution Date).
The obligations created by the Trust Agreement will terminate upon the payment
to Certificateholders of all amounts held by the Trustee and required to be paid
to them pursuant to the Trust Agreement after the final payment or other
liquidation of the Underlying Securities, including any exercise of the optional
purchase described above. In no event, however, will the Trust continue beyond a
date specified in the Trust Agreement. Written notice of termination of the
Trust Agreement will be given to each Certificateholder, and the final
distribution will be made only upon surrender and cancellation of the
Certificates at an office or agency as specified in the notice of termination.
The Trustee
Bank One, National Association, a national banking association, will act
as Trustee for the Certificates pursuant to the Trust Agreement. The Trustee's
principal corporate trust offices are located at the Corporate Trust Office, 1
Bank One Plaza, Suite IL1-0126, Chicago, Illinois 60670-0126, Attn: Corporate
Trust Administration. The Trustee's fee is represented by the Class T
Certificate.
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Amendment of the Trust Agreement
The Trust Agreement may be amended by the Depositor and the Trustee,
without the consent of any of the Certificateholders, (i) to cure any error or
ambiguity, (ii) to correct or supplement any provision therein which may be
defective or inconsistent with any other provision therein, (iii) to permit any
other provisions with respect to matters or questions arising under the Trust
Agreement which are not inconsistent with the provisions of the Trust Agreement,
(iv) to comply with the Securities Act of 1933, as amended (the "Securities
Act") or the Investment Company Act of 1940, as amended (the "Investment Company
Act"), (v) to amend any of the exhibits to the Trust Agreement pursuant to the
terms of the Trust Agreement or (vi) if such amendment is reasonably necessary,
as evidenced by an opinion of counsel, to comply with any requirements imposed
by the Internal Revenue Code of 1986 (the "Code") or any successor or amendatory
statute or any temporary or final regulation, revenue ruling, revenue procedure
or other written official announcement or interpretation relating to federal
income tax laws or any proposed such action which, if made effective, would
apply retroactively to the Trust at least from the effective date of such
amendment; provided that such action (except any amendment described in (vi)
above) shall not, as evidenced by an opinion of counsel, which opinion of
counsel shall not be an expense of the Trustee, delivered to the Trustee,
adversely affect in any material respect the interests of any Certificateholder;
provided, further, that any such amendment shall be deemed not to adversely
affect in any material respect the interests of any Certificateholder of the
Offered Certificates if the person requesting the amendment obtains letters from
the Rating Agencies to the effect that such amendment would not result in a
downgrade or withdrawal of the ratings then assigned to the Offered
Certificates. The Trust Agreement may also be amended by the Depositor and the
Trustee with the consent of the holders of a Majority in Interest of each Class
of Certificates affected thereby for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the Trust
Agreement or of modifying in any manner the rights of the holders of
Certificates; provided, however, that no such amendment may (a) reduce in any
manner the amount of, or delay the timing of, distributions required to be made
on any Certificate without the consent of the holder of such Certificate, (b)
adversely affect in any material respect the interest of the holders of the
Certificates of any Class in a manner other than as described in clause (a)
above without the consent of the holders of Certificates of such Class
representing not less than 66% of the Percentage Interests represented by such
Class or (c) reduce the aforesaid percentages of Certificates the holders of
which are required to consent to any such amendment without the consent of the
holders of all Certificates then outstanding. In no event will the Trustee
consent to any amendment unless the Trustee shall have obtained an opinion of
counsel to the effect that such amendment will not cause the Trust to fail to
qualify as a REMIC at any time that Certificates deemed to be "regular
interests" are outstanding.
Voting under the Underlying Agreements
In the event that there are any matters arising under any of the
Underlying Agreements which require the vote or direction of the holder of the
Underlying Security issued thereunder, the Trustee, as holder of the applicable
Underlying Security on behalf of the Trust, will vote the Underlying Security in
accordance with instructions received from the holders of a Majority in Interest
of each Class of Certificates. In the absence of any such instructions, the
Trustee will not vote the Underlying Securities; provided, however, that,
notwithstanding the absence of such instructions, in the event a required
distribution pursuant to the applicable Underlying Agreement shall not have been
made, the Trustee shall, subject to the provisions of the Trust Agreement,
pursue such remedies as may be available to it as holder of an Underlying
Security in accordance with the terms of the applicable Underlying Agreement.
Book-Entry Registration and Definitive Certificates
The Offered Certificates (other than the Class A-R Certificate) initially
will be Book-Entry Certificates. Beneficial Owners will hold such Certificates
through DTC, in the United States, or Clearstream or Euroclear in Europe, if
they are participants of such systems, or indirectly through organizations that
are participants in such systems. The Book-Entry Certificates initially will be
registered in the name of Cede & Co., the nominee of DTC. Clearstream and
Euroclear will hold omnibus positions on behalf of Clearstream Participants and
Euroclear Participants (each, as defined herein), respectively, through
customers' securities accounts in Clearstream's and Euroclear's names on the
books of their respective depositaries which in turn will hold such positions in
customers'
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<PAGE>
securities accounts in the depositaries' names on the books of DTC. Citibank
N.A. ("Citibank") will act as depositary for Clearstream, and The Chase
Manhattan Bank ("Chase") will act as depositary for Euroclear (Citibank and
Chase, in such capacities, individually the "Relevant Depositary" and
collectively, the "European Depositaries"). Except as described below, no person
acquiring a Book-Entry Certificate will be entitled to receive a physical
certificate representing such Certificate (a "Definitive Certificate"). Unless
and until Definitive Certificates are issued, it is anticipated that the only
"Certificateholder" will be Cede & Co., as nominee of DTC, or Citibank or Chase,
as nominees of Clearstream and Euroclear, respectively. Beneficial Owners will
not be Certificateholders as that term is used in the Trust Agreement.
Beneficial Owners are permitted to exercise their rights only indirectly through
DTC and its Participants (as defined herein) (including Clearstream and
Euroclear).
The beneficial ownership of a Book-Entry Certificate will be recorded on
the records of the brokerage firm, bank, thrift institution or other financial
intermediary (each, a "Financial Intermediary") that maintains the Beneficial
Owner's account for such purpose. In turn, the Financial Intermediary's
ownership of such Book-Entry Certificate will be recorded on the records of DTC
(or of a participating firm that acts as agent for the Financial Intermediary,
whose interest will in turn be recorded on the records of DTC, if the Beneficial
Owner's Financial Intermediary is not a Participant) and on the records of
Clearstream or Euroclear, as appropriate.
Beneficial Owners will receive all payments of principal of, and interest
on, the Book-Entry Certificates from the Trustee through DTC and its
Participants (including Clearstream and Euroclear). While the Book-Entry
Certificates are outstanding (except under the circumstances described below),
under the rules, regulations and procedures creating and affecting DTC and its
operations (the "DTC Rules"), DTC is required to make book-entry transfers among
Participants on whose behalf it acts with respect to the Book-Entry Certificates
and is required to receive and transmit payments of principal of, and interest
on, such Certificates. Participants and indirect participants with whom
Beneficial Owners have accounts with respect to Book-Entry Certificates are
similarly required to make book-entry transfers and receive and transmit such
payments on behalf of their respective Beneficial Owners. Accordingly, although
Beneficial Owners will not possess certificates, the DTC Rules provide a
mechanism by which Beneficial Owners will receive payments and will be able to
transfer their interests.
Beneficial Owners will not receive or be entitled to receive certificates
representing their respective interests in the Book-Entry Certificates, except
under the limited circumstances described below. Unless and until Definitive
Certificates are issued, Beneficial Owners who are not Participants may transfer
ownership of Book-Entry Certificates only through Participants and indirect
participants by instructing such Participants and indirect participants to
transfer Certificates, by book-entry transfer, through DTC for the account of
the purchasers of such Certificates, which account is maintained with their
respective Participants. Under the DTC Rules and in accordance with DTC's normal
procedures, transfers of ownership of Book-Entry Certificates will be executed
through DTC and the accounts of the respective Participants at DTC will be
debited and credited. Similarly, the Participants and indirect participants will
make debits or credits, as the case may be, on their records on behalf of the
selling and purchasing Beneficial Owners.
Because of time zone differences, credits of securities received in
Clearstream or Euroclear as a result of a transaction with a Participant will be
made during subsequent securities settlement processing and dated the business
day following the DTC settlement date. Such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Euroclear Participants or Clearstream Participants on such business day. Cash
received in Clearstream or Euroclear as a result of sales of securities by or
through a Clearstream Participant or Euroclear Participant will be received with
value on the DTC settlement date but will be available in the relevant
Clearstream or Euroclear cash account only as of the business day following
settlement in DTC. For information with respect to tax documentation procedures
relating to the Book-Entry Certificates, see "Certain Material Federal Income
Tax Consequences--Taxation of Debt Securities" in the Prospectus and "Global
Clearance, Settlement and Tax Documentation Procedures--Certain U.S. Federal
Income Tax Documentation Requirements" in Exhibit C hereto.
Transfers between Participants will occur in accordance with DTC Rules.
Transfers between Clearstream Participants and Euroclear Participants will occur
in accordance with their respective rules and operating procedures.
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Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Clearstream
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC Rules on behalf of the relevant European international
clearing system by the Relevant Depositary; however, such cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in accordance
with its rules and procedures and within its established deadlines (European
time). The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to the
Relevant Depositary to take action to effect final settlement on its behalf by
delivering or receiving securities in DTC, and making or receiving payment in
accordance with normal procedures for same day funds settlement applicable to
DTC. Clearstream Participants and Euroclear Participants may not deliver
instructions directly to the European Depositaries.
DTC, which is a New York-chartered limited purpose trust company, performs
services for its participants ("Participants"), some of which (and/or their
representatives) own DTC. In accordance with its normal procedures, DTC is
expected to record the positions held by each Participant in the Book-Entry
Certificates, whether held for its own account or as a nominee for another
person. In general, beneficial ownership of Book-Entry Certificates will be
subject to the rules, regulations and procedures governing DTC and its
Participants as in effect from time to time.
Clearstream is incorporated under the laws of Luxembourg as a professional
depository. Clearstream holds securities for its participating organizations
("Clearstream Participants") and facilitates the clearance and settlement of
securities transactions between Clearstream Participants through electronic
book-entry changes in accounts of Clearstream Participants, thereby eliminating
the need for physical movement of certificates. Transactions may be settled in
Clearstream in any of 28 currencies, including United States Dollars.
Clearstream provides to its Clearstream Participants, among other things,
services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing.
Clearstream interfaces with domestic markets in several countries. As a
professional depositary, Clearstream is subject to regulation by the Luxembourg
Monetary Institute. Clearstream Participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Indirect access to Clearstream is also available to others, such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Clearstream Participant, either directly or
indirectly.
Euroclear was created in 1968 to hold securities for its participants
("Euroclear Participants") and to clear and settle transactions between
Euroclear Participants, through simultaneous electronic book-entry delivery
against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may be settled through Euroclear in any of 32 currencies,
including United States Dollars. Euroclear provides various other services,
including securities lending and borrowing, and interfaces with domestic markets
in several countries generally similar to the arrangements for cross-market
transfers with DTC described above. Euroclear is operated by the Brussels,
Belgium office of Morgan Guaranty Trust Company of New York (the "Euroclear
Operator"), under contract with Euroclear Clearance Systems S.C., a Belgian
cooperative corporation (the "Cooperative"). All operations are conducted by the
Euroclear Operator, and all Euroclear securities clearance accounts and
Euroclear cash accounts are accounts with the Euroclear Operator, not the
Cooperative. The Cooperative establishes policy for Euroclear on behalf of
Euroclear Participants. Euroclear Participants include banks (including central
banks), securities brokers and dealers and other professional financial
intermediaries. Indirect access to Euroclear is also available to other firms
that clear through or maintain a custodial relationship with a Euroclear
Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation that is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board") and the New York State Banking Department, as well
as the Belgian Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear and
the related Operating Procedures of the Euroclear System and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of
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securities and cash within Euroclear, withdrawals of securities and cash from
Euroclear and receipts of payments with respect to securities in Euroclear. All
securities in Euroclear are held on a fungible basis without attribution to
specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants, and has no record
of or relationship with persons holding through Euroclear Participants.
Payments on the Book-Entry Certificates will be made on each Distribution
Date by the Trustee to DTC. DTC will be responsible for crediting the amount of
such payments to the accounts of the applicable Participants in accordance with
DTC's normal procedures. Each Participant will be responsible for disbursing
such payments to the Beneficial Owners that it represents and to each Financial
Intermediary for which it acts as agent. Each such Financial Intermediary will
be responsible for disbursing funds to the Beneficial Owners that it represents.
Under a book-entry format, Beneficial Owners may experience some delay in
their receipt of payments because such payments will be forwarded by the Trustee
to Cede & Co. Payments with respect to Book-Entry Certificates held through
Clearstream or Euroclear will be credited to the cash accounts of Clearstream
Participants or Euroclear Participants in accordance with the relevant system's
rules and procedures, to the extent received by the Relevant Depositary. Such
payments will be subject to tax reporting in accordance with relevant United
States tax laws and regulations. See "Certain Material Federal Income Tax
Consequences--Taxation of Debt Securities" in the Prospectus and "Global
Clearance, Settlement and Tax Documentation Procedures--Certain U.S. Federal
Income Tax Documentation Requirements" in Exhibit C hereto. Because DTC has
indicated that it will act only on behalf of Financial Intermediaries, the
ability of Beneficial Owners to pledge Certificates to persons or entities that
do not participate in the depository system or otherwise take actions in respect
of such Certificates may be limited due to the lack of Definitive Certificates.
In addition, issuance of the Book-Entry Certificates in book-entry form may
reduce the liquidity of such Certificates in the secondary market because
certain potential investors may be unwilling to purchase Certificates for which
they cannot obtain physical certificates.
The monthly and annual statements with respect to the Certificates and the
Underlying Security as described below under "--Statements to
Certificateholders" will be provided by the Trustee to Cede & Co., as nominee of
DTC and as Certificateholder, and may be made available by such entity to
Beneficial Owners upon request, in accordance with the DTC Rules, and to the
Financial Intermediaries to whose DTC accounts the related Book-Entry
Certificates are credited.
DTC has advised the Trustee that, unless and until Definitive Certificates
are issued, DTC will take any action permitted to be taken by a
Certificateholder under the Trust Agreement only at the direction of one or more
Financial Intermediaries to whose DTC accounts the Book-Entry Certificates are
credited, to the extent that such actions are taken on behalf of Financial
Intermediaries whose holdings include such Certificates. Clearstream or the
Euroclear Operator, as the case may be, will take any other action permitted to
be taken by a Certificateholder under the Trust Agreement on behalf of a
Clearstream Participant or Euroclear Participant only in accordance with its
relevant rules and procedures and subject to the ability of the Relevant
Depositary to effect such actions on its behalf through DTC. DTC may take
actions, at the direction of the related Participants, with respect to some
Certificates that conflict with actions taken with respect to other
Certificates.
Definitive Certificates will be issued in registered form to Beneficial
Owners, or their nominees, rather than to DTC, only if (i) DTC or the Depositor
advises the Trustee in writing that DTC is no longer willing or able to
discharge properly its responsibilities as nominee and depositary with respect
to the Certificates and the Depositor is unable to locate a qualified successor,
(ii) the Depositor, at its option, advises the Trustee that it elects to
terminate the book-entry system through DTC, or (iii) after an Event of Default
under the Trust Agreement, the Beneficial Owners representing not less than 51%
of the Certificate Principal Balances of the Book-Entry Certificates advise the
Trustee and DTC that the book-entry system is no longer in the best interests of
such Beneficial Owners. Upon issuance of Definitive Certificates to Beneficial
Owners, such Certificates will be transferable directly (and not exclusively on
a book-entry basis), and registered holders will deal directly with the Trustee
with respect to transfers, notices and payments. See "Description of the
Securities--General" in the Prospectus.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Trustee will be required to use its best efforts to
notify all Beneficial Owners of the occurrence of such event and the
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<PAGE>
availability through DTC of Definitive Certificates. Upon surrender by DTC of
the global certificates representing the Book-Entry Certificates and
instructions for re-registration, the Trustee will issue Definitive Certificates
and thereafter the Trustee will recognize the holders of such Definitive
Certificates as Certificateholders under the Trust Agreement.
Although DTC, Clearstream and Euroclear have agreed to the foregoing
procedures in order to facilitate transfer of Certificates among participants of
DTC, Clearstream and Euroclear, they are under no obligation to perform or
continue to perform such procedures and such procedures may be discontinued at
any time.
Neither the Depositor nor the Trustee will have any responsibility for any
aspect of the records relating to or payments made on account of beneficial
ownership interests of the Book-Entry Certificates held by Cede & Co., as
nominee for DTC, or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
According to DTC, the foregoing information with respect to DTC has been
provided to members of the financial community for informational purposes only
and is not intended to serve as a representation, warranty, or contract
modification of any kind.
DESCRIPTION OF THE UNDERLYING SECURITIES
All of the information contained herein with respect to the Underlying
Securities is based solely on (i) information contained in the Underlying
Agreements and (ii) information obtained from the monthly statements provided by
the Underlying Trustees in connection with the February 2000 Underlying
Remittance Dates for the Underlying Securities. None of the Depositor, the
Underwriter or the Trustee has the ability independently to verify the accuracy
of this information and, accordingly, none of the Depositor, the Underwriter or
the Trustee will make any representation or warranty as to the accuracy of such
information. Prospective investors are advised to consider the limited nature of
such available information in evaluating the suitability of any investment in
the Offered Certificates.
General
The Trust assets will consist primarily of the following:
o approximately 10.665896878% of Class IPPA-1, Mortgage Pass-Through
Certificates, Series 1998-3 (the "Series 1998-3 Underlying Security"),
issued pursuant to a pooling and servicing agreement dated as of July 1,
1998 among DLJ Mortgage Acceptance Corp., as depositor, First Nationwide
Mortgage Corporation, as seller and master servicer, and The Bank of New
York, as trustee;
o approximately 16.930638841% of Class IPPA-1, Mortgage Pass-Through
Certificates, Series 1999-2 (the "Series 1999-2 Underlying Security"),
issued pursuant to a pooling and servicing agreement dated as of March 1,
1999 among DLJ Mortgage Acceptance Corp., as depositor, First Nationwide
Mortgage Corporation, IndyMac Inc. and PNC Mortgage Securities Corp., as
sellers and servicers, and The First National Bank of Chicago, as trustee;
and
o 100% of Class IPP-A, Mortgage Pass-Through Certificates, Series 1999-3
(the "Series 1999-3 Underlying Security"), issued pursuant to a pooling
and servicing agreement dated as of April 1, 1999 among DLJ Mortgage
Acceptance Corp., as depositor, First Nationwide Mortgage Corporation and
PNC Mortgage Securities Corp., as sellers and servicers, and The First
National Bank of Chicago, as trustee.
Each of the Mortgage Pass-Through Certificates identified above is
referred to herein as an "Underlying Security" and together they are referred to
as the "Underlying Securities." Each of the pooling and servicing agreements
identified above is referred to herein as an "Underlying Agreement" and together
they are referred to as
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<PAGE>
the "Underlying Agreements." DLJ Mortgage Acceptance Corp. is referred to herein
as the "Underlying Depositor." Each of the trustees identified above is referred
to herein as an "Underlying Trustee" and together they are referred to as the
"Underlying Trustees." First Nationwide Mortgage Corporation is referred to
herein as the "Servicer." The Underlying Trust Funds relating to the Series
1998-3 Underlying Security, the Series 1999-2 Underlying Security and the Series
1999-3 Underlying Security are referred to herein as the "First Nationwide Trust
Series 1998-3," "First Nationwide Trust Series 1999-2" and "First Nationwide
Trust Series 1999-3," respectively.
Each of the three Underlying Securities evidences a senior interest in one
of three separate trust funds (each an "Underlying Trust Fund") established
pursuant to an Underlying Agreement and was issued together with other senior
interests (together with the applicable Underlying Security, the related
"Underlying Senior Interests"), certain subordinate interests (the related
"Underlying Subordinate Interests") and certain residual interests. Each of the
Underlying Trust Funds consists primarily of a pool of conventional, fixed-rate
mortgage loans (the "Underlying Mortgage Loans") secured by first liens on one-
to four-family residential properties. The aggregate outstanding principal
balance of the Underlying Mortgage Loans included in the three mortgage loan
groups directly backing the Underlying Securities (each, a "Mortgage Pool
Principal Balance") as of the Underlying Remittance Date in February 2000 were
approximately $510,086,746, $246,800,890 and $398,894,500, respectively.
The Servicer is required to deposit, or cause to be deposited, in the
account maintained for receipt of payments on the Underlying Mortgage Loans with
respect to each Underlying Trust Fund (each, an "Underlying Security Account")
on a daily basis the payments and collections on such Underlying Mortgage Loans,
except that the Servicer will deduct its servicing fee and any expenses of
liquidating defaulted Underlying Mortgage Loans or property acquired in respect
thereof.
The Underlying Subordinate Interests are subordinate to the related
Underlying Senior Interests with respect to the right to receive distributions
from the related Underlying Trust Fund and, accordingly, no distributions will
be made on the Underlying Subordinate Interests with respect to any Underlying
Trust Fund on an Underlying Remittance Date until all required distributions
have been made on the related Underlying Senior Interests for such date. In
addition, all losses (other than Excess Losses) on the Underlying Mortgage Loans
included in any Underlying Trust Fund will be borne first by the related
Underlying Subordinate Interests before being borne by the related Underlying
Senior Interests.
Based solely on the monthly statements provided by the Underlying Trustees
in connection with the February 2000 Underlying Remittance Dates, which
statements have not been independently verified for accuracy, the Series 1998-3
Underlying Security, the Series 1999-2 Underlying Security and the Series 1999-3
Underlying Security had principal balances of approximately $489,898,902,
$173,640,285 and $383,124,218, respectively, after giving effect to the February
2000 distributions thereon, representing approximately 96.04%, 70.36% and 96.05%
of the related Mortgage Pool Principal Balances for the respective Underlying
Trust Funds.
Distributions on the Underlying Securities
Distributions of principal and interest on the Underlying Securities will
be made on the 19th day of each month or, if the 19th day is not an Underlying
Business Day, the next succeeding Underlying Business Day (each, an "Underlying
Remittance Date"). As used herein, an "Underlying Business Day" with respect to
an Underlying Security is any day that, in the City of New York or in the city
in which the corporate trust office of the related Underlying Trustee is
located, is neither a legal holiday nor a day on which banking institutions are
authorized or obligated by law, regulation or executive order to be closed.
Scheduled principal received on the Underlying Mortgage Loans held in each
Underlying Trust Fund will be passed through monthly on the Underlying
Remittance Date occurring in the month in which the related Due Date occurs.
With respect to the Underlying Securities, principal prepayments received during
the period from the first day of any month to the last day of such month will be
passed through on the Underlying Remittance Date occurring in the month
following receipt. As used herein, the "Due Date" is the first day of each
calendar month,
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<PAGE>
being the day of the month on which a payment of interest and principal is due
for each Underlying Mortgage Loan, exclusive of any days of grace.
Interest received on each Underlying Mortgage Loan will be passed through
monthly on the Underlying Remittance Date occurring in the month in which the
Due Date occurs, at the pass-through rate for such Underlying Mortgage Loan.
Each Underlying Security bears interest at a rate of 6.50% per annum (the
"Underlying Pass-Through Rate").
On each Underlying Remittance Date, there will be distributed from, and to
the extent of, available funds for each of the applicable mortgage loan groups
in the Underlying Trust Funds, an amount up to the amount required to be paid in
respect of the related Underlying Security.
For a further description of the distribution of principal on the
Underlying Securities, see "Description of the Certificates" in the excerpts
from the Underlying Supplements attached hereto as Exhibit A.
Subordinated Interests
The Underlying Securities, which represent senior interests in the
Underlying Trust Funds, evidence the right of the holders thereof to receive
distributions on the related Underlying Mortgage Loans before any distributions
have been made to holders of the related Underlying Subordinate Interests. This
subordination is intended to enhance the likelihood of regular receipt by
holders of the Underlying Senior Interests of the full amount of monthly
distributions due them and to protect holders of the Underlying Senior Interests
against losses and other cash flow shortfalls. If, on any Underlying Remittance
Date, holders of the Underlying Senior Interests are paid less than the amount
due to them on such date, the interest of the holders of the Underlying Senior
Interests in the related Underlying Trust Funds will vary so as to preserve the
entitlement of the Underlying Senior Interests to unpaid principal of the
Underlying Mortgage Loans and interest thereon.
If at any time the Underlying Subordinate Interests with respect to any of
the Underlying Trust Funds have been extinguished, all future losses or
shortfalls due to delinquent payments on the related Underlying Mortgage Loans
for which no advance is made by the Servicer will be borne by the related
Underlying Senior Interests. Amounts actually paid at any time to the holder of
the related Underlying Security will not be subsequently recoverable from such
holder.
Allocation of Losses to the Underlying Securities
Realized Losses on the Underlying Mortgage Loans in the Underlying Trust
Funds (other than Excess Losses) will be allocated to the related Underlying
Subordinate Interests before they are allocated to the related Underlying Senior
Interests (including the Underlying Securities). If the aggregate principal
balance of the Underlying Subordinate Interests with respect to any Underlying
Trust Fund is reduced to zero, the amount of all such future losses on the
Underlying Mortgage Loans held in that Underlying Trust Fund will be allocated
to the related Underlying Senior Interests (including the applicable Underlying
Security), pro rata, based on their respective outstanding principal balances.
Realized Losses on mortgage loans in the Underlying Trust Funds (including
the Underlying Mortgage Loans) that exceed the applicable coverage amounts for
special hazard losses, fraud losses and bankruptcy losses are referred to herein
as "Excess Losses." Excess Losses on Underlying Mortgage Loans and on mortgage
loans in the other mortgage loan group held in the same Underlying Trust Fund
whose losses are covered by the same Underlying Subordinate Interests will be
allocated to all Underlying Senior Interests relating to those mortgage loan
groups, including the applicable Underlying Security.
S-22
<PAGE>
Adjustment to the Servicing Fee in each Underlying Trust Fund in Connection with
Prepaid Underlying Mortgage Loans
When a mortgagor makes a full or partial principal prepayment of an
Underlying Mortgage Loan between Due Dates, the mortgagor may be required to pay
interest on the principal balance thereof only to the date of prepayment. In
order to minimize any resulting shortfall in interest, the related portion of
the servicing fee owed to the Servicer will be reduced to the extent necessary
to include an amount in payments in respect of the related Underlying Security
equal to a full month's interest payment at the Underlying Pass-Through Rate
with respect to such prepaid Underlying Mortgage Loan. In the event the
aggregate amount of such interest shortfalls exceeds the related portions of the
servicing fee, then the amount of such excess will be allocated to the related
Underlying Security, thereby reducing the interest distributable thereon on the
related Underlying Remittance Date. The amount of any such interest reduction
with respect to any Underlying Security on any Underlying Remittance Date is
referred to herein as the related "Net Prepayment Interest Shortfall."
Advances
The Servicer is obligated to make advances of cash each month for
distribution on each of the Underlying Securities equal to the difference
between the amount due on such Underlying Security and the amount in the related
Underlying Security Account to be distributed to them pursuant to the Underlying
Agreement, but only to the extent such difference is attributable to delinquent
monthly payments due during the immediately preceding Due Period. The Servicer
is not under any obligation to make an advance with respect to any Underlying
Mortgage Loan if the Servicer determines, in its sole discretion, that such
advance will not be recoverable from future payments and collections on such
Underlying Mortgage Loan. Advances are intended to maintain a regular flow of
scheduled interest and principal payments on each of the Underlying Securities,
not to guarantee or insure against losses. Accordingly, any funds so advanced
are recoverable by the Servicer out of amounts received on the Underlying
Mortgage Loans.
Optional Termination of the Underlying Trust Funds
The Underlying Depositor may, on any Underlying Remittance Date, purchase
from any of the Underlying Trust Funds all mortgage loans (including the related
Underlying Mortgage Loans) in such Underlying Trust Fund remaining outstanding
at such time as the aggregate unpaid principal balance of those mortgage loans
is less than 5% of the aggregate unpaid principal balance thereof as of the
related cut-off date. The purchase price will be distributed on the related
Underlying Security in the month following the month of such purchase.
For additional information on the Underlying Securities, investors should
carefully review (i) the excerpts from the prospectus supplements related to the
Underlying Securities (the "Underlying Supplements") attached hereto as Exhibit
A and (ii) the statements for the Underlying Securities for the February 2000
Underlying Remittance Date (the "Underlying Remittance Date Statements"),
excerpts of which are attached hereto as Exhibit B. Information regarding the
Underlying Securities, including information regarding related payment
priorities and allocation of losses, is set forth in the attached Exhibits. Any
information contained in this Prospectus Supplement (including Appendix I and
the Exhibits hereto) with respect to the Underlying Securities or the Underlying
Mortgage Loans has been obtained by the Depositor from the Underlying
Supplements or Underlying Remittance Date Statements provided by the Underlying
Trustees or the Servicer, and has not been independently verified by the
Depositor, the Underwriter or the Trustee. The Underlying Supplements and all
other offering materials described above for the Underlying Securities were
prepared by the Underlying Depositor. None of the Depositor, the Underwriter or
the Trustee makes any representation as to the accuracy or completeness of the
information in the Underlying Supplements, the Underlying Remittance Date
Statements or other related materials.
S-23
<PAGE>
DESCRIPTION OF THE UNDERLYING MORTGAGE LOANS
All of the information contained herein with respect to the Underlying
Mortgage Loans is based solely on (i) information contained in the related
Underlying Supplements and (ii) information obtained from the Underlying
Trustees in connection with the Underlying Remittance Date Statements. None of
the Depositor, the Underwriter or the Trustee has the ability independently to
verify the accuracy of this information and, accordingly, none of the Depositor,
the Underwriter or the Trustee will make any representation or warranty as to
the accuracy of such information. Prospective investors are advised to consider
the limited nature of such available information when evaluating the suitability
of any investment in the Offered Certificates.
Origination and Underwriting. Each Underlying Mortgage Loan was originated
with credit, appraisal and underwriting guidelines applied by First Nationwide
Mortgage Corporation ("First Nationwide") to evaluate the prospective borrower's
credit standing and repayment ability and the value and adequacy of the
mortgaged property as collateral in accordance with applicable federal and state
laws and regulations. Certain of the Underlying Mortgage Loans have been
originated under "reduced documentation" or "no documentation" programs which
require less documentation and verification than do traditional "full
documentation" programs. Generally, under a "reduced documentation" program, no
verification of a mortgagor's stated income is undertaken by the originator.
Under a "no documentation" program, no verification of a mortgagor's income or
assets is undertaken by the originator. The underwriting for such Underlying
Mortgage Loans may have been based primarily on an appraisal of the Underlying
Mortgaged Property and the loan-to-value ratio at origination. For a complete
description of the underwriting policies applied to the Underlying Mortgage
Loans, see "The Mortgage Pool - Underwriting Standards" in the excerpts from the
Underlying Supplements attached hereto as Exhibit A.
Selected Underlying Mortgage Loan Data. The tables on pages I-1 through
I-12 summarize certain characteristics of the Underlying Mortgage Loans included
in each Underlying Trust Fund as such Underlying Mortgage Loans were constituted
as of February 1, 2000. It is expected that the information set forth herein
will be representative of the characteristics of the Underlying Mortgage Loans
as of the date hereof, although prior to issuance of the Offered Certificates,
certain of the Underlying Mortgage Loans may be (or may have been) prepaid in
full or in part or may be repurchased as described herein.
Servicing of the Underlying Mortgage Loans. The Servicer acts as servicer
and provides customary servicing functions with respect to the Underlying
Mortgage Loans. The Servicer is entitled to a servicing fee for its servicing
activities.
The following tables set forth certain delinquency information with
respect to the Underlying Mortgage Loans with respect to each of the Underlying
Trust Funds, substantially all of which has been obtained from the monthly
statements provided by the Underlying Trustees in connection with the February
2000 Underlying Remittance Date for the Underlying Securities. The information
contained in the following tables may not be indicative of future delinquent
payment rates of the Underlying Mortgage Loans or reductions in the principal
balances of the Underlying Securities.
S-24
<PAGE>
Underlying Mortgage Loan Delinquency Information as of February 19, 2000
Relating to the Series 1998-3 Underlying Security
<TABLE>
<CAPTION>
Mortgage Pool Mortgage Pool
Principal Principal 30 - 59 60 - 89
Balance as of Balance as of Days Days 90 + Days
Original Issue February 19, Delinquent Delinquent Delinquent
Date(1) 2000(1) # Balance(1) %(2) # Balance(1) %(2) # Balance(1)
------- ------- - ---------- ---- - ---------- ---- - ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$544,838,217 $510,086,746.05 0 $0 0.00% 0 $0 0.00% 0 $0
<CAPTION>
Mortgage Pool Mortgage Pool
Principal Principal
Balance as of Balance as of In
Original Issue February 19, Foreclosure R.E.O.
Date(1) 2000(1) %(2) # Balance(1) %(2) # Balance(1) %(2)
------- ------- ---- - ---------- ---- - ---------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$544,838,217 $510,086,746.05 0.00% 0 $0 0.00% 0 $0 0.00%
<CAPTION>
Mortgage Pool Mortgage Pool
Principal Principal
Balance as of Balance as of
Original Issue February 19, Cumulative Cumulative
Date(1) 2000(1) Losses(1) Losses %(3)
------- ------- --------- -----------
<S> <C> <C> <C>
$544,838,217 $510,086,746.05 $0 0.00%
</TABLE>
(1) Approximate. As compiled from the monthly statement provided by the
Underlying Trustee in connection with the February 2000 Underlying
Remittance Date for the related Underlying Trust Fund. Reflects the
application of payments on the Underlying Mortgage Loans due on or before
February 1, 2000.
(2) Delinquency, Foreclosure and R.E.O. percentages are represented as
percentages of the related aggregate Mortgage Pool Principal Balance as of
February 1, 2000.
(3) Represented as a percentage of the related Mortgage Pool Principal Balance
as of the original issue date.
S-25
<PAGE>
Underlying Mortgage Loan Delinquency Information as of February 19, 2000
Relating to the Series 1999-2 Underlying Security
<TABLE>
<CAPTION>
Mortgage Pool Mortgage Pool
Principal Principal 31 - 60 61- 90
Balance as of Balance as of Days Days 91 + Days
Original Issue February 19, Delinquent Delinquent Delinquent
Date(1) 2000(1) # Balance(1) %(2) # Balance(1) %(2) # Balance(1)
------- ------- - ---------- ---- - ---------- ---- - ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$257,837,395 $246,800,890.06 0 $0 0.00% 1 $534,720.77 0.22% 0 $0
<CAPTION>
Mortgage Pool Mortgage Pool
Principal Principal
Balance as of Balance as of In
Original Issue February 19, Foreclosure R.E.O.
Date(1) 2000(1) %(2) # Balance(1) %(2) # Balance(1) %(2)
------- ------- ---- - ---------- ---- - ---------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$257,837,395 $246,800,890.06 0.00% 2 $367,139.27 0.15% 0 $0 0.00%
<CAPTION>
Mortgage Pool Mortgage Pool
Principal Principal
Balance as of Balance as of
Original Issue February 19, Cumulative Cumulative
Date(1) 2000(1) Losses(1) Losses %(3)
------- ------- --------- -----------
<S> <C> <C> <C>
$257,837,395 $246,800,890.06 $0 0.00%
</TABLE>
(1) Approximate. As compiled from the monthly statement provided by the
Underlying Trustee in connection with the February 2000 Underlying
Remittance Date for the related Underlying Trust Fund. Reflects the
application of payments on the Underlying Mortgage Loans due on or before
February 1, 2000.
(2) Delinquency, Foreclosure and R.E.O. percentages are represented as
percentages of the related aggregate Mortgage Pool Principal Balance as of
February 1, 2000.
(3) Represented as a percentage of the related Mortgage Pool Principal Balance
as of the original issue date.
S-26
<PAGE>
Underlying Mortgage Loan Delinquency Information as of February 19, 2000
Relating to the Series 1999-3 Underlying Security
<TABLE>
<CAPTION>
Mortgage Pool Mortgage Pool
Principal Principal 31 - 60 61 - 90
Balance as of Balance as of Days Days 91 + Days
Original Issue February19, Delinquent Delinquent Delinquent
Date(1) 2000(1) # Balance(1) %(2) # Balance(1) %(2) # Balance(1)
------- ------- - ---------- ---- - ---------- ---- - ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$407,897,647 $398,894,500.18 0 $0 0.00% 0 $0 0.00% 0 $0
<CAPTION>
Mortgage Pool Mortgage Pool
Principal Principal
Balance as of Balance as of In
Original Issue February19, Foreclosure R.E.O.
Date(1) 2000(1) %(2) # Balance(1) %(2) # Balance(1) %(2)
------- ------- ---- - --------------- - ---------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$407,897,647 $398,894,500.18 0.00% 0 $0 0.00% 0 $0 0.00%
<CAPTION>
Mortgage Pool Mortgage Pool
Principal Principal
Balance as of Balance as of
Original Issue February19, Cumulative Cumulative
Date(1) 2000(1) Losses(1) Losses %(3)
------- ------- --------- -----------
<S> <C> <C> <C>
$407,897,647 $398,894,500.18 $0 0.00%
</TABLE>
(1) Approximate. As compiled from the monthly statement provided by the
Underlying Trustee in connection with the February 2000 Underlying
Remittance Date for the related Underlying Trust Fund. Reflects the
application of payments on the Underlying Mortgage Loans due on or before
February 1, 2000.
(2) Delinquency, Foreclosure and R.E.O. percentages are represented as
percentages of the related aggregate Mortgage Pool Principal Balance as of
February 1, 2000.
(3) Represented as a percentage of the related Mortgage Pool Principal Balance
as of the original issue date.
S-27
<PAGE>
THE DEPOSITOR
Greenwich Capital Acceptance, Inc. (the "Depositor"), is a Delaware
corporation organized on April 23, 1987 for the limited purpose of acquiring,
owning and transferring certain mortgage-related assets and selling interests
therein or bonds secured thereby. It is a indirect, limited purpose finance
subsidiary of National Westminster Bank Plc and an affiliate of Greenwich
Capital Markets, Inc. Greenwich Capital Markets, Inc. is a registered
broker-dealer engaged in the U.S. government securities and related capital
markets business. The Depositor maintains its principal office at 600 Steamboat
Road, Greenwich, Connecticut 06830. Its telephone number is (203) 625-2700.
Neither the Depositor nor any of its affiliates will insure or guarantee
distributions on the Certificates.
YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS
Yield Considerations
If the purchaser of an Offered Certificate offered at a discount
calculates the anticipated yield to maturity of such Offered Certificate based
on an assumed rate of payment of principal that is faster than that actually
received on the Underlying Mortgage Loans and, in turn, on the Underlying
Securities, the actual yield to maturity will be lower than that so calculated.
If the purchaser of an Offered Certificate offered at a premium calculates the
anticipated yield to maturity of such Offered Certificate based on an assumed
rate of payment of principal that is slower than that actually received on the
Underlying Mortgage Loans and, in turn, on the Underlying Securities, the actual
yield to maturity will be lower than that so calculated.
The yield to maturity of the Offered Certificates and the aggregate amount
of distributions on the Offered Certificates will be related to the timing and
amount of principal distributions on the Underlying Securities, which will be
related to the rate of payment of principal (including prepayments) on the
Underlying Mortgage Loans and the allocation of such principal payments in
accordance with the priorities discussed in the excerpts from the Underlying
Supplements contained in Exhibit A hereto. The rate of principal payments on the
Underlying Mortgage Loans will be affected by the amortization schedules of the
Underlying Mortgage Loans and by the timing and amount of principal prepayments
thereon (for this purpose, the term "prepayment" also includes payments
resulting from refinancings and liquidations of the Underlying Mortgage Loans
due to defaults, casualties, condemnations and purchases of the Underlying
Mortgage Loans).
The model used in this Prospectus Supplement (the "PSA") represents an
assumed rate of prepayment each month relative to the then outstanding principal
balance of a pool of mortgage loans for the life of such mortgage loans. The PSA
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 Underlying Mortgage Loans. A 100% PSA assumes constant prepayment
rates of 0.2% per annum of the then outstanding principal balance of the
Underlying Mortgage Loans in the first month of the life of the mortgage loans
and an additional 0.2% per annum in each month thereafter until the thirtieth
month. Beginning in the thirtieth month and in each month thereafter during the
life of such Underlying Mortgage Loans, 100% PSA assumes a constant prepayment
rate of 6% per annum each month. As used in the table below, 0% PSA assumes
prepayment rates equal to 0% of the 100% PSA i.e., no prepayments.
Correspondingly, 175% PSA assumes prepayment rates equal to 175% of the 100%
PSA, and so forth.
The decrement tables on the following pages (the "DEC Tables") indicate
the weighted average lives of the Offered Certificates and set forth the
percentage of the original principal amount of the Offered Certificates that
would be outstanding after each of the Distribution Dates shown at various
percentages of PSA assuming that there is no optional termination of any of the
Underlying Trust Funds. See "Yield and Prepayment Considerations" in the
Prospectus.
S-28
<PAGE>
Variations in actual prepayment experience (including prepayments
resulting from defaults) for the Underlying Mortgage Loans will increase or
decrease the percentages of principal amounts (and weighted average lives) shown
in the DEC Tables. There is no assurance that payments of the Underlying
Mortgage Loans will conform to any of the percentages of PSA described in the
DEC Tables. Among other things, the DEC Tables assume that the Underlying
Mortgage Loans prepay at the indicated constant rates, notwithstanding the fact
that such Underlying Mortgage Loans may vary substantially as to geography,
interest rate and remaining terms.
Factors Affecting Prepayments on the Underlying Mortgage Loans
All of the Underlying Mortgage Loans in the Underlying Trust Funds are
fixed-rate mortgage loans. The rate of payments (including prepayments) on pools
of mortgage loans are influenced by a variety of economic, geographic, social,
tax, legal and other factors. If prevailing mortgage rates fall significantly
below the then current fixed rate on the Underlying Mortgage Loans, the rate of
prepayment resulting from refinancing would be expected to increase,
particularly because the availability of fixed or adjustable rate mortgage loans
at competitive interest rates may encourage borrowers to prepay their Underlying
Mortgage Loans. Conversely, if prevailing mortgage rates rise significantly
above the then current fixed rates on the Underlying Mortgage Loans, the rate of
prepayments on the Underlying Mortgage Loans would be expected to decrease.
Other factors affecting prepayment of mortgage loans include changes in
borrowers' housing needs, job transfers, unemployment, borrowers' net equity in
the mortgaged premises and servicing decisions. The Underlying Mortgage Loans
may be prepaid at any time by borrowers. Investors are cautioned that past
prepayment rates are unlikely to be indicative of future prepayment rates. No
assurance can be given as to the rate of principal payments or prepayments on
the Underlying Mortgage Loans and, consequently, on the Offered Certificates.
Substantially all of the Underlying Mortgage Loans contain "due-on-sale"
clauses. However, the Servicer may choose not to accelerate an Underlying
Mortgage Loan upon conveyance of the related mortgaged premises if the Servicer
would make a similar decision with respect to a comparable mortgage loan held
for its own account. The weighted average lives of the Offered Certificates will
be decreased to the extent that the sale of mortgaged premises securing the
Underlying Mortgage Loans will result in the prepayment of such Underlying
Mortgage Loans.
Early Termination of the Underlying Trust Funds
As noted in "Description of the Underlying Securities--Optional
Termination of the Underlying Trust Funds" herein, the Underlying Depositor may
redeem an Underlying Security on or after any Underlying Remittance Date on
which, after taking into account payments of principal and allocations of
realized losses, if any, to be made on that date, the aggregate outstanding
principal amount of all mortgage loans held in the related Underlying Trust Fund
(including the related Underlying Mortgage Loans) is less than 5% of their
aggregate principal amount as of the cut-off date for that Underlying Trust
Fund. In such event, the related Underlying Trust Fund may be terminated. The
termination of any Underlying Trust Fund will result in the receipt by holders
of the applicable Class or Classes of Offered Certificates of principal payments
that could affect the yields to maturity on such Certificates and will have the
effect of shortening the weighted average life or lives of such Certificates.
Weighted Average Lives of the Certificates
Weighted average life refers to the average amount of time that will
elapse from the date of delivery of a security until each dollar of principal of
such security will be repaid to the investor. The weighted average life of each
Class of Offered Certificates will be influenced by the (i) rate at which
principal of the Underlying Mortgage Loans is paid, which may be in the form of
scheduled amortization or prepayments (for this purpose, the term prepayment"
includes payments resulting from refinancings, liquidations of such Underlying
Mortgage Loans due to defaults, casualties, indemnifications and purchases by or
on behalf of the Servicer), (ii) optional termination with respect to any of the
Underlying Trust Funds and (iii) any required repurchase by the Underlying
Depositor of any of the Underlying Securities as a result of a breach of certain
representations and warranties.
S-29
<PAGE>
Assumed Final Distribution Dates
The assumed final Distribution Date for each Class of Certificates (other
than the Class A-3 Certificates and Class A-9 Certificates) is April 19, 2029,
which is the distribution date immediately following the latest scheduled
maturity date for any Underlying Mortgage Loan. The assumed final Distribution
Dates for the Class A-3 Certificates and Class A-9 Certificates are October 19,
2010 and June 19, 2013, respectively. The assumed final Distribution Dates for
the Class A-3 Certificates and Class A-9 Certificates were calculated based on
the structuring assumptions contained in "--Modeling Assumptions" below and
assuming a prepayment speed on the Underlying Mortgage Loans of 0% PSA. No event
of default, change in the priorities for distribution among the various Classes
or other provisions under the Trust Agreement will arise or become applicable
solely by reason of the failure to retire the entire Certificate Principal
Balance of any Class of Certificates on or before its assumed final Distribution
Date.
Modeling Assumptions
The DEC Tables have been prepared on the basis of, among other things, the
following modeling assumptions:
(i) all scheduled payments on the Underlying Mortgage Loans are
timely received on the first day of each month, commencing in March 2000;
(ii) the Underlying Mortgage Loans will prepay monthly at the
specified percentages of PSA;
(iii) all principal prepayments constitute prepayments in full of
the Underlying Mortgage Loans, are received on the last day of each month,
commencing in February 2000, and include 30 days' interest thereon;
(iv) there are no defaults, losses or interest shortfalls on the
Underlying Mortgage Loans prior to or after the Closing Date;
(v) the Closing Date is February 28, 2000, and cash distributions
are received by the Certificateholders on the 19th day of each month,
commencing in March 2000 (distributions will not include any distributions
received on the Underlying Securities on or before the February 2000
Underlying Remittance Date);
(vi) the Underlying Mortgage Loans have been amortized using the
respective scheduled payments, outstanding principal balances (prior to
giving effect to prepayments received during the related prepayment
period) and interest rates;
(vii) no optional termination of the Trust or the Underlying Trust
Funds occurs;
(viii) the Classes of Offered Certificates have the initial
principal amounts specified on the cover page hereof;
(ix) the outstanding principal amount of the Underlying Senior
Interests and the Underlying Subordinate Interests are as set forth in the
February 2000 Underlying Remittance Date monthly statements;
(x) for each Underlying Trust Fund and related Underlying Security,
the related Underlying Senior Interests were aggregated as one security,
and the related Underlying Subordinate Interests were aggregated as one
security calculated as the difference between (a) the related Mortgage
Pool Principal Balance as of the Underlying Remittance Date in February
2000 and (b) the aggregate of the related Underlying Senior Interests;
S-30
<PAGE>
(xi) the aggregate Underlying Senior Interests and aggregate
Underlying Subordinate Interests described in clause (x) above are as
follows:
(a) First Nationwide Trust Series 1998-3: $489,986,372.57
and $20,100,373.48;
(b) First Nationwide Trust Series 1999-2: $235,311,085.72
and $11,489,804.34; and
(c) First Nationwide Trust Series 1999-3: $383,124,218.35
and $15,770,281.83;
(xii) each Underlying Trust Fund included only the mortgage loan
groups relating to the applicable Underlying Mortgage Loans, and any
additional mortgage loan groups held in such Underlying Trust Fund were
disregarded;
(xiii) for purposes of determining the amount of cash from the
Underlying Securities that will be allocated to the Certificates, the
following percentages were used:
(a) Series 1998-3 Underlying Security: 10.6639928486%;
(b) Series 1999-2 Underlying Security: 12.4934231212%; and
(c) Series 1999-3 Underlying Security: 100.00%;
(xiv) except with respect to the modeling assumptions set forth in
clauses (x) - (xii) above, payments of principal with respect to the
Underlying Trust Funds are made in accordance with the methodologies and
priorities set forth in the Underlying Supplements; and
(xv) the Underlying Mortgage Loans held in the specified Underlying
Trust Funds have the following characteristics:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Principal Balance of
Underlying Trust Underlying Mortgage Remaining Term
Funds Loans ($) Gross Rate (%) Net Rate (%) (months) Loan Age (months)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
First Nationwide
Trust Series 1998-2 510,086,746.05 7.25489 6.50 339 20
- ----------------------------------------------------------------------------------------------------------------------
First Nationwide
Trust Series 1999-2 246,800,890.06 7.19892 6.50 343 13
- ----------------------------------------------------------------------------------------------------------------------
First Nationwide
Trust Series 1999-3 398,894,500.18 6.95769 6.50 348 11
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
S-31
<PAGE>
Percent of Initial Certificate Principal Balance Outstanding of the
Class A-1 Certificates at the Following Percentages of PSA+
<TABLE>
<CAPTION>
Distribution Date 0% 100% 175% 200% 225% 300% 400%
- ----------------- -- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Initial Percent 100 100 100 100 100 100 100
February 2001 98 90 84 82 80 73 65
February 2002 95 76 61 57 52 39 22
February 2003 93 62 41 34 27 9 0
February 2004 90 49 22 14 6 0 0
February 2005 87 37 6 0 0 0 0
February 2006 84 26 0 0 0 0 0
February 2007 81 16 0 0 0 0 0
February 2008 77 7 0 0 0 0 0
February 2009 74 0 0 0 0 0 0
February 2010 70 0 0 0 0 0 0
February 2011 65 0 0 0 0 0 0
February 2012 60 0 0 0 0 0 0
February 2013 55 0 0 0 0 0 0
February 2014 50 0 0 0 0 0 0
February 2015 44 0 0 0 0 0 0
February 2016 38 0 0 0 0 0 0
February 2017 31 0 0 0 0 0 0
February 2018 24 0 0 0 0 0 0
February 2019 17 0 0 0 0 0 0
February 2020 8 0 0 0 0 0 0
February 2021 0 0 0 0 0 0 0
February 2022 0 0 0 0 0 0 0
February 2023 0 0 0 0 0 0 0
February 2024 0 0 0 0 0 0 0
February 2025 0 0 0 0 0 0 0
February 2026 0 0 0 0 0 0 0
February 2027 0 0 0 0 0 0 0
February 2028 0 0 0 0 0 0 0
February 2029 0 0 0 0 0 0 0
February 2030 0 0 0 0 0 0 0
Weighted Average Life in Years(1) 12.95 4.12 2.64 2.37 2.15 1.70 1.35
</TABLE>
- ----------
(1) The weighted average life is determined by (i) multiplying the assumed net
reduction, if any, in the principal amount on each Distribution Date by
the number of years from the Closing Date to the related Distribution
Date, (ii) summing the results, and (iii) dividing the sum by the
aggregate amount of the assumed net reductions in principal amount.
+ Rounded to nearest whole percentage.
S-32
<PAGE>
Percent of Initial Certificate Principal Balance Outstanding of the
Class A-2 Certificates at the Following Percentages of PSA+
<TABLE>
<CAPTION>
Distribution Date 0% 100% 175% 200% 225% 300% 400%
- ----------------- -- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Initial Percent 100 100 100 100 100 100 100
February 2001 100 100 100 100 100 100 100
February 2002 100 100 100 100 100 100 100
February 2003 100 100 100 100 100 100 63
February 2004 100 100 100 100 100 57 0
February 2005 100 100 100 91 67 4 0
February 2006 100 100 78 51 27 0 0
February 2007 100 100 45 18 0 0 0
February 2008 100 100 17 0 0 0 0
February 2009 100 95 0 0 0 0 0
February 2010 100 73 0 0 0 0 0
February 2011 100 52 0 0 0 0 0
February 2012 100 33 0 0 0 0 0
February 2013 100 15 0 0 0 0 0
February 2014 100 0 0 0 0 0 0
February 2015 100 0 0 0 0 0 0
February 2016 100 0 0 0 0 0 0
February 2017 100 0 0 0 0 0 0
February 2018 100 0 0 0 0 0 0
February 2019 100 0 0 0 0 0 0
February 2020 100 0 0 0 0 0 0
February 2021 98 0 0 0 0 0 0
February 2022 72 0 0 0 0 0 0
February 2023 44 0 0 0 0 0 0
February 2024 14 0 0 0 0 0 0
February 2025 0 0 0 0 0 0 0
February 2026 0 0 0 0 0 0 0
February 2027 0 0 0 0 0 0 0
February 2028 0 0 0 0 0 0 0
February 2029 0 0 0 0 0 0 0
February 2030 0 0 0 0 0 0 0
Weighted Average Life in Years(1) 22.77 11.20 6.93 6.11 5.47 4.17 3.19
</TABLE>
- ----------
(1) The weighted average life is determined by (i) multiplying the assumed net
reduction, if any, in the principal amount on each Distribution Date by the
number of years from the Closing Date to the related Distribution Date, (ii)
summing the results, and (iii) dividing the sum by the aggregate amount of the
assumed net reductions in principal amount.
+ Rounded to nearest whole percentage.
S-33
<PAGE>
Percent of Initial Certificate Principal Balance Outstanding of the
Class A-3 Certificates at the Following Percentages of PSA+
<TABLE>
<CAPTION>
Distribution Date 0% 100% 175% 200% 225% 300% 400%
- ----------------- -- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Initial Percent 100 100 100 100 100 100 100
February 2001 93 93 93 93 93 93 93
February 2002 86 86 86 86 86 86 86
February 2003 78 78 78 78 78 78 78
February 2004 70 70 70 70 70 70 56
February 2005 61 61 61 61 61 61 0
February 2006 52 52 52 52 52 0 0
February 2007 42 42 42 42 32 0 0
February 2008 31 31 31 17 0 0 0
February 2009 20 20 10 0 0 0 0
February 2010 8 8 0 0 0 0 0
February 2011 0 0 0 0 0 0 0
February 2012 0 0 0 0 0 0 0
February 2013 0 0 0 0 0 0 0
February 2014 0 0 0 0 0 0 0
February 2015 0 0 0 0 0 0 0
February 2016 0 0 0 0 0 0 0
February 2017 0 0 0 0 0 0 0
February 2018 0 0 0 0 0 0 0
February 2019 0 0 0 0 0 0 0
February 2020 0 0 0 0 0 0 0
February 2021 0 0 0 0 0 0 0
February 2022 0 0 0 0 0 0 0
February 2023 0 0 0 0 0 0 0
February 2024 0 0 0 0 0 0 0
February 2025 0 0 0 0 0 0 0
February 2026 0 0 0 0 0 0 0
February 2027 0 0 0 0 0 0 0
February 2028 0 0 0 0 0 0 0
February 2029 0 0 0 0 0 0 0
February 2030 0 0 0 0 0 0 0
Weighted Average Life in Years(1) 5.92 5.92 5.76 5.51 5.23 4.42 3.60
</TABLE>
- ----------
(1) The weighted average life is determined by (i) multiplying the assumed net
reduction, if any, in the principal amount on each Distribution Date by
the number of years from the Closing Date to the related Distribution
Date, (ii) summing the results, and (iii) dividing the sum by the
aggregate amount of the assumed net reductions in principal amount.
+ Rounded to nearest whole percentage.
S-34
<PAGE>
Percent of Initial Certificate Principal Balance Outstanding of the
Class A-4 Certificates at the Following Percentages of PSA+
<TABLE>
<CAPTION>
Distribution Date 0% 100% 175% 200% 225% 300% 400%
- ----------------- -- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Initial Percent 100 100 100 100 100 100 100
February 2001 107 107 107 107 107 107 107
February 2002 114 114 114 114 114 114 114
February 2003 121 121 121 121 121 121 121
February 2004 130 130 130 130 130 130 130
February 2005 138 138 138 138 138 138 138
February 2006 148 148 148 148 148 148 98
February 2007 157 157 157 157 157 143 65
February 2008 168 168 168 168 168 111 44
February 2009 179 179 179 179 160 88 31
February 2010 191 191 191 164 135 70 23
February 2011 204 204 173 141 113 56 17
February 2012 218 218 150 120 95 45 13
February 2013 232 232 130 102 80 35 9
February 2014 237 234 112 87 67 28 7
February 2015 237 211 97 73 55 22 5
February 2016 237 190 83 62 46 17 4
February 2017 237 169 70 52 38 13 3
February 2018 237 150 59 43 31 10 2
February 2019 237 132 50 35 25 8 1
February 2020 237 115 41 29 20 6 1
February 2021 237 99 34 23 16 5 1
February 2022 237 84 27 18 12 3 0
February 2023 237 70 22 14 9 2 0
February 2024 237 56 17 11 7 2 0
February 2025 210 44 12 8 5 1 0
February 2026 162 31 8 5 3 1 0
February 2027 109 20 5 3 2 0 0
February 2028 53 9 2 1 1 0 0
February 2029 0 0 0 0 0 0 0
February 2030 0 0 0 0 0 0 0
Weighted Average Life in Years(1) 26.80 20.33 16.18 14.97 13.82 10.86 7.85
</TABLE>
- ----------
(1) The weighted average life is determined by (i) multiplying the assumed net
reduction, if any, in the principal amount on each Distribution Date by
the number of years from the Closing Date to the related Distribution
Date, (ii) summing the results, and (iii) dividing the sum by the
aggregate amount of the assumed net reductions in principal amount.
+ Rounded to nearest whole percentage.
S-35
<PAGE>
Percent of Initial Certificate Principal Balance Outstanding of the
Class A-5 Certificates at the Following Percentages of PSA+
<TABLE>
<CAPTION>
Distribution Date 0% 100% 175% 200% 225% 300% 400%
- ----------------- -- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Initial Percent 100 100 100 100 100 100 100
February 2001 99 99 99 99 99 99 99
February 2002 98 98 98 98 98 98 98
February 2003 96 96 96 96 96 96 96
February 2004 95 95 95 95 95 95 95
February 2005 94 94 94 94 94 94 94
February 2006 92 90 89 88 88 86 84
February 2007 90 86 83 82 81 78 73
February 2008 89 82 76 75 73 68 61
February 2009 87 76 68 66 63 56 48
February 2010 85 70 60 57 54 45 35
February 2011 82 64 52 48 45 36 26
February 2012 80 58 45 41 38 29 19
February 2013 77 53 39 35 32 23 14
February 2014 75 48 34 30 26 18 10
February 2015 72 43 29 25 22 14 8
February 2016 68 39 25 21 18 11 6
February 2017 65 35 21 18 15 9 4
February 2018 61 31 18 15 12 7 3
February 2019 58 27 15 12 10 5 2
February 2020 53 24 12 10 8 4 1
February 2021 49 20 10 8 6 3 1
February 2022 44 17 8 6 5 2 1
February 2023 39 14 6 5 4 2 0
February 2024 33 12 5 4 3 1 0
February 2025 27 9 4 3 2 1 0
February 2026 21 6 3 2 1 0 0
February 2027 14 4 2 1 1 0 0
February 2028 7 2 1 0 0 0 0
February 2029 0 0 0 0 0 0 0
February 2030 0 0 0 0 0 0 0
Weighted Average Life in Years(1) 19.02 14.43 12.38 11.86 11.40 10.31 9.29
</TABLE>
- ----------
(1) The weighted average life is determined by (i) multiplying the assumed net
reduction, if any, in the principal amount on each Distribution Date by
the number of years from the Closing Date to the related Distribution
Date, (ii) summing the results, and (iii) dividing the sum by the
aggregate amount of the assumed net reductions in principal amount.
+ Rounded to the nearest whole percentage.
S-36
<PAGE>
Percent of Initial Certificate Principal Balance Outstanding of the
Class A-6 Certificates at the Following Percentages of PSA+
<TABLE>
<CAPTION>
Distribution Date 0% 100% 175% 200% 225% 300% 400%
- ----------------- -- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Initial Percent 100 100 100 100 100 100 100
February 2001 107 107 107 107 107 107 107
February 2002 114 114 114 114 114 114 95
February 2003 121 121 121 121 121 95 0
February 2004 130 130 130 130 130 4 0
February 2005 138 138 138 138 116 0 0
February 2006 148 148 148 139 72 0 0
February 2007 157 157 122 49 0 0 0
February 2008 168 168 46 0 0 0 0
February 2009 179 179 0 0 0 0 0
February 2010 191 191 0 0 0 0 0
February 2011 204 142 0 0 0 0 0
February 2012 218 89 0 0 0 0 0
February 2013 232 40 0 0 0 0 0
February 2014 248 0 0 0 0 0 0
February 2015 264 0 0 0 0 0 0
February 2016 282 0 0 0 0 0 0
February 2017 301 0 0 0 0 0 0
February 2018 321 0 0 0 0 0 0
February 2019 343 0 0 0 0 0 0
February 2020 332 0 0 0 0 0 0
February 2021 266 0 0 0 0 0 0
February 2022 195 0 0 0 0 0 0
February 2023 119 0 0 0 0 0 0
February 2024 37 0 0 0 0 0 0
February 2025 0 0 0 0 0 0 0
February 2026 0 0 0 0 0 0 0
February 2027 0 0 0 0 0 0 0
February 2028 0 0 0 0 0 0 0
February 2029 0 0 0 0 0 0 0
February 2030 0 0 0 0 0 0 0
Weighted Average Life in Years(1) 22.18 11.92 7.63 6.75 5.92 3.39 2.22
</TABLE>
- ----------
(1) The weighted average life is determined by (i) multiplying the assumed net
reduction, if any, in the principal amount on each Distribution Date by
the number of years from the Closing Date to the related Distribution
Date, (ii) summing the results, and (iii) dividing the sum by the
aggregate amount of the assumed net reductions in principal amount.
+ Rounded to the nearest whole percentage.
S-37
<PAGE>
Percent of Initial Certificate Principal Balance Outstanding of the
Class A-7 Certificates at the Following Percentages of PSA+
<TABLE>
<CAPTION>
Distribution Date 0% 100% 175% 200% 225% 300% 400%
- ----------------- -- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Initial Percent 100 100 100 100 100 100 100
February 2001 98 97 86 82 79 68 53
February 2002 97 93 67 59 51 26 0
February 2003 95 89 51 39 27 0 0
February 2004 93 86 38 23 9 0 0
February 2005 91 83 27 10 0 0 0
February 2006 89 76 15 0 0 0 0
February 2007 86 56 0 0 0 0 0
February 2008 84 36 0 0 0 0 0
February 2009 81 18 0 0 0 0 0
February 2010 78 1 0 0 0 0 0
February 2011 75 0 0 0 0 0 0
February 2012 72 0 0 0 0 0 0
February 2013 68 0 0 0 0 0 0
February 2014 65 0 0 0 0 0 0
February 2015 61 0 0 0 0 0 0
February 2016 56 0 0 0 0 0 0
February 2017 49 0 0 0 0 0 0
February 2018 31 0 0 0 0 0 0
February 2019 12 0 0 0 0 0 0
February 2020 0 0 0 0 0 0 0
February 2021 0 0 0 0 0 0 0
February 2022 0 0 0 0 0 0 0
February 2023 0 0 0 0 0 0 0
February 2024 0 0 0 0 0 0 0
February 2025 0 0 0 0 0 0 0
February 2026 0 0 0 0 0 0 0
February 2027 0 0 0 0 0 0 0
February 2028 0 0 0 0 0 0 0
February 2029 0 0 0 0 0 0 0
February 2030 0 0 0 0 0 0 0
Weighted Average Life in Years(1) 14.31 6.88 3.34 2.65 2.15 1.44 1.04
</TABLE>
- ----------
(1) The weighted average life is determined by (i) multiplying the assumed net
reduction, if any, in the principal amount on each Distribution Date by
the number of years from the Closing Date to the related Distribution
Date, (ii) summing the results, and (iii) dividing the sum by the
aggregate amount of the assumed net reductions in principal amount.
+ Rounded to the nearest whole percentage.
S-38
<PAGE>
Percent of Initial Certificate Principal Balance Outstanding of the
Class A-8 Certificates at the Following Percentages of PSA+
<TABLE>
<CAPTION>
Distribution Date 0% 100% 175% 200% 225% 300% 400%
- ----------------- -- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Initial Percent 100 100 100 100 100 100 100
February 2001 97 86 86 86 86 86 86
February 2002 93 67 67 67 67 67 67
February 2003 90 48 48 48 48 48 33
February 2004 86 30 30 30 30 30 0
February 2005 81 13 13 13 13 2 0
February 2006 77 0 0 0 0 0 0
February 2007 72 0 0 0 0 0 0
February 2008 66 0 0 0 0 0 0
February 2009 61 0 0 0 0 0 0
February 2010 55 0 0 0 0 0 0
February 2011 48 0 0 0 0 0 0
February 2012 41 0 0 0 0 0 0
February 2013 34 0 0 0 0 0 0
February 2014 26 0 0 0 0 0 0
February 2015 17 0 0 0 0 0 0
February 2016 8 0 0 0 0 0 0
February 2017 0 0 0 0 0 0 0
February 2018 0 0 0 0 0 0 0
February 2019 0 0 0 0 0 0 0
February 2020 0 0 0 0 0 0 0
February 2021 0 0 0 0 0 0 0
February 2022 0 0 0 0 0 0 0
February 2023 0 0 0 0 0 0 0
February 2024 0 0 0 0 0 0 0
February 2025 0 0 0 0 0 0 0
February 2026 0 0 0 0 0 0 0
February 2027 0 0 0 0 0 0 0
February 2028 0 0 0 0 0 0 0
February 2029 0 0 0 0 0 0 0
February 2030 0 0 0 0 0 0 0
Weighted Average Life in Years(1) 10.02 2.94 2.94 2.94 2.94 2.83 2.39
</TABLE>
- ----------
(1) The weighted average life is determined by (i) multiplying the assumed net
reduction, if any, in the principal amount on each Distribution Date by
the number of years from the Closing Date to the related Distribution
Date, (ii) summing the results, and (iii) dividing the sum by the
aggregate amount of the assumed net reductions in principal amount.
+ Rounded to the nearest whole percentage.
S-39
<PAGE>
Percent of Initial Certificate Principal Balance Outstanding of the
Class A-9 Certificates at the Following Percentages of PSA+
<TABLE>
<CAPTION>
Distribution Date 0% 100% 175% 200% 225% 300% 400%
- ----------------- -- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Initial Percent 100 100 100 100 100 100 100
February 2001 100 100 100 100 100 100 100
February 2002 100 100 100 100 100 100 100
February 2003 100 100 100 100 100 100 100
February 2004 100 100 100 100 100 100 100
February 2005 100 100 100 100 100 100 26
February 2006 100 100 100 100 100 100 0
February 2007 100 100 100 100 100 0 0
February 2008 100 100 100 100 58 0 0
February 2009 100 100 100 31 0 0 0
February 2010 100 100 20 0 0 0 0
February 2011 86 86 0 0 0 0 0
February 2012 51 51 0 0 0 0 0
February 2013 12 12 0 0 0 0 0
February 2014 0 0 0 0 0 0 0
February 2015 0 0 0 0 0 0 0
February 2016 0 0 0 0 0 0 0
February 2017 0 0 0 0 0 0 0
February 2018 0 0 0 0 0 0 0
February 2019 0 0 0 0 0 0 0
February 2020 0 0 0 0 0 0 0
February 2021 0 0 0 0 0 0 0
February 2022 0 0 0 0 0 0 0
February 2023 0 0 0 0 0 0 0
February 2024 0 0 0 0 0 0 0
February 2025 0 0 0 0 0 0 0
February 2026 0 0 0 0 0 0 0
February 2027 0 0 0 0 0 0 0
February 2028 0 0 0 0 0 0 0
February 2029 0 0 0 0 0 0 0
February 2030 0 0 0 0 0 0 0
Weighted Average Life in Years(1) 12.01 12.01 9.73 8.85 8.09 6.36 4.90
</TABLE>
- ----------
(1) The weighted average life is determined by (i) multiplying the assumed net
reduction, if any, in the principal amount on each Distribution Date by
the number of years from the Closing Date to the related Distribution
Date, (ii) summing the results, and (iii) dividing the sum by the
aggregate amount of the assumed net reductions in principal amount.
+ Rounded to the nearest whole percentage.
S-40
<PAGE>
Percent of Initial Certificate Principal Balance Outstanding of the
Class A-R Certificates at the Following Percentages of PSA+
<TABLE>
<CAPTION>
Distribution Date 0% 100% 175% 200% 225% 300% 400%
- ----------------- -- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Initial Percent 100 100 100 100 100 100 100
February 2001 0 0 0 0 0 0 0
February 2002 0 0 0 0 0 0 0
February 2003 0 0 0 0 0 0 0
February 2004 0 0 0 0 0 0 0
February 2005 0 0 0 0 0 0 0
February 2006 0 0 0 0 0 0 0
February 2007 0 0 0 0 0 0 0
February 2008 0 0 0 0 0 0 0
February 2009 0 0 0 0 0 0 0
February 2010 0 0 0 0 0 0 0
February 2011 0 0 0 0 0 0 0
February 2012 0 0 0 0 0 0 0
February 2013 0 0 0 0 0 0 0
February 2014 0 0 0 0 0 0 0
February 2015 0 0 0 0 0 0 0
February 2016 0 0 0 0 0 0 0
February 2017 0 0 0 0 0 0 0
February 2018 0 0 0 0 0 0 0
February 2019 0 0 0 0 0 0 0
February 2020 0 0 0 0 0 0 0
February 2021 0 0 0 0 0 0 0
February 2022 0 0 0 0 0 0 0
February 2023 0 0 0 0 0 0 0
February 2024 0 0 0 0 0 0 0
February 2025 0 0 0 0 0 0 0
February 2026 0 0 0 0 0 0 0
February 2027 0 0 0 0 0 0 0
February 2028 0 0 0 0 0 0 0
February 2029 0 0 0 0 0 0 0
February 2030 0 0 0 0 0 0 0
Weighted Average Life in Years(1) 0.06 0.06 0.06 0.06 0.06 0.06 0.06
</TABLE>
- ----------
(1) The weighted average life is determined by (i) multiplying the assumed net
reduction, if any, in the principal amount on each Distribution Date by
the number of years from the Closing Date to the related Distribution
Date, (ii) summing the results, and (iii) dividing the sum by the
aggregate amount of the assumed net reductions in principal amount.
+ Rounded to the nearest whole percentage.
S-41
<PAGE>
USE OF PROCEEDS
The Depositor will apply the proceeds of the sale of the Offered
Certificates towards the purchase price of the Underlying Securities, the
payment of expenses related to such purchase and other corporate purposes.
CERTAIN MATERIAL FEDERAL INCOME TAX CONSEQUENCES
Upon the issuance of the Certificates, Brown & Wood LLP, counsel to the
Depositor, will deliver its opinion generally to the effect that, assuming
compliance with all provisions of the Trust Agreement, for federal income tax
purposes, the Trust qualifies as a real estate mortgage investment conduit (a
"REMIC") under the Code.
The Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6,
Class A-7, Class A-8, Class A-9 and Class T Certificates will represent "regular
interests" in the REMIC and the Class A-R Certificate will constitute the sole
class of "residual interests" in the REMIC. As REMIC regular interests, such
certificates will generally be treated as debt for federal income tax purposes.
Certificateholders will be required to include in income, all interest and
original issue discount on such certificates in accordance with the accrual
method of accounting regardless of the Certificateholders' usual methods of
accounting.
Special Tax Attributes of the Offered Certificates
As is described more fully under "Certain Material Federal Income Tax
Consequences" in the Prospectus, the Offered Certificates (other than the Class
A-R Certificate) will represent qualifying assets under Section 856(c)(4)(A) and
7701(a)(19)(C)(v) of the Code, and net interest income attributable to such
Certificates will be "interest on obligations secured by mortgages on real
property" within the meaning of Section 856(c)(3)(B) of the Code, to the extent
the assets of the Trust are assets described in such sections. The Offered
Certificates (other than the Class A-R Certificate) will represent qualifying
assets under Section 860G(a)(3) if acquired by a REMIC within the prescribed
time periods of the Code.
Original Issue Discount
The Offered Certificates may be issued with original issue discount for
federal income tax purposes. For purposes of determining the amount and rate of
accrual of original issue discount and market discount, the Depositor intends to
assume that there will be prepayments on the Underlying Mortgage Loans at a rate
equal to 200% PSA. See "Yield, Prepayment and Maturity Considerations" herein
and "Certain Material Federal Income Tax Consequences" in the Prospectus.
The Offered Certificates may be treated as being issued at a premium. In
such case, the Certificateholders may elect under Section 171 of the Code to
amortize such premium under the constant interest method and to treat such
amortizable premium as an offset to interest income on the Certificates.
If the method for computing original issue discount described in the
Prospectus results in a negative amount for any period with respect to a
Certificateholder, such holder will be permitted to offset such amounts only
against the respective future income, if any, from such Certificate. Although
the tax treatment is uncertain, a Certificateholder may be permitted to deduct a
loss to the extent that such holder's respective remaining basis in such
Certificate exceeds the maximum amount of future payments to which such holder
is entitled, assuming no further principal prepayments of the Underlying
Mortgage Loans are received. Although the matter is not free from doubt, any
such loss might be treated as a capital loss.
Prohibited Transactions Tax and Other taxes
The Code imposes a tax on REMICs equal to 100% of the net income derived
from "prohibited transactions" (the Prohibited Transactions Tax"). In general,
subject to certain specified exceptions, a prohibited
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<PAGE>
transaction means the disposition of an Underlying Mortgage Loan, the receipt of
income from a source other than an Underlying Mortgage Loan or certain other
permitted investments, the receipt of compensation for services, or gain from
the disposition of an asset purchased with the payments on the Underlying
Mortgage Loans for temporary investment pending distribution on the
Certificates. It is not anticipated that the Trust will engage in any prohibited
transactions in which it would recognize a material amount of net income.
In addition, certain contributions to a trust fund that elects to be
treated as a REMIC made after the day on which such trust fund issues all of its
interests could result in the imposition of a tax on the trust fund equal to
100% of the value of the contributed property (the "Contributions Tax"). The
Trust will not accept contributions that would subject it to such tax.
In addition, a trust fund that elects to be treated as a REMIC may also be
subject to federal income tax at the highest corporate rate on "net income from
foreclosure property," determined by reference to the rules applicable to real
estate investment trusts. "Net income from foreclosure property" generally means
gain from the sale of a foreclosure property other than qualifying rents and
other qualifying income for a real estate investment trust. It is not
anticipated that the Trust will recognize net income from foreclosure property
subject to federal income tax.
In the event that any Prohibited Transactions Tax, Contributions Tax, tax
on net income from foreclosure property or state or local income or franchise
tax is imposed on the Trust, such tax will be paid with amounts otherwise
distributable to the holders of the Certificates. Pursuant to the Trust
Agreement, the holder of the Class A-R Certificate, as "tax matters" person, is
obligated to indemnify the Trust for the amount of any such tax. There can be no
assurance that the holder of the Class A-R Certificate will have sufficient
resources to pay any such indemnity to the Trust. It is not anticipated that any
material state or local income or franchise tax will be imposed on the Trust.
The Residual Certificate
The holder of the Class A-R Certificate must include the taxable income of
the REMIC in its federal taxable income. The resulting tax liability of such
holder may exceed cash distributions to such holder during certain periods. All
or a portion of the taxable income from the Class A-R Certificate recognized by
a holder may be treated as "excess inclusion" income, which, with limited
exceptions, is subject to U.S. federal income tax.
The Small Business Job Protection Act of 1996 has eliminated the special
rule permitting Section 593 institutions ("thrift institutions") to use net
operating losses and other allowable deductions to offset their excess inclusion
income from REMIC residual certificates that have "significant value" within the
meaning of the REMIC Regulations, effective for taxable years beginning after
December 31, 1995, except with respect to residual certificates continuously
held by a thrift institution since November 1, 1995.
In addition, the Small Business Job Protection Act of 1996 provides three
rules for determining the effect on excess inclusions on the alternative minimum
taxable income of a REMIC residual certificateholder. First, alternative minimum
taxable income for such residual holder is determined without regard to the
special rule that taxable income cannot be less than excess inclusions. Second,
a residual holder's alternative minimum taxable income for a tax year cannot be
less than the excess inclusions for the year. Third, the amount of any
alternative minimum tax net operating loss deductions must be computed without
regard to any excess inclusions. These rules are effective for tax years
beginning after December 31, 1986, unless a residual holder elects to have such
rules apply only to tax years beginning after August 20, 1996.
Furthermore, the Small Business Job Protection Act of 1996, as part of the
repeal of the bad debt reserve method for thrift institutions, repealed the
application of Section 593(d) of the Code to any taxable year beginning after
December 31, 1995.
Proposed Treasury regulations issued on February 4, 2000 (the "New
Proposed Regulations") would modify the safe harbor which, if satisfied,
provides that transfers of non-economic residual interests are not
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<PAGE>
disregarded for federal income tax purposes. Under the New Proposed Regulations,
a transfer of a non-economic residual interest will not qualify under this safe
harbor unless the present value of the anticipated tax liabilities associated
with holding the residual interest does not exceed the present value of the sum
of (i) any consideration given to the transferee to acquire the interest, (ii)
expected future distributions on the interest, and (iii) any anticipated tax
savings associated with holding the interest as the REMIC generates losses. For
purposes of this calculation, the present value generally is calculated using a
discount rate equal to applicable federal rate. The Proposed Regulations
indicate that the effective date of the modification to the safe harbor
requirements could be as early as February 4, 2000.
In addition, President Clinton's Fiscal Year 2001 Budget Proposal contains
a provision under which a REMIC would be secondarily liable for the tax
liability of its residual interest. The proposal states that it would be
effective for REMICs created after the date of enactment. It is unknown whether
this provision will be included in any bill introduced to Congress this year or
if introduced whether it will be enacted. Prospective investors in REMIC
residual interests, including the Class A-R Certificate, should consult their
tax advisors regarding the New Proposed Regulations and the Fiscal Year 2001
Budget Proposals.
Also, purchasers of the Class A-R Certificate should consider carefully
the tax consequences of an investment in Residual Certificates discussed in the
Prospectus and should consult their own tax advisors with respect to those
consequences. See "Certain Federal Income Tax Consequences--REMIC
Certificates--b. Residual Certificates" in the Prospectus. Specifically,
prospective holders of the Class A-R Certificate should consult their tax
advisors regarding whether, at the time of acquisition, the Class A-R
Certificate will be treated as a "non-economic" residual interest, a
"non-significant value" residual interest and a "tax avoidance potential"
residential interest. See "Certain Federal Income Tax Consequences--REMIC
Certificates--Tax-Related Restrictions on Transfer of Residual
Certificates--Noneconomic Residual Certificates" in the Prospectus.
Additionally, for information regarding prohibited transactions and treatment of
Realized Losses, see "Certain Federal Income Tax Consequences--REMIC
Certificates--Prohibited Transactions and Other taxes" and "--REMIC
Certificates-- Regular Certificates--Treatment of Realized Losses" in the
Prospectus.
For further information regarding the federal income tax consequences of
investing in the Offered Certificates, see Certain Federal Income Tax
Consequences--REMIC Certificates" in the Prospectus.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), prohibits "parties in interest" with respect to an employee
benefit plan subject to ERISA and/or a plan or other arrangement subject to the
excise tax provisions set forth under Section 4975 of the Code (each of the
foregoing, a "Plan") from engaging in certain transactions involving such Plan
and its assets unless a statutory, regulatory or administrative exemption
applies to the transaction. Section 4975 of the Code imposes certain excise
taxes on prohibited transactions involving Plans described under that Section;
ERISA authorizes the imposition of civil penalties for prohibited transactions
involving Plans not covered under Section 4975 of the Code. Any Plan fiduciary
which proposes to cause a Plan to acquire any of the Offered Certificates should
consult with its counsel with respect to the potential consequences under ERISA
and the Code of the Plan's acquisition and ownership of such Certificates. See
"ERISA Considerations" in the Prospectus.
Certain employee benefit plans, including governmental plans and certain
church plans, are not subject to ERISA's requirements. Accordingly, assets of
such plans may be invested in the Offered Certificates without regard to the
ERISA considerations described herein and in the Prospectus, subject to the
provisions of other applicable federal and state law. Any such plan which is
qualified and exempt from taxation under Sections 401(a) and 501(a) of the Code
may nonetheless be subject to the prohibited transaction rules set forth in
Section 503 of the Code.
Except as noted above, investments by Plans are subject to ERISA's general
fiduciary requirements, including the requirement of investment prudence and
diversification and the requirement that a Plan's investments
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<PAGE>
be made in accordance with the documents governing the Plan. A fiduciary which
decides to invest the assets of a Plan in the Offered Certificates should
consider, among other factors, the sensitivity of the investments to the rate of
principal payments (including prepayments) on the Underlying Mortgage Loans.
The U.S. Department of Labor has granted to Greenwich Capital Markets,
Inc. Prohibited Transaction Exemption 90-59, Application No. D-8374, 55 Fed.
Reg. 36724 (September 6, 1990) (the "Exemption") which exempts from the
application of the prohibited transaction rules transactions relating to (1) the
acquisition, sale and holding by Plans of certain certificates representing an
undivided interest in certain asset-backed pass-through trusts with respect to
which Greenwich Capital Markets, Inc. or any of its affiliates is the sole
underwriter or the manager or co-manager of the underwriting syndicate; and (2)
the servicing, operation and management of such asset-backed pass-through
trusts, provided that the general conditions and certain other conditions set
forth in the Exemption are satisfied.
Among the conditions which must be satisfied for the Exemption to apply
are the following:
(1) The acquisition of the certificates by a Plan is on terms
(including the price for such certificates) that are at least as favorable
to the investing Plan as they would be in an arm's-length transaction with
an unrelated party;
(2) The rights and interests evidenced by the certificates acquired
by the Plan are not subordinated to the rights and interests evidenced by
other certificates of the trust;
(3) The certificates acquired by the Plan have received a rating at
the time of such acquisition that is in one of the three highest generic
rating categories from S&P, Moody's Investors Service, Inc., DCR or Fitch
IBCA, Inc.;
(4) The sum of all payments made to and retained by the underwriter
in connection with the distribution of the certificates represents not
more than reasonable compensation for underwriting such certificates; the
sum of all payments made to and retained by the seller pursuant to the
sale of the trust assets to the trust represents not more than the fair
market value of such assets; and the sum of all payments made to and
retained by any servicer represents not more than reasonable compensation
for such servicer's services under the pooling and servicing agreement and
reimbursement of such servicer's reasonable expenses in connection
therewith;
(5) The trustee is not an affiliate of any underwriter, the seller,
any servicer, the certificate insurer, any borrower whose obligations
under one or more Underlying Mortgage Loans constitute more than 5% of the
aggregate unamortized principal balance of the assets in the Trust, or any
of their respective affiliates (together with the trustee, the "Restricted
Group"); and
(6) The Plan investing in the certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the SEC under
the Securities Act of 1933, as amended.
In addition, (i) the investment pool must consist only of assets of types
enumerated in the Exemption which have been included in other investment pools;
(ii) certificates evidencing interests in such other investment pools must have
been rated in one of the three highest generic rating categories by a rating
agency for at least one year prior to a Plan's acquisition of certificates; and
(iii) certificates evidencing interests in such other investment pools must have
been purchased by investors other than Plans for at least one year prior to a
Plan's acquisition of certificates.
The Exemption will not apply to a Plan's investment in a certificate if
the Plan fiduciary responsible for the decision to invest in the certificates is
a mortgagor or obligor with respect to not more than 5% of the fair market value
of the obligations constituting the underlying mortgage loans or an affiliate of
such a person, unless: (1) in the case of an acquisition in connection with the
initial issuance of any certificates, at least 50% of each class of
S-45
<PAGE>
certificates in which Plans have invested is acquired by persons independent of
the Restricted Group and at least 50% of the aggregate interest in the trust is
acquired by persons independent of the Restricted Group; (2) a Plan's investment
in any class of certificates does not exceed 25% of the outstanding certificates
of that class at the time of acquisition; (3) immediately after such
acquisition, no more than 25% of the assets of any Plan with respect to which
the investing fiduciary has discretionary authority or renders investment advice
are invested in certificates evidencing interests in trusts sponsored or
containing assets sold or serviced by the same entity; and (4) the Plan is not
sponsored by any member of the Restricted Group.
Assuming the accuracy of certain statements included in the Underlying
Supplements, it is expected that the Exemption will apply to the acquisition and
holding by Plans of the Offered Certificates (other than the Class A-R
Certificate) and that all conditions of the Exemption other than those within
the control of the investors will be met.
Prospective Plan investors should consult with their legal advisors
concerning the impact of ERISA and the Code, the applicability of the Exemption,
and the potential consequences in their specific circumstances, prior to making
an investment in the Offered Certificates. Moreover, each Plan fiduciary should
determine whether, under the general fiduciary standards of investment prudence
and diversification, an investment in the Offered Certificates is appropriate
for the Plan, taking into account the overall investment policy of the Plan and
the composition of the Plan's investment portfolio.
The Class A-R Certificate shall not be transferred and the Trustee shall
not register any proposed transfer of the Class A-R Certificate unless it
receives (i) a representation substantially to the effect that the proposed
transferee is not a Plan, is not acquiring the Class A-R Certificate on behalf
of or with the assets of a Plan (including assets that may be held in an
insurance company's separate or general accounts where assets in such accounts
may be deemed "plan assets" for purposes of ERISA), or (ii) an opinion of
counsel in form and substance satisfactory to the Trustee and the Depositor that
the purchase or holding of the Class A-R Certificate by or on behalf of a Plan
will not constitute a prohibited transaction and will not result in the assets
of the Trust being deemed to be "plan assets" and subject to the fiduciary
responsibility provisions of ERISA or the prohibited transaction provisions of
ERISA and the Code or any similar law or subject the Trustee or the Depositor to
any obligation in addition to those undertaken in the Trust Agreement. Such
representation as described above shall be deemed to have been made to the
Trustee by the transferee's acceptance of the Class A-R Certificate. In the
event that such representation is violated or any transfer to a Plan or person
acting on behalf of a Plan or using a Plan's assets is attempted without such
opinion of counsel, such attempted transfer or acquisition shall be void and of
no effect.
LEGAL INVESTMENT CONSIDERATIONS
Assuming the accuracy of certain representations contained in the
Underlying Agreements (which information is not subject to independent
certification) and on the basis of certain assumptions derived from statements
included in the Underlying Supplements, the Offered Certificates will constitute
"mortgage related securities" for the purposes of the "Secondary Mortgage Market
Enhancement Act of" 1984 ("SMMEA") so long as they are rated in one of the two
highest rating categories by at least one nationally recognized statistical
rating organization and, as such, are legal investments for certain entities to
the extent provided for in SMMEA.
There may be restrictions on the ability of certain investors, including
depository institutions, either to purchase the Offered Certificates or to
purchase Offered Certificates representing more than a specified percentage of
the investor's assets. Investors should consult their own legal advisors in
determining whether and to what extent the Offered Certificates constitute legal
investments for such investors. See "Legal Investment" in the Prospectus.
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<PAGE>
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting
Agreement between the Depositor and Greenwich Capital Markets, Inc. (the
"Underwriter"), which is an affiliate of the Depositor, the Depositor has agreed
to sell to the Underwriter, and the Underwriter has agreed to purchase from the
Depositor, all of the Offered Certificates.
Distribution of the Offered Certificates will be made by the Underwriter
from time to time in negotiated transactions or otherwise at varying prices to
be determined at the time of sale. The Underwriter may effect such transactions
by selling Offered Certificates to or through dealers and such dealers may
receive from the Underwriter, for which they act as agent, compensation in the
form of underwriting discounts, concessions or commissions. The Underwriter and
any dealers that participate with the Underwriter in the distribution of the
Offered Certificates may be deemed to be underwriters, and any discounts,
commissions or concessions received by them, and any profits on resale of the
Offered Certificates purchased by them, may be deemed to be underwriting
discounts and commissions under the Securities Act.
The Depositor has been advised by the Underwriter that it intends to make
a market in the Offered Certificates but has no obligation to do so. There can
be no assurance that a secondary market for the Offered Certificates will
develop or, if it does develop, that it will continue.
The Depositor has agreed to indemnify the Underwriter against, or make
contributions to the Underwriter with respect to, certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters in connection with the issuance of the Offered
Certificates will be passed upon for the Depositor and the Underwriter by Brown
& Wood LLP, New York, New York.
RATINGS
It is a condition to the issuance of the Offered Certificates that they be
rated "AAA" by Standard & Poor's, a division of The McGraw-Hill Companies, Inc.
("S&P") and by Duff & Phelps Credit Rating Company ("DCR" and, together with
S&P, the "Rating Agencies").
The ratings assigned by the Rating Agencies to mortgage pass-through
certificates address the likelihood of the receipt of all distributions by the
related certificateholders under the agreements pursuant to which such
certificates are issued. The ratings by the Rating Agencies take into
consideration the credit quality of the related mortgage pool, including any
credit support providers, structural and legal aspects associated with such
certificates, and the extent to which the payment stream on the mortgage pool is
adequate to make the payments required by such certificates. The ratings by the
Rating Agencies on such certificates do not, however, constitute a statement
regarding frequency of prepayments of the mortgage loans.
The Depositor has not engaged any rating agency other than the Rating
Agencies to provide ratings on the Offered Certificates. However, there can be
no assurance as to whether any other rating agency will rate the Offered
Certificates, or, if it does, what rating would be assigned by any such other
rating agency. Any rating on the Offered Certificates by another rating agency,
if assigned at all, may be lower than the ratings assigned to such Certificates
by the Rating Agencies. The rating on the Class A-R Certificate only addresses
the return of the Certificate Principal Balance thereof and interest thereon at
the related Pass-Through Rate.
A security rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the assigning rating
organization. Each security rating should be evaluated independently
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<PAGE>
of any other security rating. In the event that the ratings initially assigned
to any of the Offered Certificates by the Rating Agencies are subsequently
lowered for any reason, no person or entity is obligated to provide any
additional support or credit enhancement with respect to such Offered
Certificates.
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<PAGE>
INDEX OF DEFINED TERMS
Term Page
- ---- ----
Available Funds.............................................................S-11
Beneficial Owners...........................................................S-10
Book-Entry Certificates.....................................................S-10
Business Day................................................................S-10
Certificate Account.........................................................S-11
Certificate Principal Balance...............................................S-13
Chase.......................................................................S-17
Citibank....................................................................S-17
Class A-4 Accretion Termination Date........................................S-13
Class A-4 Accrual Distribution Amount.......................................S-13
Class A-6 Accretion Termination Date........................................S-13
Class A-6 Accrual Distribution Amount.......................................S-13
Class A-R Certificate.......................................................S-10
Clearstream.................................................................S-10
Clearstream Participants....................................................S-18
Code........................................................................S-16
Contributions Tax...........................................................S-43
Cooperative.................................................................S-18
DCR.........................................................................S-47
DEC Tables..................................................................S-28
Definitive Certificate......................................................S-17
Depositor...................................................................S-28
Distribution Date...........................................................S-10
DTC.........................................................................S-10
DTC Rules...................................................................S-17
Due Date....................................................................S-21
Eligible....................................................................S-11
ERISA.......................................................................S-44
Euroclear...................................................................S-10
Euroclear Operator..........................................................S-18
Euroclear Participants......................................................S-18
Federal Reserve Board.......................................................S-18
Financial Intermediary......................................................S-17
First Nationwide............................................................S-24
Global Securities..............................................................1
Investment Company Act......................................................S-16
Majority in Interest........................................................S-15
Net Prepayment Interest Shortfall...........................................S-23
Offered Certificates........................................................S-10
Participants................................................................S-18
Pass-Through Rate...........................................................S-14
Percentage Interest.........................................................S-15
Plan........................................................................S-44
Prohibited Transactions Tax.................................................S-42
PSA.........................................................................S-28
Rating Agencies.............................................................S-47
Record Date.................................................................S-10
REMIC.......................................................................S-42
Residual Certificate........................................................S-10
S&P.........................................................................S-47
Securities..................................................................S-16
Servicer....................................................................S-21
SMMEA.......................................................................S-46
Terms and Conditions........................................................S-18
Trust.......................................................................S-10
Trust Agreement.............................................................S-10
Trustee.....................................................................S-10
U.S. Person....................................................................4
Underlying Agreement........................................................S-20
Underlying Mortgage Loans...................................................S-21
Underlying Pass-Through Rate................................................S-22
Underlying Remittance Date..................................................S-21
Underlying Remittance Date Statement........................................S-23
Underlying Securities.......................................................S-20
Underlying Security Account.................................................S-21
Underlying Senior Interests.................................................S-21
Underlying Subordinate Interests............................................S-21
Underlying Supplements......................................................S-23
Underlying Trust Fund.......................................................S-21
Underwriter.................................................................S-47
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<PAGE>
APPENDIX I*
CHARACTERISTICS OF THE UNDERLYING MORTGAGE LOANS FOR
FIRST NATIONWIDE TRUST SERIES 1998-3
CURRENT PRINCIPAL BALANCES
PERCENTAGE OF
NUMBER OF AGGREGATE UNPAID AGGREGATE
RANGE OF PRINCIPAL MORTGAGE PRINCIPAL UNPAID PRINCIPAL
BALANCES ($) LOANS BALANCE ($) BALANCE (%)
- ----------------------- --------- ---------------- ----------------
209,751 - 300,000 623 164,570,258.79 32.26
300,001 - 400,000 493 169,863,148.06 33.30
400,001 - 500,000 221 98,679,311.69 19.35
500,001 - 600,000 83 45,197,959.66 8.86
600,001 - 700,000 25 15,944,500.74 3.13
700,001 - 800,000 6 4,371,138.86 0.86
800,001 - 900,000 1 806,711.91 0.16
900,001 - 1,000,000 10 9,571,353.60 1.88
1,000,001 - 1,082,363 1 1,082,362.74 0.21
----- --------------- ------
TOTAL 1,463 $510,086,746.05 100.00%
===== =============== ======
MORTGAGE INTEREST RATES
PERCENTAGE OF
NUMBER OF AGGREGATE UNPAID AGGREGATE
RANGE OF MORTGAGE MORTGAGE PRINCIPAL UNPAID PRINCIPAL
INTEREST RATES (%) LOANS BALANCE ($) BALANCE (%)
- ----------------------- --------- ---------------- ----------------
6.500 and below 3 1,068,171.44 0.21
6.501 - 6.750 18 6,143,614.46 1.20
6.751 - 7.000 242 84,407,586.24 16.55
7.001 - 7.250 615 214,795,444.18 42.11
7.251 - 7.500 481 167,266,083.30 32.79
7.501 - 7.750 99 34,788,515.06 6.82
7.751 - 8.000 5 1,617,331.37 0.32
----- --------------- ------
TOTAL 1,463 $510,086,746.05 100.00%
===== =============== ======
- ----------
* Due to rounding, certain percentages may not add up to 100.00%.
I-1
<PAGE>
GEOGRAPHIC DISTRIBUTION OF MORTGAGED PROPERTIES
PERCENTAGE OF
NUMBER OF AGGREGATE UNPAID AGGREGATE
MORTGAGE PRINCIPAL UNPAID PRINCIPAL
STATE LOANS BALANCE ($) BALANCE (%)
- ----------------------- --------- ---------------- ----------------
Arizona 10 3,033,628.61 0.59
California 1,337 466,799,102.14 91.51
Colorado 6 1,904,759.16 0.37
Connecticut 1 284,120.04 0.06
District of Columbia 3 890,827.11 0.17
Florida 7 1,979,177.88 0.39
Georgia 4 1,109,475.01 0.22
Hawaii 7 2,934,435.39 0.58
Illinois 1 294,288.13 0.06
Maryland 6 2,132,064.10 0.42
Massachusetts 1 348,421.59 0.07
Missouri 1 400,985.10 0.08
Montana 1 639,358.27 0.13
Nevada 9 2,673,269.57 0.52
New York 3 850,812.92 0.17
Oregon 20 6,719,176.89 1.32
Pennsylvania 4 1,479,746.97 0.29
South Carolina 1 265,186.17 0.05
Texas 3 1,159,285.90 0.23
Utah 2 511,477.76 0.10
Virginia 4 1,131,761.05 0.22
Washington 32 12,545,386.29 2.46
----- --------------- ------
TOTAL 1,463 $510,086,746.05 100.00%
===== =============== ======
No more than approximately 2.25% of the related Underlying Mortgage Loans are
secured by mortgaged properties located in any one postal ZIP code.
LOAN PURPOSE
PERCENTAGE OF
NUMBER OF AGGREGATE UNPAID AGGREGATE
MORTGAGE PRINCIPAL UNPAID PRINCIPAL
LOAN PURPOSE LOANS BALANCE ($) BALANCE (%)
- ----------------------- --------- ---------------- ----------------
Rate/Term Refinance 622 216,955,749.62 42.53
Purchase 580 201,555,036.10 39.51
Cash Out Refinance 261 91,575,960.33 17.95
----- --------------- ------
TOTAL 1,463 $510,086,746.05 100.00%
===== =============== ======
I-2
<PAGE>
TYPES OF MORTGAGED PROPERTIES
PERCENTAGE OF
NUMBER OF AGGREGATE UNPAID AGGREGATE
MORTGAGE PRINCIPAL UNPAID PRINCIPAL
TYPE LOANS BALANCE ($) BALANCE (%)
- ----------------------- --------- ---------------- ----------------
2 Units 3 1,311,819.01 0.26
Condominium 55 17,420,425.53 3.42
PUD 244 86,233,293.83 16.91
Single Family Detached 1,161 405,121,207.68 79.42
----- --------------- ------
TOTAL 1,463 $510,086,746.05 100.00%
===== =============== ======
OCCUPANCY STATUS
PERCENTAGE OF
NUMBER OF AGGREGATE UNPAID AGGREGATE
MORTGAGE PRINCIPAL UNPAID PRINCIPAL
OCCUPANCY LOANS BALANCE ($) BALANCE
- ----------------------- --------- ---------------- ----------------
Investor 5 1,465,965.82 0.29
Primary 1,456 507,647,807.19 99.52
Second Home 2 972,973.04 0.19
----- --------------- ------
TOTAL 1,463 $510,086,746.05 100.00%
===== =============== ======
REMAINING TERMS TO MATURITY
PERCENTAGE OF
NUMBER OF AGGREGATE UNPAID AGGREGATE
MORTGAGE PRINCIPAL UNPAID PRINCIPAL
REMAINING TERM (MONTHS) LOANS BALANCE ($) BALANCE (%)
- ----------------------- --------- ---------------- ----------------
161 - 168 3 961,897.52 0.19
205 - 216 1 238,015.65 0.05
217 - 228 4 1,570,799.59 0.31
325 - 336 2 567,322.21 0.11
337 - 342 1,453 506,748,711.08 99.35
----- --------------- ------
TOTAL 1,463 $510,086,746.05 100.00%
===== =============== ======
I-3
<PAGE>
CHARACTERISTICS OF THE UNDERLYING MORTGAGE LOANS FOR
FIRST NATIONWIDE TRUST SERIES 1999-2
CURRENT PRINCIPAL BALANCES
PERCENTAGE OF
NUMBER OF AGGREGATE UNPAID AGGREGATE
RANGE OF PRINCIPAL MORTGAGE PRINCIPAL UNPAID PRINCIPAL
BALANCEs($) LOANS BALANCE ($) BALANCE (%)
- ----------------------- --------- ---------------- ----------------
39,485 - 100,000 36 2,636,304.44 1.07
100,001 - 200,000 122 18,751,437.65 7.60
200,001 - 300,000 297 77,160,283.68 31.26
300,001 - 400,000 189 64,381,045.51 26.09
400,001 - 500,000 101 45,138,875.28 18.29
500,001 - 600,000 36 19,690,871.29 7.98
600,001 - 700,000 22 14,088,200.15 5.71
700,001 - 800,000 3 2,280,723.85 0.92
800,001 - 900,000 2 1,683,553.52 0.68
900,001 - 989,595 1 989,594.69 0.40
----- --------------- ------
TOTAL 809 $246,800,890.06 100.00%
===== =============== ======
MORTGAGE INTEREST RATES
PERCENTAGE OF
NUMBER OF AGGREGATE UNPAID AGGREGATE
RANGE OF MORTGAGE MORTGAGE PRINCIPAL UNPAID PRINCIPAL
INTEREST RATES (%) LOANS BALANCE ($) BALANCE (%)
- ----------------------- --------- ---------------- ----------------
7.000 and below 287 92,263,201.11 37.38
7.001 - 7.500 437 129,107,692.42 52.31
7.501 - 8.000 84 25,117,493.00 10.18
8.001 >= 1 312,503.53 0.13
----- --------------- ------
TOTAL 809 $246,800,890.06 100.00%
===== =============== ======
I-4
<PAGE>
GEOGRAPHIC DISTRIBUTION OF MORTGAGED PROPERTIES
PERCENTAGE OF
NUMBER OF AGGREGATE UNPAID AGGREGATE
MORTGAGE PRINCIPAL UNPAID PRINCIPAL
STATE LOANS BALANCE ($) BALANCE (%)
- ----------------------- --------- ---------------- ----------------
Arizona 11 2,180,350.97 0.88
California 662 212,682,340.07 86.18
Colorado 7 1,514,713.49 0.61
Delaware 1 342,076.83 0.14
Florida 4 564,830.78 0.23
Georgia 4 722,390.47 0.29
Idaho 8 1,432,804.25 0.58
Maryland 12 2,796,245.89 1.13
Massachusetts 1 164,354.01 0.07
Montana 1 158,550.02 0.06
Nevada 13 3,813,646.65 1.55
Oregon 24 5,554,402.32 2.25
Pennsylvania 2 351,092.82 0.14
South Carolina 1 261,324.66 0.11
Utah 11 2,459,140.98 1.00
Virginia 20 4,635,059.38 1.88
Washington 27 7,167,566.47 2.90
----- --------------- ------
TOTAL 809 $246,800,890.06 100.00%
===== =============== ======
No more than approximately 1.86% of the related Underlying Mortgage Loans are
secured by mortgaged properties located in any one postal ZIP code.
LOAN PURPOSE
PERCENTAGE OF
NUMBER OF AGGREGATE UNPAID AGGREGATE
MORTGAGE PRINCIPAL UNPAID PRINCIPAL
LOAN PURPOSE LOANS BALANCE ($) BALANCE (%)
- ----------------------- --------- ---------------- ----------------
Rate/Term Refinance 454 133,610,937.12 54.14
Purchase 210 64,272,462.34 26.04
Cash Out Refinance 145 48,917,490.60 19.82
----- --------------- ------
TOTAL 809 $246,800,890.06 100.00%
===== =============== ======
I-5
<PAGE>
TYPES OF MORTGAGED PROPERTIES
PERCENTAGE OF
NUMBER OF AGGREGATE UNPAID AGGREGATE
MORTGAGE PRINCIPAL UNPAID PRINCIPAL
TYPE LOANS BALANCE ($) BALANCE (%)
- ----------------------- --------- ---------------- ----------------
2 Units 15 4,569,893.67 1.85
3 Units 2 458,406.32 0.19
4 Units 3 873,850.15 0.35
Condominium 47 10,159,297.76 4.12
PUD 129 40,608,413.38 16.45
Single Family Detached 613 190,131,028.78 77.04
----- --------------- ------
TOTAL 809 $246,800,890.06 100.00%
===== =============== ======
OCCUPANCY STATUS
PERCENTAGE OF
NUMBER OF AGGREGATE UNPAID AGGREGATE
MORTGAGE PRINCIPAL UNPAID PRINCIPAL
OCCUPANCY LOANS BALANCE ($) BALANCE
- ----------------------- --------- ---------------- ----------------
Investor 1 242,957.69 0.10
Primary 800 244,192,589.49 98.94
Second Home 8 2,365,342.88 0.96
----- --------------- ------
TOTAL 809 $246,800,890.06 100.00%
===== =============== ======
REMAINING TERMS TO MATURITY
PERCENTAGE OF
NUMBER OF AGGREGATE UNPAID AGGREGATE
MORTGAGE PRINCIPAL UNPAID PRINCIPAL
REMAINING TERM (MONTHS) LOANS BALANCE ($) BALANCE (%)
- ----------------------- --------- ---------------- ----------------
166 - 168 25 3,934,552.47 1.59
169 - 180 10 1,900,778.90 0.77
325 - 336 34 10,795,143.82 4.37
337 - 348 478 149,694,480.29 60.65
349 - 350 262 80,475,934.58 32.61
----- --------------- -------
TOTAL 809 $246,800,890.06 100.00%
===== =============== =======
I-6
<PAGE>
CHARACTERISTICS OF THE UNDERLYING MORTGAGE LOANS FOR
FIRST NATIONWIDE TRUST SERIES 1999-3
CURRENT PRINCIPAL BALANCES
PERCENTAGE OF
NUMBER OF AGGREGATE UNPAID AGGREGATE
RANGE OF PRINCIPAL MORTGAGE PRINCIPAL UNPAID PRINCIPAL
BALANCES($) LOANS BALANCE ($) BALANCE (%)
- ----------------------- --------- ---------------- ----------------
37,750 - 100,000 22 1,780,504.79 0.45
100,001 - 200,000 88 13,439,946.73 3.37
200,001 - 300,000 383 101,886,755.39 25.54
300,001 - 400,000 389 134,535,847.44 33.73
400,001 - 500,000 175 77,772,630.37 19.50
500,001 - 600,000 64 34,903,805.56 8.75
600,001 - 700,000 27 17,133,762.02 4.30
700,001 - 800,000 7 5,309,001.97 1.33
800,001 - 900,000 7 6,014,066.60 1.51
900,001 - 1,000,000 4 3,918,370.70 0.98
1,000,001 - 1,103,618 2 2,199,808.62 0.55
----- --------------- ------
TOTAL 1,168 $398,894,500.19 100.00%
===== =============== ======
MORTGAGE INTEREST RATES
PERCENTAGE OF
NUMBER OF AGGREGATE UNPAID AGGREGATE
RANGE OF MORTGAGE MORTGAGE PRINCIPAL UNPAID PRINCIPAL
INTEREST RATES (%) LOANS BALANCE ($) BALANCE (%)
- ----------------------- --------- ---------------- ----------------
7.000 and below 862 303,051,767.03 75.97
7.001 - 7.375 306 95,842,733.16 24.03
----- --------------- ------
TOTAL 1,168 $398,894,500.19 100.00%
===== =============== ======
I-7
<PAGE>
GEOGRAPHIC DISTRIBUTION OF MORTGAGED PROPERTIES
PERCENTAGE OF
NUMBER OF AGGREGATE UNPAID AGGREGATE
MORTGAGE PRINCIPAL UNPAID PRINCIPAL
STATE LOANS BALANCE ($) BALANCE (%)
- ----------------------- --------- ---------------- ----------------
Arizona 1 190,582.12 0.05
California 1,048 362,070,363.31 90.77
Connecticut 1 222,736.71 0.06
Delaware 1 253,102.91 0.06
Florida 29 8,789,335.05 2.20
Georgia 15 4,613,723.45 1.16
Hawaii 5 1,875,203.79 0.47
Illinois 5 1,835,504.10 0.46
Kansas 1 442,545.78 0.11
Maryland 2 606,612.62 0.15
Nevada 4 900,912.89 0.23
North Carolina 1 259,160.37 0.06
Oregon 6 1,636,818.81 0.41
Pennsylvania 1 473,322.70 0.12
Tennessee 1 415,629.67 0.10
Texas 33 10,157,194.79 2.55
Virginia 1 358,984.79 0.09
Washington 13 3,792,766.33 0.95
----- --------------- ------
TOTAL 1,168 $398,894,500.19 100.00%
===== =============== ======
No more than approximately 1.69% of the related Underlying Mortgage Loans are
secured by mortgaged properties located in any one postal ZIP code.
LOAN PURPOSE
PERCENTAGE OF
NUMBER OF AGGREGATE UNPAID AGGREGATE
MORTGAGE PRINCIPAL UNPAID PRINCIPAL
LOAN PURPOSE LOANS BALANCE ($) BALANCE (%)
- ----------------------- --------- ---------------- ----------------
Rate/Term Refinance 512 178,664,259.24 44.79
Purchase 404 131,298,417.18 32.92
Cash Out Refinance 252 88,931,823.77 22.29
----- --------------- ------
TOTAL 1,168 $398,894,500.19 100.00%
===== =============== ======
I-8
<PAGE>
TYPES OF MORTGAGED PROPERTIES
PERCENTAGE OF
NUMBER OF AGGREGATE UNPAID AGGREGATE
MORTGAGE PRINCIPAL UNPAID PRINCIPAL
TYPE LOANS BALANCE ($) BALANCE (%)
- ----------------------- --------- ---------------- ----------------
2-4 Units 4 1,687,990.85 0.42
Condominium 66 16,951,071.42 4.25
PUD 233 83,078,914.20 20.83
Single Family Detached 865 297,176,523.72 74.50
----- --------------- ------
TOTAL 1,168 $398,894,500.19 100.00%
===== =============== ======
OCCUPANCY STATUS
PERCENTAGE OF
NUMBER OF AGGREGATE UNPAID AGGREGATE
MORTGAGE PRINCIPAL UNPAID PRINCIPAL
OCCUPANCY LOANS BALANCE ($) BALANCE
- ----------------------- --------- ---------------- ----------------
Investor/vacant 16 3,796,920.10 0.95
Primary 1,147 393,799,758.13 98.72
Second Home 5 1,297,821.96 0.33
----- --------------- ------
TOTAL 1,168 $398,894,500.19 100.00%
===== =============== ======
REMAINING TERMS TO MATURITY
PERCENTAGE OF
NUMBER OF AGGREGATE UNPAID AGGREGATE
MORTGAGE PRINCIPAL UNPAID PRINCIPAL
REMAINING TERM (MONTHS) LOANS BALANCE ($) BALANCE (%)
- ----------------------- --------- ---------------- ----------------
230 - 240 3 1,046,112.26 0.26
289 - 300 1 388,491.03 0.10
325 - 336 1 154,607.47 0.04
337 - 348 442 147,019,193.42 36.86
349 - 350 721 250,286,096.01 62.74
----- --------------- ------
TOTAL 1,168 $398,894,500.19 100.00%
===== =============== ======
I-9
<PAGE>
[This page intentionally left blank]
<PAGE>
APPENDIX II
PLANNED PRINCIPAL BALANCE TABLES
Distribution Date Principal Balance
- ----------------- -----------------
February 1, 2000............................................. 111,411,000.00
March 19, 2000............................................... 110,393,758.02
April 19, 2000............................................... 109,321,836.90
May 19, 2000................................................. 108,195,714.23
June 19, 2000................................................ 107,015,817.37
July 19, 2000................................................ 105,782,598.88
August 19, 2000.............................................. 104,496,536.18
September 19, 2000........................................... 103,158,131.34
October 19, 2000............................................. 101,767,910.73
November 19, 2000............................................ 100,326,424.71
December 19, 2000............................................ 98,834,247.30
January 19, 2001............................................. 97,298,133.69
February 19, 2001............................................ 95,718,609.72
March 19, 2001............................................... 94,096,221.62
April 19, 2001............................................... 92,431,535.57
May 19, 2001................................................. 90,725,137.40
June 19, 2001................................................ 88,977,632.19
July 19, 2001................................................ 87,189,643.86
August 19, 2001.............................................. 85,365,219.87
September 19, 2001........................................... 83,504,968.09
October 19, 2001............................................. 81,653,301.37
November 19, 2001............................................ 79,810,181.98
December 19, 2001............................................ 77,975,572.35
January 19, 2002............................................. 76,149,435.12
February 19, 2002............................................ 74,331,733.12
March 19, 2002............................................... 72,522,429.33
April 19, 2002............................................... 70,721,486.96
May 19, 2002................................................. 68,928,869.36
June 19, 2002................................................ 67,144,540.10
July 19, 2002................................................ 65,368,462.92
August 19, 2002.............................................. 63,600,601.71
September 19, 2002........................................... 61,840,920.60
October 19, 2002............................................. 60,089,383.85
November 19, 2002............................................ 58,345,955.92
December 19, 2002............................................ 56,610,601.44
January 19, 2003............................................. 54,883,285.23
February 19, 2003............................................ 53,163,972.28
March 19, 2003............................................... 51,452,627.75
April 19, 2003............................................... 49,749,216.99
May 19, 2003................................................. 48,053,705.50
June 19, 2003................................................ 46,366,058.98
July 19, 2003................................................ 44,686,243.29
August 19, 2003.............................................. 43,016,363.29
September 19, 2003........................................... 41,354,238.22
October 19, 2003............................................. 39,699,834.44
November 19, 2003............................................ 38,053,118.46
December 19, 2003............................................ 36,414,056.96
II-1
<PAGE>
Distribution Date Principal Balance
- ----------------- -----------------
January 19, 2004............................................. 34,782,616.79
February 19, 2004............................................ 33,158,764.99
March 19, 2004............................................... 31,542,468.73
April 19, 2004............................................... 29,935,114.97
May 19, 2004................................................. 28,350,816.80
June 19, 2004................................................ 26,773,910.13
July 19, 2004................................................ 25,204,362.55
August 19, 2004.............................................. 23,642,832.48
September 19, 2004........................................... 22,088,593.13
October 19, 2004............................................. 20,541,612.59
November 19, 2004............................................ 19,001,859.09
December 19, 2004............................................ 17,469,301.04
January 19, 2005............................................. 15,943,906.99
February 19, 2005............................................ 14,425,645.66
March 19, 2005............................................... 12,947,353.47
April 19, 2005............................................... 11,476,444.47
May 19, 2005................................................. 10,017,324.99
June 19, 2005................................................ 8,565,047.64
July 19, 2005................................................ 7,119,581.35
August 19, 2005.............................................. 5,682,187.07
September 19, 2005........................................... 4,251,532.23
October 19, 2005............................................. 2,827,586.23
November 19, 2005............................................ 1,410,318.59
December 19, 2005............................................ 0.00
II-2
<PAGE>
EXHIBIT A
The information about the Underlying Securities and the Underlying
Mortgage Loans contained in this Exhibit A has been obtained from the Underlying
Supplements, which were prepared in connection with the public offerings of the
Underlying Securities. Such information has not been independently represented
to the Trust as being accurate and complete. Additionally the Underlying
Supplements contain information only as of the respective dates of such
documents. You should be aware, however, that material changes may have occurred
since the preparation of the Underlying Supplements and the composition of the
related mortgage pools may have changed significantly. There may be considerable
differences between the current mortgage loan characteristics and the
characteristics described in connection with the issuance of the Underlying
Securities.
All capitalized terms contained in the following excerpts that are not
defined therein have the meanings solely as specified in the Underlying
Supplements.
EXCERPTS FROM THE UNDERLYING SUPPLEMENT RELATING TO
FIRST NATIONWIDE TRUST SERIES 1998-3(1)
THE MORTGAGE POOL
General
* * *
Certain information with respect to the Mortgage Loans to be included in
the Mortgage Pool is set forth below. Prior to [July 30, 1998 (the "Closing
Date")], Mortgage Loans may be removed from the Mortgage Pool and other Mortgage
Loans may be substituted therefor. The Depositor believes that the information
set forth herein with respect to the Mortgage Pool as presently constituted is
representative of the characteristics of the Mortgage Pool as it will be
constituted at the Closing Date, although certain characteristics of the
Mortgage Loans in the Mortgage Pool may vary. Unless otherwise indicated,
information presented below expressed as a percentage (other than rates of
interest) are approximate percentages based on the Stated Principal Balances of
the Mortgage Loans as of [July 1, 1998 (the "Cut-off Date")].
As of the Cut-off Date, the aggregate of the Stated Principal Balances of
all of the Mortgage Loans included in the Mortgage Pool is expected to be
approximately $587,963,451 (the "Cut-off Date Pool Principal Balance"). [The
Mortgage Pool consists of two groups (each, a "Loan Group") of Mortgage Loans:
the "Group I Loans" and the "Group II Loans." As of the Cut-off Date, the Group
I Loans consisted of 1,534 Mortgage Loans with an aggregate principal balance of
approximately $544,838,216. As of the Cut-off Date, the Group II Loans consisted
of 264 Mortgage Loans with an aggregate principal balance of approximately
$43,125,235.]
The Mortgage Loans provide for the amortization of the amount financed
over a series of substantially equal monthly payments. All of the Mortgage Loans
provide for payments due on the first day of each month (the "Due Date"). The
Mortgage Loans to be included in the Mortgage Pool were acquired by the Seller
in the normal course of its business and substantially in accordance with the
underwriting criteria specified herein. At origination, substantially all of the
Mortgage Loans had stated terms to maturity of 30 years. Scheduled monthly
payments made
- ----------
(1) In this excerpt, the related Underlying Security is referred to as the
"Class IPP-A-1 Certificates" and the Underlying Mortgage Loans are
referred to as the "Group I Loans." Distributions of interest and
principal to the Group I Senior Certificates, including the Class IPP-A-1
Certificates, generally will be based on payments received or advanced
with respect to the Group I Loans.
A-1
<PAGE>
EXHIBIT A--Excerpts from Underlying Supplement
Relating to First Nationwide Trust Series 1998-3 (cont'd)
by the Mortgagors on the Mortgage Loans ("Scheduled Payments") either earlier or
later than the scheduled Due Dates thereof will not affect the amortization
schedule or the relative application of such payments to principal and interest.
Each Mortgage Loan imposes certain penalties for early prepayments (except for
prepayments due to the sale of the Mortgaged Property). During the first five
years after origination of each Mortgage Loan (the "Penalty Period"), the
Mortgagor may not prepay more than 20% of the original principal amount of such
Mortgage Loan in any twelve month period without incurring a penalty except that
with respect to approximately 5% of the Mortgage Loans no penalty will be
assessed unless the entire principal balance of such Mortgage Loan is prepaid;
provided, however, no penalty will be assessed if the entire principal balance
of the Mortgage Loan is prepaid as a result of a transfer of the related
Mortgaged Property. The penalty is equal to the lesser of (i) six months'
interest on such excess and (ii) the amount authorized by applicable law. No
penalty will be imposed after the Penalty Period.
[The principal balance at origination of each Group I Loan ranged from
approximately $277,700 to $1,100,000, with an average principal balance at
origination of approximately $355,607.]
Each Group I Loan was originated on or after November 1, 1997....
[As of the Cut-off Date, 16.66% of the Group I Loans, by aggregate Stated
Principal Balances of the Group I Loans, were originated under the Reduced
Documentation Program. See "--Underwriting Standards" herein.]
The latest stated maturity date of any Group I Loan is August 1, 2028, and
the earliest stated maturity date of any Group I Loan is July 1, 2013....
As of the Cut-off Date, no Mortgage Loan [was] delinquent more than 30
days.
No Mortgage Loan is subject to a buydown agreement. No Mortgage Loan
provides for deferred interest or negative amortization.
[As of the Cut-off Date, all of the Group I Mortgage Loans had
Loan-to-Value Ratios at origination of 95% or less, and the weighted average
Loan-to-Value Ratio, by aggregate Stated Principal Balances of the Group I
Loans, was approximately 72.01%. As of the Cut-off Date, approximately 6.86%,
5.64% and 0.49% of the Group I Loans, by aggregate Stated Principal Balances of
the Group I Loans, had original Loan-to-Value Ratios in excess of 80%, 85% and
90%, respectively.] Except for two Mortgage Loans, representing approximately
0.11% of the Cut-off Date Pool Principal Balance, each Mortgage Loan with a
Loan-to-Value Ratio at origination of greater than 80% will be covered by a
primary mortgage guaranty insurance policy issued by a mortgage insurance
company acceptable to the Federal National Mortgage Association ("FNMA") or the
Federal Home Loan Mortgage Corporation ("FHLMC"), which policy provides coverage
of a portion of the original principal balance of the related Mortgage Loan
equal to the product of the original principal balance thereof and a fraction,
the numerator of which is the excess of the original principal balance of the
related Mortgage Loan over 75% of the lesser of the appraised value and selling
price of the related Mortgaged Property and the denominator of which is the
original principal balance of the related Mortgage Loan, plus accrued interest
thereon and related foreclosure expenses. No such primary mortgage guaranty
insurance policy will be required with respect to any such Mortgage Loan after
the date on which the related Loan-to-Value Ratio is 80% or less or, based on a
new appraisal, the principal balance of such Mortgage Loan represents 80% or
less of the new appraised value. See "--Underwriting Standards" herein.
The "Loan-to-Value Ratio" of a Mortgage Loan at any given time is a
fraction, expressed as a percentage, the numerator of which is the principal
balance of the related Mortgage Loan at the date of determination and the
denominator of which is (a) in the case of a purchase, the lesser of the selling
price of the Mortgaged Property and its appraised value determined in an
appraisal obtained by the originator at origination of such Mortgage Loan, or
(b) in the case of a refinance, the appraised value of the Mortgaged Property at
the time of such refinance. No assurance can be given that the value of any
Mortgaged Property has remained or will remain at the level that existed on the
appraisal or sale date. If residential real estate values generally or in a
particular geographic area decline, the Loan-to-Value Ratios might not be a
reliable indicator of the rates of delinquencies, foreclosures and losses that
could occur with respect to such Mortgage Loans.
A-2
<PAGE>
EXHIBIT A--Excerpts from Underlying Supplement
Relating to First Nationwide Trust Series 1998-3 (cont'd)
* * *
Underwriting Standards
The information set forth in the following paragraphs has been provided by
the Seller. None of the Depositor, the Underwriter, the Trustee or any of their
respective affiliates has made or will make any representation as [to] the
accuracy or completeness of the information provided by the Seller.
Except for 86 Mortgage Loans, representing approximately 5.12% of the
Cut-off Date Pool Principal Balance, the Mortgage Loans have been underwritten
as described below by the Seller. The Mortgage Loans have either been originated
by the Seller or purchased by the Seller from various banks, savings and loan
associations, mortgage bankers (which may or may not be affiliated with the
Seller) and other mortgage loan originators. All of the Mortgage Loans which
were not underwritten in accordance with the Seller's underwriting standards
were underwritten in accordance with underwriting guidelines believed to be
substantially similar to the underwriting standards of the Seller set forth
below.
The underwriting standards of the Seller for purchase money or rate/term
refinance loans secured by primary residences generally allow Loan-to-Value
Ratios at origination of up to 95% for mortgage loans with original principal
balances of up to $300,000, up to 90% for mortgage loans with original principal
balances of up to $400,000, up to 80% for mortgage loans with original principal
balances of up to $650,000, and up to 70% for mortgage loans with original
principal balances of up to $1,000,000. For cash--out refinance loans (generally
allowed on primary residences only), the maximum Loan-to-Value Ratio generally
is 75%, and the maximum "cash out" amount permitted is based in part on the
Loan-to-Value Ratio of the related mortgage loan.
In determining whether a prospective borrower has sufficient monthly
income available (i) to meet the borrower's monthly obligation on the proposed
mortgage loans and (ii) to meet monthly housing expenses and other financial
obligations including the borrower's monthly obligations on the proposed
mortgage loan, the Seller generally applies ratios of up to 28% and 36%,
respectively, of the proposed borrower's acceptable stable monthly gross income
for borrower's with Loan-to-Value Ratios at origination between 80.01% and 95%,
and up to 33% and 38%, respectively, with Loan-to-Value Ratio at origination of
up to 80%. From time to time, the Seller makes loans where these ratios are
exceeded. In those instances, underwriters typically look at mitigating factors
such as the liquidity of the mortgagor, the stability of the real estate market
where the mortgaged property is located, and local economic conditions,
percentage of down payment and credit score.
Each [M]ortgage [L]oan on a primary residence or second home with a
Loan-to-Value Ratio at origination in excess of 80% is insured by a primary
mortgage insurance policy covering a portion of the principal balance of the
[M]ortgage [L]oan at origination. The amount of such coverage depends upon the
Loan-to-Value Ratio at origination.
Each [M]ortgage [L]oan is generally approved from an application pursuant
to (a) the Full/Alternative Documentation Program or (b) the Reduced
Documentation Program. The Full/Alternative Documentation Program generally
requires the following documents: (i) Uniform Residential Loan Application (FNMA
Form 1003 or Freddie Mac Form 65), (ii) Statement of Assets and Liabilities
(FNMA Form 1003A or Freddie Mac 65A, if applicable), (iii) [a] tri-merged credit
report (generally from three separate repositories and/or a standard factual
data credit report), (iv) Verification of Employment Form (or federal tax
returns for self-employed borrowers) providing a complete two year employment
history, (v) Verification of Deposit Form for all liquid assets, verifying
minimum cash reserves based upon the Loan-to-Value Ratio and borrower's income,
and (vi) a Uniform Residential Appraisal Report (FNMA Form 1004 or Freddie Mac
Form 70). The Full/Alternative Documentation Program allows for the use of
certain alternative documents in lieu of the Verification of Deposit Form and
Verification of Employment Form. These include W-2 Statements, tax returns and
pay check stubs from the most recent full month for verification of income and
the most recent three months personal bank statements for verification of liquid
assets. In addition, self-employed borrowers generally must provide federal tax
returns for the previous two or three years, including K-I's, federal business
tax returns for two years and year-to-date financial statements.
A-3
<PAGE>
EXHIBIT A--Excerpts from Underlying Supplement
Relating to First Nationwide Trust Series 1998-3 (cont'd)
Under the Reduced Documentation Program, the Seller obtains from
prospective borrowers either a verification of deposit or bank statements for
the most recent three-month period preceding the mortgage loan application.
Under this program, the borrower provides income information on the mortgage
loan application, and the debt service-to- income ratio is calculated. Although
income is not verified, generally the existence of the business is verified by a
business credit report, plus a signed IRS Form 4506 (Request for copy of Tax
Returns). Mortgage loans underwritten under the Reduced Documentation Program
are limited to borrowers with credit histories that demonstrate an established
ability to repay indebtedness in a timely fashion. Permitted loan-to-value
ratios (including secondary financing) under the Reduced Documentation Program
generally is limited.
A minimum credit score is not stated, however, the Seller utilizes a
credit score as one component in grading the creditworthiness of a loan and in
establishing the level of authority necessary to approve a loan application. The
higher the credit score, the lower level of authority needed to approve a loan
and accordingly the lower the credit score, the greater the degree of caution
used in the decision to approve a loan application.
[As of the Cut-off Date, 16.66% of the Group I Loans, by aggregate Stated
Principal Balances of the Group I Loans, were originated under the Reduced
Documentation Program.]
* * *
Voting Rights
Voting rights of the Trust Fund in general will be allocated 1% to the
Notional Amount Certificates with the balance allocated among the other Classes
of Certificates based upon their respective Class Principal Balances.
DESCRIPTION OF THE CERTIFICATES
General
The Certificates will be issued pursuant to the Agreement. Set forth below
are summaries of the specific terms and provisions pursuant to which the
Certificates will be issued....
The Mortgage Pass-Through Certificates, Series 1998-3 will consist of the
Class IPP-A-1, Class IIPP-A-1, Class I-P, Class I-X, Class II-X and Class A-R
Certificates (collectively, the "Senior Certificates") and the Class C-B-1,
Class C-B-2, Class C-B-3, Class C-B-4, Class C-B-5 and Class C-B-6 Certificates
(collectively, the "Subordinate Certificates"). The Senior Certificates and the
Subordinate Certificates are collectively referred to herein as the
"Certificates". Only the Senior Certificates and the Class C-B-1, Class C-B-2
and Class C-B-3 Certificates (collectively, the "Offered Certificates") are
offered [by the related disclosure documentation]. The Classes of Offered
Certificates will have the respective initial Class Principal Balances or
initial Notional Amounts (subject to the permitted variance) and Pass-Through
Rates set forth [in the related prospectus supplement(1)].
The Class Principal Balance of any Class of Certificates as of any
Distribution Date is the initial Class Principal Balance thereof reduced by the
sum of (i) all amounts previously distributed to holders of Certificates of such
Class as payments of principal and (ii) the amount of Realized Losses (including
Excess Losses) allocated to such Class. The Notional Amount Certificates do not
have a principal balance and are not entitled to any distributions in respect of
principal of the Mortgage Loans.
- ----------
(1) The related prospectus supplement indicates that the Class IPP-A-1
Certificates have an initial Class Principal Balance of $524,317,220
and a Pass-Through Rate of 6.50% per annum.
A-4
<PAGE>
EXHIBIT A--Excerpts from Underlying Supplement
Relating to First Nationwide Trust Series 1998-3 (cont'd)
The [Group I] Senior Certificates ... will evidence in the aggregate an
initial beneficial ownership interest of approximately 96.25%...of the [Group I]
Loans...as of the Closing Date. The Class C-B-1, Class C-B-2, Class C-B-3, Class
C-B-4, Class C-B-5 and Class C-B-6 Certificates will each evidence in the
aggregate an initial beneficial ownership interest of approximately 1.45%,
1.00%, 0.45%, 0.30%, 0.25% and 0.30%, respectively, of the Group I and Group II
Loans.
[The Certificates are divided into two Certificate groups (each, a
"Certificate Group"): the Group I Certificates and the Group II Certificates.
The "Group I Certificates" consist of the Class IPP-A1, Class I-P, Class I-X,
Class A-R and Group C-B Certificates. The "Group C-B Certificates" consist of
the Class C-B-1, Class C-B-2, Class C-B-3, Class C-B-4, Class C-B-5 and Class
C-B-6 Certificates. The Class IPP-A-1, Class I-P, Class I-X and Class A-R
Certificates are collectively referred to herein as the "Group I Senior
Certificates".]
* * *
Distributions
Distributions on the Certificates will be made by the Trustee on the 19th
day of each month, or if such day is not a business day, on the first business
day thereafter, commencing in August 1998 (each, a "Distribution Date"), to the
persons in whose names such Certificates are registered at the close of business
on the last business day of the month preceding the month of such Distribution
Date (the "Record Date").
Distributions on each Distribution Date will be made by check mailed to
the address of the person entitled thereto as it appears on the applicable
certificate register or, in the case of a Certificateholder who holds 100% of a
Class of Certificates or who holds a Notional Amount Certificate or who holds
Certificates with an aggregate initial certificate balance of $1,000,000 or more
and who has so notified the Trustee in writing in accordance with the Agreement,
by wire transfer in immediately available funds to the account of such
Certificateholder at a bank or other depository institution having appropriate
wire transfer facilities; provided, however, that the final distribution in
retirement of the Certificates will be made only upon presentment and surrender
of such Certificates at the Corporate Trust Office of the Trustee.
Priority of Distributions Among Certificates
Distributions with respect to a Certificate Group will in general be made
to the extent of the Available Funds for the related Loan Group, except as
otherwise provided herein, in the order and priority as follows: (1) first, to
the Class I-P Certificates, a certain portion of the principal received in
respect of each Class P Mortgage Loan, as described in "--Distributions of
Principal" herein; (2) second, to the Senior Certificates of such Certificate
Group entitled to interest, accrued and unpaid interest, as described in
"--Distributions of Interest" herein; (3) third, to the Senior Certificates of
such Certificate Group entitled to principal (other than the Class I-P
Certificates), principal in the order described for the Senior Certificates of
such Certificate Group as set forth in "--Distributions of Principal--Senior
Principal Distribution Amount" herein; (4) fourth, to the extent of remaining
Available Funds for both Loan Groups, to the Class I-P Certificates, any Class
PO Deferred Amounts; (5) fifth, to the extent of remaining Available Funds for
both Loan Groups, to each Class of Group C-B Certificates, interest and then
principal in increasing order of numerical Class designation, with both interest
and principal being paid to one Class before any payments are made to the next
Class; and (6) sixth, to the Class A-R Certificates, the remainder (which is
expected to be zero) of all Available Funds.
***
"Available Funds" with respect to any Distribution Date and the Mortgage
Loans in a Loan Group will be equal to the sum of (i) all scheduled installments
of interest (net of the related Expense Fees) and principal due on the Due Date
in the month in which such Distribution Date occurs and received prior to the
related Determination Date, together with any Advances in respect thereof; (ii)
all proceeds of any primary mortgage guaranty insurance policies and any other
insurance policies with respect to such Mortgage Loans, to the extent such
proceeds are not
A-5
<PAGE>
EXHIBIT A--Excerpts from Underlying Supplement
Relating to First Nationwide Trust Series 1998-3 (cont'd)
applied to the restoration of the related Mortgaged Property or released to the
Mortgagor in accordance with the Master Servicer's normal servicing procedures
(collectively, "Insurance Proceeds") and all other cash amounts received and
retained in connection with the liquidation of defaulted Mortgage Loans, by
foreclosure or otherwise ("Liquidation Proceeds") during the month preceding the
month of such Distribution Date (in each case, net of unreimbursed expenses
incurred in connection with a liquidation or foreclosure and unreimbursed
Advances, if any); (iii) all partial or full prepayments received during the
related Prepayment Period applicable to such Distribution Date; and (iv) amounts
received with respect to such Distribution Date as the Substitution Adjustment
Amount or Purchase Price in respect of a Mortgage Loan repurchased by the Seller
or the Master Servicer as of such Distribution Date, reduced by amounts in
reimbursement for Advances previously made and other amounts as to which the
Master Servicer is entitled to be reimbursed pursuant to the First Nationwide
Agreement.
Distributions of Interest
The Pass-Through Rate for each interest-bearing Class of Offered
Certificates for each Distribution Date (the "Pass-Through Rate") is as set
forth or described [in the related prospectus supplement(1)].
The Notional Amount of the Class I-X Certificates with respect to any
Distribution Date will equal the product of (x) the aggregate Stated Principal
Balance, as of the second preceding Due Date after giving effect to Scheduled
Payments for such Due Date, whether or not received, or with respect to the
initial Distribution Date, as of the Cut-off Date, of the [Group I Loans having
Net Rates in excess of 6.50% per annum (the "Group I Premium Rate Mortgage
Loans")] and (y) a fraction, the numerator of which is the weighted average of
the Stripped Interest Rates (as defined below) for the Group I Premium Rate
Mortgage Loans as of such Due Date and the denominator of which is 6.50%.
* * *
The "Stripped Interest Rate" means for any Group I ... Premium Rate
Mortgage Loan, the excess, if any, of the Net Rate for such Mortgage Loan over
6.50%.
The "Net Rate" of a Mortgage Loan is the Mortgage Rate thereof minus the
related Expense Fee Rate. The "Mortgage Rate" of a Mortgage Loan is the rate at
which interest accrues thereon in accordance with the terms of the related
Mortgage Note. [The "Expense Fee Rate" is the rate at which fees payable to the
Master Servicer, in respect of its servicing activities, and the Trustee, in
respect of its activities as Trustee, accrue.]
On each Distribution Date, to the extent of funds available therefor, each
interest-bearing Class of Certificates will be entitled to receive an amount
allocable to interest (as to each such Class, the "Interest Distribution
Amount") with respect to the related Interest Accrual Period. The Interest
Distribution Amount for any interest-bearing Class of Certificates will be equal
to the sum of (i) interest at the applicable Pass-Through Rate on the related
Class Principal Balance or Notional Amount, as the case may be, and (ii) the sum
of the amounts, if any, by which the amount described in clause (i) above on
each prior Distribution Date exceeded the amount actually distributed as
interest on such prior Distribution Dates and not subsequently distributed. The
[Class I-P] Certificates will not bear interest.
With respect to each Distribution Date, the "Interest Accrual Period" for
each interest-bearing Class of Certificates will be the calendar month preceding
the month of such Distribution Date.
The interest entitlement described above for each interest-bearing Class
of Certificates will be reduced by the amount of "Net Interest Shortfalls"
experienced by the related Loan Group for such Distribution Date.
- ----------
(1) The related prospectus supplement indicates that the Class IPP-A-1
Certificates have a Pass-Through Rate of 6.50% per annum.
A-6
<PAGE>
EXHIBIT A--Excerpts from Underlying Supplement
Relating to First Nationwide Trust Series 1998-3 (cont'd)
With respect to any Distribution Date, the "Net Interest Shortfall" for a
Loan Group is equal to the sum of (i) the amount of interest which would
otherwise have been received with respect to any Mortgage Loan that was the
subject of (x) a Relief Act Reduction or (y) a Special Hazard Loss, Fraud Loss,
Debt Service Reduction or Deficient Valuation, after the exhaustion of the
respective amounts of coverage provided by the Group C-B Certificates for such
types of losses and (ii) any Net Prepayment Interest Shortfalls. Net Interest
Shortfalls for a Loan Group on any Distribution Date will be allocated pro rata
among all Classes of Certificates in the related Certificate Group entitled to
receive distributions of interest on such Distribution Date from the related
Loan Group, based on the amount of interest each such Class of Certificates
would otherwise be entitled to receive on such Distribution Date in respect of
such Loan Group before taking into account any reduction in such amounts
resulting from such Net Interest Shortfalls. The amount a Class of Group C-B
Certificates would otherwise be entitled to receive from either the Group I or
Group II Loans before taking into account any such reduction will be based upon
the amount of interest accruing at the applicable Pass-Through Rate on such
Class' proportionate share (based upon Class Principal Balance) of the
applicable Group C-B Loan Group Component Balance for such Distribution Date. A
"Relief Act Reduction" is a reduction in the amount of monthly interest payment
on a Mortgage Loan pursuant to the Soldiers' and Sailors' Civil Relief Act of
1940.... With respect to any Distribution Date, the "Net Prepayment Interest
Shortfall" for a Loan Group is the amount by which the aggregate of Prepayment
Interest Shortfalls experienced by a Loan Group during the Prepayment Period
exceeds the available Compensating Interest for such Loan Group for such period.
A "Prepayment Interest Shortfall" is the amount by which interest paid by a
borrower in connection with a prepayment of principal on a Mortgage Loan is less
than one month's interest at the related Mortgage Rate (net of the Master
Servicing Fee) on the amount of such prepayment.
Accrued interest to be distributed on any Distribution Date will be
calculated, in the case of each interest-bearing Class of Certificates, on the
basis of the related Class Principal Balance or Notional Amount, as applicable,
immediately prior to such Distribution Date. Interest will be calculated and
payable on the basis of a 360-day year divided into twelve 30-day months.
In the event that, on a particular Distribution Date, Available Funds for
a Loan Group applied in the order described above under "--Priority of
Distributions Among Certificates" are not sufficient to make a full distribution
of the interest entitlement on the Certificates of the related Certificate
Group, interest will be distributed on each Class of Certificates of equal
priority based on the amount of interest each such Class would otherwise have
been entitled to receive in the absence of such shortfall. Any such unpaid
amount will be carried forward and added to the amount holders of each such
Class of Certificates will be entitled to receive on the next Distribution Date.
Such a shortfall could occur, for example, if losses realized on the Mortgage
Loans for the related Loan Group were exceptionally high or were concentrated in
a particular month. Any such unpaid amount will not bear interest.
Distributions of Principal
General. On each Distribution Date, Certificateholders of each Certificate
Group will be entitled to receive principal distributions from the related
Available Funds to the extent and in the priority described herein. See
"--Priority of Distributions Among Certificates" herein. The Group I ... Senior
Certificates [generally] will receive such distributions from amounts received
or advanced in respect of the Group I ... Loans, .... The Group C-B Certificates
will receive such distributions from amounts received or advanced in respect of
both the Group I and Group II Loans.
For any Distribution Date and Loan Group, the "Principal Payment Amount"
is the sum for the Mortgage Loans in such Loan Group of (i) scheduled principal
payments on such Mortgage Loans due on the related Due Date, (ii) the principal
portion of repurchase proceeds received with respect to any such Mortgage Loan
which was repurchased as permitted or required by the First Nationwide Agreement
during the calendar month preceding the month of the Distribution Date and (iii)
any other unscheduled payments of principal which were received on such Mortgage
Loans during the preceding calendar month, other than Payoffs, Curtailments or
Liquidation Principal (as defined below). For any Distribution Date and Loan
Group, the "Principal Prepayment Amount" is the sum for the Mortgage Loans in
such Loan Group of all Payoffs and Curtailments relating to such Mortgage Loans
in such Loan Group which were received during the related Prepayment Period.
A-7
<PAGE>
EXHIBIT A--Excerpts from Underlying Supplement
Relating to First Nationwide Trust Series 1998-3 (cont'd)
With respect to each Distribution Date, the related "Prepayment Period"
will be the calendar month preceding the month in which the related Distribution
Date occurs.
"Liquidation Principal" is the principal portion of Liquidation Proceeds
received with respect to each Mortgage Loan which became a Liquidated Mortgage
Loan (but not in excess of the principal balance thereof) during the calendar
month preceding the month of the Distribution Date, exclusive of the portion
thereof attributable to the Class P Principal Distribution Amount, if
applicable. A "Liquidated Mortgage Loan" is a defaulted Mortgage Loan as to
which the Master Servicer has determined that all amounts which it expects to
recover from or on account of such Mortgage Loan, whether from Insurance
Proceeds, Liquidation Proceeds or otherwise have been recovered.
The Notional Amount Certificates will not be entitled to receive any
distributions of principal.
Senior Principal Distribution Amount. On each Distribution Date, to the
extent of Available Funds for a Loan Group, up to the amount of the Senior
Principal Distribution Amount for the related Certificate Group for such
Distribution Date, will be distributed as principal to the related Senior
Certificates as follows:
(A) with respect to the Group I Certificates, first, to the Class
A-R Certificates, until the Class Principal Balance thereof has been
reduced to zero, and then to the Class IPP-A-1 Certificates, until the
Class Principal Balance thereof has been reduced to zero; and
* * *
The "Senior Credit Support Depletion Date" is the date on which the
aggregate Class Principal Balance of the Subordinate Certificates has been
reduced to zero.
The "Senior Principal Distribution Amount" for any Distribution Date and
Certificate Group will equal the sum of (i) the related Senior Percentage of the
Principal Payment Amount for the related Loan Group (exclusive of the portion
thereof attributable to the Class P Principal Distribution Amount, if
applicable), (ii) the related Senior Prepayment Percentage of the Principal
Prepayment Amount for the related Loan Group (exclusive of the portion thereof
attributable to the Class P Principal Distribution Amount, if applicable), and
(iii) the Senior Liquidation Amount for the related Loan Group.
The "Senior Liquidation Amount" for a Loan Group is the aggregate, for
each Mortgage Loan in such Loan Group which became a Liquidated Mortgage Loan
during the calendar month preceding the month of the Distribution Date, of the
lesser of (i) the Senior Percentage for the related Certificate Group of the
Stated Principal Balance of such Mortgage Loan (exclusive of the Class P
Fraction thereof, if applicable) and (ii) the Senior Prepayment Percentage for
the related Certificate Group of the Liquidation Principal with respect to such
Mortgage Loan.
"Stated Principal Balance" means, as to any Mortgage Loan and Due Date,
the unpaid principal balance of such Mortgage Loan as of such Due Date, as
specified in the amortization schedule at the time relating thereto (before any
adjustment to such amortization schedule by reason of any moratorium or similar
waiver or grace period), after giving effect to any previous partial principal
prepayments and Liquidation Proceeds received and to the payment of principal
due on such Due Date and irrespective of any delinquency in payment by the
related Mortgagor.
The "Senior Percentage" for any Distribution Date for a Certificate Group
is the percentage equivalent of a fraction the numerator of which is the
aggregate of the Class Principal Balances of the Classes of Senior Certificates
of such Certificate Group (other than, with respect to the Group I Senior
Certificates, the Class I-P Certificates) immediately prior to such date and the
denominator of which is the aggregate of the Stated Principal Balances of the
Mortgage Loans in the related Loan Group (less, with respect to the Group I
Senior Certificates, the Class I-P Principal Balance), in each case immediately
prior to the Distribution Date; provided, however, in no event will the
A-8
<PAGE>
EXHIBIT A--Excerpts from Underlying Supplement
Relating to First Nationwide Trust Series 1998-3 (cont'd)
Senior Percentage for a Certificate Group exceed 100%. The "Subordinate
Percentage" for a Certificate Group for any Distribution Date will be calculated
as the difference between 100% and the related Senior Percentage for such date.
The Senior Prepayment Percentage for any Distribution Date for a
Certificate Group occurring during the five years beginning on the first
Distribution Date will equal 100%. Thereafter, such Senior Prepayment Percentage
will, except as described below, be subject to gradual reduction as described in
the following paragraph. This disproportionate allocation of certain unscheduled
payments in respect of principal will have the effect of accelerating the
amortization of the Senior Certificates in a Certificate Group while, in the
absence of Realized Losses, increasing the interest in the aggregate Stated
Principal Balance of the applicable Loan Group evidenced by the Group C-B
Certificates. Increasing the respective interest of the Group C-B Certificates
relative to that of the Senior Certificates is intended to preserve the
availability of the subordination provided by the Group C-B Certificates.
The Senior Prepayment Percentage for any Distribution Date for a
Certificate Group occurring on or after the fifth anniversary of the first
Distribution Date will be as follows: for any Distribution Date in the first
year thereafter, the related Senior Percentage plus 70% of the related
Subordinate Percentage for such Distribution Date; for any Distribution Date in
the second year thereafter, the related Senior Percentage plus 60% of the
related Subordinate Percentage for such Distribution Date; for any Distribution
Date in the third year thereafter, the related Senior Percentage plus 40% of the
related Subordinate Percentage for such Distribution Date; for any Distribution
Date in the fourth year thereafter, the related Senior Percentage plus 20% of
the related Subordinate Percentage for such Distribution Date; and for any
Distribution Date thereafter, the related Senior Percentage for such
Distribution Date (unless on any of the foregoing Distribution Dates the related
Senior Percentage exceeds the initial Senior Percentage for such Certificate
Group, in which case such Senior Prepayment Percentage for such Distribution
Date will once again equal 100%). In the event the Senior Prepayment Percentage
for the Group I Certificates or Group II Certificates will once again equal 100%
in accordance with the parenthetical in the previous sentence, the Senior
Prepayment Percentage for the other Certificate Group will also equal 100%.
Notwithstanding the foregoing no decrease in the reduction to the Senior
Prepayment Percentage for the Senior Certificates of a Certificate Group as
described above will occur if as of the first Distribution Date as to which any
such decrease applies (i) with respect to each Certificate Group, the
outstanding principal balance of the related Mortgage Loans, in either case
delinquent 60 days or more (averaged over the preceding six month period), as a
percentage of the aggregate principal balance of the related Group C-B Loan
Group Component Balance, as of such Distribution Date, is equal to or greater
than 50% or (ii) cumulative Realized Losses with respect to the Mortgage Loans
in the related Loan Group exceed (a) with respect to the Distribution Date on
the fifth anniversary of the first Distribution Date, 30% of the aggregate
principal balance of the related Group C-B Loan Group Component Balance, as of
the Closing Date (each, an "Original Subordinate Principal Balance"), (b) with
respect to the Distribution Date on the sixth anniversary of the first
Distribution Date, 35% of such Original Subordinate Principal Balance, (c) with
respect to the Distribution Date on the seventh anniversary of the first
Distribution Date, 40% of such Original Subordinate Principal Balance, (d) with
respect to the Distribution Date on the eighth anniversary of the first
Distribution Date, 45% of such Original Subordinate Principal Balance and (e)
with respect to the Distribution Date on the ninth anniversary of the first
Distribution Date, 50% of such Original Subordinate Principal Balance. In the
event that the Senior Prepayment Percentage for the Group I Certificates or the
Group II Certificates is not permitted to reduce due to the limitations set
forth above, the Senior Prepayment Percentage for the other Certificate Group
will also be prevented from any such reduction.
If on any Distribution Date the allocation to a Class of Senior
Certificates of the related Principal Prepayment Amount in the percentage
required above would reduce the outstanding Class Principal Balance of such
Class below zero, the distribution to such Class of Certificates of the related
Senior Prepayment Percentage of such amounts for such Distribution Date will be
limited to the percentage necessary to reduce the related Class Principal
Balance to zero.
Subordinate Principal Distribution Amount. On each Distribution Date, to
the extent of Available Funds therefor, up to the amount of the Subordinate
Principal Distribution Amount for such Distribution Date, will be
A-9
<PAGE>
EXHIBIT A--Excerpts from Underlying Supplement
Relating to First Nationwide Trust Series 1998-3 (cont'd)
distributed as principal of the Class or Classes of Subordinate Certificates.
Except as provided in the following paragraph, each Class of Subordinate
Certificates will be entitled to receive its pro rata share (based on its
respective Class Principal Balance) of the Subordinate Principal Distribution
Amount, in each case to the extent of the amount available from Available Funds
for the Group I and Group II Loans for distribution of principal of such Class.
Distributions of principal of the Subordinate Certificates will be made on each
Distribution Date sequentially to the Classes of Subordinate Certificates in the
order of their numerical Class designation (beginning with the Class with the
lowest numerical Class designation) until each such Class of Subordinate
Certificates has received its respective pro rata share of the Subordinate
Principal Distribution Amount for such Distribution Date.
With respect to each Class of Subordinate Certificates, if on any
Distribution Date the related Subordination Level of such Class is less than
such percentage as of the Closing Date, no distributions of Payoffs and
Curtailments will be made to any Class or Classes of Subordinate Certificates
junior to such Class (the "Restricted Classes") and the amount otherwise
distributable to the Restricted Classes in respect of such Payoffs and
Curtailments will be allocated among the remaining Classes of Subordinate
Certificates, pro rata, based upon their respective Class Principal Balances.
The "Subordination Level" on any Distribution Date with respect to any
Class of Subordinate Certificates is the percentage obtained by dividing the sum
of the Class Principal Balances of all Classes of Certificates which are
subordinate in right of payment to such Class by the sum of the Class Principal
Balances of all Classes of Certificates, in each case immediately prior to such
Distribution Date.
The "Subordinate Principal Distribution Amount" for any Distribution Date
will equal (A) the sum of (i) the Subordinate Percentage for the Group I
Certificates of the Principal Payment Amount for the Group I Loans (exclusive of
the portion thereof attributable to the Class P Principal Distribution Amount),
(ii) the Subordinate Percentage for the Group II Certificates of the Principal
Payment Amount for the Group II Loans, (iii) the Subordinate Prepayment
Percentage for the Group I Certificates of the Principal Prepayment Amount for
the Group I Loans (exclusive of the portion thereof attributable to the Class P
Principal Distribution Amount), (iv) the Subordinate Prepayment Percentage for
the Group II Certificates of the Principal Prepayment Amount for the Group II
Loans and (v) the Subordinate Liquidation Amount for the Group I and Group II
Loans less (B) the sum of (x) the Class PO Deferred Amounts required to be paid
to the Class I-P Certificates on such Distribution Date, (y) in the event that
the Class Principal Balance of either the Group I or Group II Senior
Certificates has been reduced to zero, principal paid from Available Funds of
the Loan Group related to such Certificate Group to the other Certificate Group
as described in [the related prospectus supplement] and (z) the amounts in
respect of principal paid from Available Funds of any Overcollateralized Group
to any Undercollateralized Group as described in [the related prospectus
supplement].
Any reduction to the Subordinate Principal Distribution Amount described
above shall first offset amounts in respect of the related Principal Payment
Amounts, second the related Subordinate Liquidation Amounts and then the related
Principal Prepayment Amounts.
The "Subordinate Liquidation Amount" for a Loan Group will equal the
excess, if any, of the aggregate Liquidation Principal of all Mortgage Loans in
such Loan Group which became Liquidated Mortgage Loans during the calendar month
preceding the month of such Distribution Date over the sum of the related Senior
Liquidation Amount for such Distribution Date.
Class P Principal Distribution Amount. On each Distribution Date, the
Class I-P Certificates will receive a portion of the Available Funds for the
Group I Loans attributable to principal received on or in respect of any Group I
Loan with a Net Rate of less than 6.50% (a "Class P Mortgage Loan"), equal to
the amount of such principal so attributable multiplied by a fraction, the
numerator of which is 6.50% minus the Net Rate on such Class P Mortgage Loan and
the denominator of which is 6.50% (the "Class P Fraction"). In addition, on each
Distribution Date for so long as any of the Group C-B Certificates remains
outstanding, the Class I-P Certificates will also be allocated principal, to the
extent of amounts available to pay the Subordinate Principal Distribution Amount
(without regard to clause (B) of such definition) on such Distribution Date, in
an amount generally equal to the Class PO Deferred Amounts not previously
reimbursed; provided, that such payments in respect of Class PO Deferred Amounts
shall
A-10
<PAGE>
EXHIBIT A--Excerpts from Underlying Supplement
Relating to First Nationwide Trust Series 1998-3 (cont'd)
not cause a further reduction of the outstanding Class I-P Principal Balance.
The aggregate of the amounts payable to the Class I-P Certificates described in
this paragraph are referred to herein as the "Class P Principal Distribution
Amount".
Residual Certificates. The Class A-R Certificates will remain outstanding
for so long as the Trust Fund shall exist, whether or not they are receiving
current distributions of principal or interest. In addition to distributions of
interest and principal as described above, on each Distribution Date the holders
of the Class A-R Certificates will be entitled to receive Available Funds for
either Loan Group remaining after payment of interest and principal on the
Senior Certificates, Class PO Deferred Amounts on the Class I-P Certificates and
interest and principal on the Subordinate Certificates for such Distribution
Date, as described above. It is not anticipated that there will be any
significant amounts remaining for any such distribution.
Allocation of Losses
On each Distribution Date, the Class P Fraction of any Realized Loss,
including any Excess Loss, on a Class P Mortgage Loan will be allocated to the
Class I-P Certificates until the Class Principal Balance thereof is reduced to
zero. The amount of any such Realized Loss, other than an Excess Loss, allocated
on or prior to the Senior Credit Support Depletion Date will be treated as a
Class PO Deferred Amount. To the extent funds are available on such Distribution
Date or on any future Distribution Date from amounts that would otherwise be
allocable to the Subordinate Principal Distribution Amount, Class PO Deferred
Amounts will be paid on the Class I-P Certificates in accordance with the
priorities described above under "--Priority of Distributions Among
Certificates" herein. Any distribution in respect of unpaid Class PO Deferred
Amounts will not further reduce the Class Principal Balance of the Class I-P
Certificates. The Class PO Deferred Amounts will not bear interest. The Class
Principal Balance of the Class of Subordinate Certificates then outstanding with
the highest numerical Class designation will be reduced by the amount of any
payments in respect of Class PO Deferred Amounts. After the Senior Credit
Support Depletion Date, no new Class PO Deferred Amounts will be created in
respect of the Class I-P Certificates.
On each Distribution Date, any Realized Loss (other than the Class P
Fraction thereof, if applicable), other than any Excess Loss, experienced by a
Loan Group will be allocated first to the Subordinate Certificates, in
decreasing order of their numerical Class designations (beginning with the Class
of Subordinate Certificates then outstanding with the highest numerical Class
designation), in each case until the Class Principal Balance of the respective
Class of Certificates has been reduced to zero, and then to the Senior
Certificates for the related Certificate Group (other than the Notional Amount
and Class I-P Certificates) pro rata, based upon their respective Class
Principal Balances; provided, however, such losses on Group I Loans will only be
allocated to the Group I Senior Certificates and such losses on the Group II
Loans will only be allocated to the Group II Senior Certificates.
On each Distribution Date, Excess Losses (other than the Class P Fraction
thereof, if applicable) will be allocated pro rata among the Classes of
Certificates (other than the Notional Amount and Class I-P Certificates) based
upon their respective Class Principal Balances.
On each Distribution Date, if the aggregate Class Principal Balance of all
the Certificates exceeds the aggregate Stated Principal Balance of the Mortgage
Loans (after giving effect to distributions of principal and the allocation of
all losses to the Certificates on such Distribution Date), such excess will be
deemed a principal loss and will be allocated to the most junior Class of
Subordinate Certificates then outstanding.
Investors in the Group I and Group II Senior Certificates should be aware
that because the Group C-B Certificates represent interests in both the Group I
and Group II Loans, the Class Principal Balances of the Group C-B Certificates
could be reduced to zero as a result of a disproportionate amount of Realized
Losses on the Mortgage Loans in one of such Loan Groups. Therefore,
notwithstanding that Realized Losses, other than Excess Losses, on the Mortgage
Loans in one Loan Group may only be allocated to the related Senior
Certificates, the allocation to the Group C-B Certificates of such Realized
Losses on the Mortgage Loans in the other Loan Group will increase the
likelihood that losses may be allocated to such Senior Certificates.
A-11
<PAGE>
EXHIBIT A--Excerpts from Underlying Supplement
Relating to First Nationwide Trust Series 1998-3 (cont'd)
[Generally, the characteristics of the Group I Loans are substantially
similar to those of the Group II Loans.]
In general, a "Realized Loss" means, with respect to a Liquidated Mortgage
Loan, the amount by which the remaining unpaid principal balance of the Mortgage
Loan exceeds the amount of Liquidation Proceeds applied to the principal balance
of the related Mortgage Loan. "Excess Losses" are (i) Special Hazard Losses in
excess of the Special Hazard Loss Coverage Amount, (ii) Bankruptcy Losses in
excess of the Bankruptcy Loss Coverage Amount, and (iii) Fraud Losses in excess
of the Fraud Loss Coverage Amount. "Special Hazard Losses" are Realized Losses
in respect of Special Hazard Mortgage Loans. "Bankruptcy Losses" are losses that
are incurred as a result of Debt Service Reductions and Deficient Valuations.
"Fraud Losses" are Realized Losses sustained by reason of a default arising from
fraud, dishonesty or misrepresentation....
A "Special Hazard Mortgage Loan" is a Liquidated Mortgage Loan as to which
the ability to recover the full amount due thereunder was substantially impaired
by a hazard not insured against under a standard hazard insurance policy of the
type described in the [related disclosure documentation].
* * *
The Subordinate Certificates will provide protection to the Classes of
Certificates of higher relative priority against (i) Special Hazard Losses in an
initial amount expected to be up to approximately $12,089,588 (the "Special
Hazard Loss Coverage Amount"), (ii) Bankruptcy Losses in an initial amount
expected to be up to approximately $165,990 (the "Bankruptcy Loss Coverage
Amount") and (iii) Fraud Losses in an initial amount expected to be up to
approximately $11,759,270 (the "Fraud Loss Coverage Amount").
* * *
As used herein, a "Deficient Valuation" is a bankruptcy proceeding whereby
the bankruptcy court may establish the value of the Mortgaged Property at an
amount less than the then outstanding principal balance of the Mortgage Loan
secured by such Mortgaged Property or may reduce the outstanding principal
balance of a Mortgage Loan. . . . In addition, certain other modifications of
the terms of a Mortgage Loan can result from a bankruptcy proceeding, including
the reduction (a "Debt Service Reduction") of the amount of the monthly payment
on the related Mortgage Loan. . . .
A-12
<PAGE>
EXCERPTS FROM THE UNDERLYING SUPPLEMENT
RELATING TO FIRST NATIONWIDE TRUST SERIES 1999-2(1)
THE MORTGAGE POOL
General
* * *
Certain information with respect to the Mortgage Loans to be included in
the mortgage pool (the "Mortgage Pool") is set forth below. Prior to March 29,
1999 (the "Closing Date"), Mortgage Loans may be removed from the Mortgage Pool
and other Mortgage Loans may be substituted therefor. The Depositor believes
that the information set forth herein with respect to the Mortgage Pool as
presently constituted is representative of the characteristics of the Mortgage
Pool as it will be constituted at the Closing Date, although certain
characteristics of the Mortgage Loans in the Mortgage Pool may vary. Unless
otherwise indicated, information presented below expressed as a percentage
(other than rates of interest) are approximate percentages based on the Stated
Principal Balances of the Mortgage Loans in the related Loan Group as of [March
1, 1999 (the "Cut-off Date")] and have been rounded in order to total 100%.
As of the Cut-off Date, the aggregate Stated Principal Balance of all of
the Mortgage Loans included in the Mortgage Pool is expected to be approximately
$548,286,529 (the "Cut-off Date Pool Principal Balance"). [The Mortgage Pool
consists of four groups (each, a "Loan Group") of Mortgage Loans: the "Group I
Loans," the "Group II Loans," the "Group III Loans" and the "Group IV Loans."(2)
[As of the Cut-off Date, the Group I Loans consisted of 834 Mortgage Loans with
an aggregate Stated Principal Balance of approximately $257,837,395. As of the
Cut-off Date, the Group II Loans consisted of 282 Mortgage Loans with an
aggregate Stated Principal Balance of approximately $43,334,057.]
The Mortgage Loans provide for the amortization of the amount financed
over a series of substantially equal monthly payments. All of the Mortgage Loans
provide for payments due on the first day of each month (the "Due Date"). The
Mortgage Loans to be included in the Mortgage Pool were originated or acquired
by the Sellers in the normal course of their business and substantially in
accordance with the underwriting criteria specified herein. At origination, the
Group I Loans had stated terms to maturity which ranged from 15 to 30 years....
Scheduled monthly payments made by the Mortgagors on the Mortgage Loans
("Scheduled Payments") either earlier or later than the scheduled Due Dates
thereof will not affect the amortization schedule or the relative application of
such payments to principal and interest. ...[E]ach First Nationwide Loan imposes
certain penalties for early prepayments (except for prepayments due to the sale
of the Mortgaged Property). During the first three or five years after
origination of each First Nationwide Loan (the "Penalty Period"), the Mortgagor
may not prepay more than 20% of the original principal amount of such Mortgage
Loan in any twelve month period without incurring a penalty. With respect to
each First Nationwide Loan with a three year Penalty Period, the penalty shall
be equal to the lesser of (i) the lesser of (a) six months' interest on such
excess and (b) two percent of such excess and (ii) the amount authorized by
applicable law. With respect to each First Nationwide Loan with a five year
Penalty Period, the
- ----------
(1) In this excerpt, the related Underlying Security is referred to as the
"Class IPP-A-1 Certificates" and the Underlying Mortgage Loans are
referred to as the "Group I Loans." Distributions of interest and
principal to the Group I Senior Certificates, including the Class IPP-A-1
Certificates, generally will be based on payments received or advanced
with respect to the Group I Loans.
(2) The Group I Loans and the Group II Loans are collectively referred to as
the "First Nationwide Loans" in this excerpt.
A-13
<PAGE>
EXHIBIT A--Excerpts from Underlying Supplement
Relating to First Nationwide Trust Series 1999-2 (cont'd)
penalty is equal to the lesser of (i) six months' interest on such excess and
(ii) the amount authorized by applicable law. No penalty will be imposed after
the Penalty Period.
Each Group I Loan was originated on or after June 30, 1997. ...
[As of the Cut-off Date, 1.06% and 49.29% of the Group I Loans, by
aggregate Stated Principal Balances of the Group I Loans, were originated under
"no documentation" and "reduced documentation" programs, respectively. See
"--Underwriting Standards" herein.]
The latest stated maturity date of any Group I Loan is April 1, 2029, and
the earliest stated maturity date of any Group I Loan is December 1, 2013....
* * *
No Mortgage Loan is subject to a buydown agreement. No Mortgage Loan
provides for deferred interest or negative amortization.
[As of the Cut-off Date, all of the Group I Loans had Loan-to-Value Ratios
at origination of 95% or less, and the weighted average Loan-to-Value Ratio, by
aggregate Stated Principal Balances of the Group I Loans, was approximately
72.74%. As of the Cut-off Date, approximately 3.25%, 2.82% and 1.57% of the
Group I Loans, by aggregate Stated Principal Balances of the Group I Loans, had
original Loan-to-Value Ratios in excess of 80%, 85% and 90%, respectively.]
Except for 119 Mortgage Loans, representing approximately 4.36% of the Cut-off
Date Pool Principal Balance, each Mortgage Loan with a Loan-to-Value Ratio at
origination of greater than 80% will be covered by a primary mortgage guaranty
insurance policy issued by a mortgage insurance company acceptable to the
Federal National Mortgage Association ("FNMA"), the Federal Home Loan Mortgage
Corporation ("FHLMC") or any nationally recognized statistical rating
organization, which policy provides coverage of a portion of the original
principal balance of the related Mortgage Loan equal to the product of the
original principal balance thereof and a fraction, the numerator of which is the
excess of the original principal balance of the related Mortgage Loan over 75%
of the lesser of the appraised value and selling price of the related Mortgaged
Property and the denominator of which is the original principal balance of the
related Mortgage Loan, plus accrued interest thereon and related foreclosure
expenses. No such primary mortgage guaranty insurance policy will be required
with respect to any such Mortgage Loan after the date on which the related
Loan-to-Value Ratio is 80% or less or, based on a new appraisal, the principal
balance of such Mortgage Loan represents 80% or less of the new appraised value.
See "--Underwriting Standards" herein.
The "Loan-to-Value Ratio" of a Mortgage Loan at any given time is a
fraction, expressed as a percentage, the numerator of which is the principal
balance of the related Mortgage Loan at the date of determination and the
denominator of which is (a) in the case of a purchase, the lesser of the selling
price of the Mortgaged Property and its appraised value determined in an
appraisal obtained by the originator at origination of such Mortgage Loan, or
(b) in the case of a refinance, the appraised value of the Mortgaged Property at
the time of such refinance. No assurance can be given that the value of any
Mortgaged Property has remained or will remain at the level that existed on the
appraisal or sales date. If residential real estate values generally or in a
particular geographic area decline, the Loan-to-Value Ratios might not be a
reliable indicator of the rates of delinquencies, foreclosures and losses that
could occur with respect to such Mortgage Loans.
* * *
Underwriting Standards
The Mortgage Loans have either been originated by a Seller or purchased by
a Seller from various banks, savings and loan associations, mortgage bankers
(which may or may not be affiliated with a Seller) and other mortgage loan
originators, and were originated generally in accordance with the underwriting
criteria described herein.
A-14
<PAGE>
EXHIBIT A--Excerpts from Underlying Supplement
Relating to First Nationwide Trust Series 1999-2 (cont'd)
All of the Mortgage Loans are "conventional non-conforming mortgage loans"
(i.e., loans which are not insured by the Federal Housing Authority or partially
guaranteed by the Veterans Administration or which do not qualify for sale to
FNMA or FHLMC). The underwriting standards applicable to the Mortgage Loans
typically differ from, and are generally less stringent than, the underwriting
standards established by FNMA or FHLMC primarily with respect to original
principal balances, Loan-to-Value Ratios, borrower income, required
documentation, interest rates, borrower occupancy of the mortgaged property
and/or property types. To the extent the programs reflect underwriting standards
different from these of FNMA and FHLMC, the performance of the mortgage loans
thereunder may reflect higher delinquency rates and/or credit losses. Neither
the Depositor nor any affiliate has re-underwritten any Mortgage Loan.
Generally, each Mortgagor will have been required to complete an
application designed to provide to the original lender pertinent credit
information concerning the Mortgagor. As part of the description of the
Mortgagor's financial condition, such Mortgagor will have furnished information
(which may be supplied solely in such application) with respect to its assets,
liabilities, income (except as described below), credit history, employment
history and personal information, and furnished an authorization to apply for a
credit report which summarizes the Mortgagor's credit history with local
merchants and lenders and any record of bankruptcy. The Mortgagor may also have
been required to authorize verifications of deposits at financial institutions
where the Mortgagor had demand or savings accounts. In the case of investment
properties and two- to four-unit dwellings, income derived from the Mortgaged
Property may have been considered for underwriting purposes, in addition to the
income of the Mortgagor from other sources. With respect to Mortgaged Property
consisting of vacation or second homes, no income derived from the property
generally will have been considered for underwriting purposes. In the case of
certain borrowers with acceptable payment histories, no income will be required
to be stated (or verified) in connection with the loan application.
Based on the data provided in the application and certain verification (if
required), a determination is made by the original lender that the Mortgagor's
monthly income (if required to be stated) will be sufficient to enable the
Mortgagor to meet its monthly obligations on the Mortgage Loan and other
expenses related to the property (such as property taxes, utility costs,
standard hazard insurance and other fixed obligations other than housing
expenses). Generally, scheduled payments on a Mortgage Loan during the first
year of its term plus taxes and insurance and all scheduled payments on
obligations that extend beyond ten months (including those mentioned above and
other fixed obligations) equal no more than a specified percentage of the
prospective Mortgagor's gross income. The percentage applied varies on a case by
case basis depending on a number of underwriting criteria, including the
Loan-to-Value Ratio of the Mortgage Loan. The originator may also consider the
amount of liquid assets available to the Mortgagor after origination.
Certain of the Mortgage Loans have been originated under "reduced
documentation" ... [or] "no documentation" ... programs which require less
documentation and verification than do traditional "full documentation"
programs. Generally, under a "reduced documentation" program, no verification of
a mortgagor's stated income is undertaken by the originator .... Under a "no
documentation" program, no verification of a mortgagor's income or assets is
undertaken by the originator. The underwriting for such Mortgage Loans may be
based primarily or entirely on an appraisal of the Mortgaged Property and the
Loan-to-Value Ratio at origination.
[As of the Cut-off Date, 1.06% and 49.29% of the Group I Loans, by
aggregate Stated Principal Balances of the Group I Loans, were originated under
"no documentation" and "reduced documentation" programs, respectively.]
The adequacy of the Mortgaged Property as security for repayment of the
related Mortgage Loan will generally have been determined by an appraisal in
accordance with pre-established appraisal procedure guidelines for appraisals
established by or acceptable to the originator. All appraisals conform to the
Uniform Standards of Professional Appraisal Practice adopted by the Appraisal
Standards Board of the Appraisal Foundation and must be on forms acceptable to
FNMA and/or FHLMC. Appraisers may be staff appraisers employed by the originator
or independent appraisers selected in accordance with pre-established appraisal
procedure guidelines established by the originator. The appraisal procedure
guidelines generally will have required the appraiser or an agent on its behalf
to personally inspect the property and to verify whether the property was in
good condition and that construction, if
A-15
<PAGE>
EXHIBIT A--Excerpts from Underlying Supplement
Relating to First Nationwide Trust Series 1999-2 (cont'd)
new, had been substantially completed. The appraisal generally will have been
based upon a market data analysis of recent sales of comparable properties and,
when deemed applicable, an analysis based on income generated from the property
or a replacement cost analysis based on the current cost of constructing or
purchasing a similar property.
* * *
Voting Rights
Voting rights of the Trust Fund in general will be allocated 1% to each
Class of Class X Certificates with the balance allocated among the other Classes
of Certificates based upon their respective Class Principal Balances.
DESCRIPTION OF THE CERTIFICATES
General
The Certificates will be issued pursuant to the Agreement. Set forth below
are summaries of the specific terms and provisions pursuant to which the
Certificates will be issued....
The Mortgage Pass-Through Certificates, Series 1999-2 will consist of the
Class IPP-A-1, Class IPP-A-2, Class IPP-A-3, Class IPP-A-4, Class IIPP-A, Class
III-A-1, Class IV-A-1, Class IV-A-2, Class IV-A-3, Class IV-A-4, Class I-P,
Class A-P, Class III-X-1, Class III-X-2, Class IV-X and Class A-R Certificates
(collectively, the "Senior Certificates") and the Class C-B-1, Class C-B-2,
Class C-B-3, Class C-B-4, Class C-B-5, Class C-B-6, Class D-B-1, Class D-B-2,
Class D-B-3, Class D-B-4, Class D-B-5 and Class D-B-6 Certificates
(collectively, the "Subordinate Certificates"). The Senior Certificates and the
Subordinate Certificates are collectively referred to herein as the
"Certificates." Only the Senior Certificates and the Class C-B-1, Class C-B-2,
Class C-B-3, Class D-B-1, Class D-B-2 and Class D-B-3 Certificates
(collectively, the "Offered Certificates") are offered [by the related
disclosure documentation]. The Classes of Offered Certificates will have the
respective initial Class Principal Balances or initial Notional Amounts (subject
to the permitted variance) and Pass-Through Rates set forth or described [in the
related prospectus supplement(1)].
The "Class Principal Balance" of any Class of Certificates as of any
Distribution Date is the initial Class Principal Balance thereof (A) reduced by
the sum of (i) all amounts previously distributed to holders of Certificates of
such Class as payments of principal, (ii) the amount of Realized Losses
(including Excess Losses) allocated to such Class and (iii) in the case of any
Subordinate Certificate any amounts allocated to such Class in reduction of its
Class Principal Balance in respect of payment of Class PO Deferred Amounts, as
described below under "--Allocation of Losses" and (B) in the case of the
Accrual Certificates, increased by all interest accrued and added to the Class
Principal Balance thereof prior to such Distribution Date. The Class X
Certificates do not have a principal balance and are not entitled to any
distributions in respect of principal of the Mortgage Loans.
The [Group I] Senior Certificates ... will evidence in the aggregate an
initial beneficial ownership interest of approximately 95.50% ... of the [Group
I] Loans ... as of the Closing Date.
[The Certificates are divided into four Certificate groups (each, a
"Certificate Group"): the Group I Certificates, the Group II Certificates, the
Group III Certificates and the Group IV Certificates. The "Group I Certificates"
consist of the Group I Senior Certificates and the Group C-B Certificates. The
"Group I Senior Certificates" consist of the Class IPP-A-1, Class IPP-A-2, Class
IPP-A-3, Class IPP-A-4 and Class I-P Certificates.
- ----------
(1) The related prospectus supplement indicates that the Class IPP-A-1
Certificates have an initial Class Principal Balance of $181,704,000 and a
Pass-Through Rate of 6.500% per annum.
A-16
<PAGE>
EXHIBIT A--Excerpts from Underlying Supplement
Relating to First Nationwide Trust Series 1999-2 (cont'd)
The "Group C-B Certificates" consist of the Class C-B-1, Class C-B-2, Class
C-B-3, Class C-B-4, Class C-B-5 and Class C-B-6 Certificates.]
* * *
Distributions
Distributions on the Certificates will be made by the Trustee on the 19th
day of each month, with respect to the Group I Certificates..., or if ... such
day is not a business day, on the first business day thereafter, commencing in
April 1999 (each, a "Distribution Date"), to the persons in whose names such
Certificates are registered at the close of business on the last business day of
the month preceding the month of such Distribution Date (the "Record Date").
Distributions on each Distribution Date will be made by check mailed to
the address of the person entitled thereto as it appears on the applicable
certificate register or, in the case of a Certificateholder who holds 100% of a
Class of Certificates or who holds a Class X Certificate or who holds
Certificates with an aggregate initial certificate balance of $1,000,000 or more
and who has so notified the Trustee in writing in accordance with the Agreement,
by wire transfer in immediately available funds to the account of such
Certificateholder at a bank or other depository institution having appropriate
wire transfer facilities; provided, however, that the final distribution in
retirement of the Certificates will be made only upon presentment and surrender
of such Certificates at the Corporate Trust Office of the Trustee.
Priority of Distributions Among Certificates
Distributions with respect to a Certificate Group will in general be made
to the extent of the Available Funds for the related Loan Group in the order and
priority as follows: (1) first, to the related Class P Certificates, if any, a
certain portion of the principal received in respect of each related Class P
Mortgage Loan, as described in "--Distributions of Principal" herein; (2)
second, to the Senior Certificates of such Certificate Group entitled to
interest, accrued and unpaid interest, as described in "--Interest" herein; (3)
third, to the Senior Certificates of such Certificate Group entitled to
principal (other than the related Class P Certificates, if any), principal in
the order described for the Senior Certificates of such Certificate Group as set
forth in "--Distributions of Principal--Senior Principal Distribution Amount";
(4) fourth, to the Class P Certificates, if any, of such Certificate Group, any
related Class PO Deferred Amounts; provided, however, the Class I-P Certificates
shall be entitled to receive related Class PO Deferred Amounts to the extent of
remaining Available Funds for the Group I and Group II Loans ... (5) fifth, to
each Class of Subordinate Certificates of such Certificate Group, interest and
then principal in increasing order of numerical Class designation, with both
interest and principal being paid to one Class before any payments are made to
the next Class; provided, however, that since the Group C-B Certificates relate
to the Group I and Group II Loans ... such Certificates receive payments from
the remaining Available Funds for the Group I and Group II Loans ... and (6)
sixth, to the Class A-R Certificates, the remainder (which is expected to be
zero) of all Available Funds.
* * *
"Available Funds" with respect to any Distribution Date and the Mortgage
Loans in a Loan Group will be equal to the sum of (i) all scheduled installments
of interest (net of the related Expense Fees) and principal due on the Due Date
in the month in which such Distribution Date occurs and received prior to the
related Determination Date, together with any Advances in respect thereof; (ii)
all proceeds of any primary mortgage guaranty insurance policies and any other
insurance policies with respect to the Mortgage Loans, to the extent such
proceeds are not applied to the restoration of the related Mortgaged Property or
released to the Mortgagor in accordance with the applicable Servicer's normal
servicing procedures (collectively, "Insurance Proceeds") and all other cash
amounts received and retained in connection with the liquidation of defaulted
Mortgage Loans, by foreclosure or otherwise ("Liquidation Proceeds") during the
month preceding the month of such Distribution Date (in each case, net of
unreimbursed expenses incurred in connection with a liquidation or foreclosure
and unreimbursed Advances, if any); (iii) all partial or full prepayments
received during the related Prepayment Period applicable to such Distribution
A-17
<PAGE>
EXHIBIT A--Excerpts from Underlying Supplement
Relating to First Nationwide Trust Series 1999-2 (cont'd)
Date, exclusive of prepayment penalties; (iv) amounts received with respect to
such Distribution Date as the Substitution Adjustment Amount or Purchase Price
in respect of a Deleted Mortgage Loan or a Mortgage Loan repurchased by a Seller
or a Servicer as of such Distribution Date, reduced (in the case of clauses (i)
through (iv) above) by amounts in reimbursement for Advances previously made and
other amounts as to which each Servicer is entitled to be reimbursed pursuant to
the Agreement; and (v) any amounts payable as Compensating Interest by such
Servicer on such Distribution Date relating to such Mortgage Loans.
Distributions of Interest
The Pass-Through Rate for each interest-bearing Class of Offered
Certificates for each Distribution Date (the "Pass-Through Rate") is as set
forth or described [in the related prospectus supplement(1)].
The [Class I-P and Class A-P Certificates (collectively, the "Class P
Certificates")] will not be entitled to receive any distributions of interest.
* * *
With respect to each Distribution Date, the "Interest Accrual Period" for
each interest-bearing Class of Certificates will be the calendar month preceding
the month of such Distribution Date.
The interest entitlement described above for each interest-bearing Class
of Certificates will be reduced by "Net Interest Shortfalls" experienced by the
related Loan Group or, with respect to the Subordinate Certificates, the related
Loan Groups, for such Distribution Date.
With respect to any Distribution Date, the "Net Interest Shortfall" for a
Loan Group is equal to the sum of (i) the amount of interest which would
otherwise have been received with respect to any Mortgage Loan in such Loan
Group that was the subject of (x) a Relief Act Reduction or (y) a Special Hazard
Loss, Fraud Loss, Debt Service Reduction or Deficient Valuation, after the
exhaustion of the respective amounts of coverage provided by the applicable
Subordinate Certificates for such types of losses and (ii) any Net Prepayment
Interest Shortfalls. Net Interest Shortfalls for a Loan Group on any
Distribution Date will be allocated pro rata among all Classes of Certificates
in the related Certificate Group entitled to receive distributions of interest
on such Distribution Date from the related Loan Group, based on the amount of
interest each such Class of Certificates would otherwise be entitled to receive
on such Distribution Date in respect of such Loan Group before taking into
account any reduction in such amounts resulting from such Net Interest
Shortfalls. The amount of interest a Class of Group C-B Certificates would
otherwise be entitled to receive from either the Group I or Group II Loans
before taking into account any such reduction will be based upon the amount of
interest accruing at the applicable Pass-Through Rate on such Class'
proportionate share (based upon Class Principal Balance) of the applicable Group
C-B Loan Group Component Balance for such Distribution Date.... A "Relief Act
Reduction" is a reduction in the amount of monthly interest payment on a
Mortgage Loan pursuant to the Soldiers' and Sailors' Civil Relief Act of
1940.... With respect to any Distribution Date, the "Net Prepayment Interest
Shortfall" for a Loan Group is the amount by which the aggregate of Prepayment
Interest Shortfalls experienced by the related Loan Group during the applicable
Prepayment Period applicable to such Distribution Date exceeds the available
Compensating Interest for such Loan Group for such period. A "Prepayment
Interest Shortfall" is the amount by which interest paid by a borrower in
connection with a prepayment of principal on a Mortgage Loan is less than one
month's interest at the related Mortgage Rate (net of the related Servicing Fee)
on the Stated Principal Balance of such Mortgage Loan.
Accrued interest to be distributed or added to principal, as the case may
be, on any Distribution Date will be calculated, in the case of each
interest-bearing Class of Certificates, on the basis of the related Class
Principal
- ----------
(1) The related prospectus supplement indicates that the Class IPP-A-1
Certificates have a Pass-Through Rate of 6.500% per annum.
A-18
<PAGE>
EXHIBIT A--Excerpts from Underlying Supplement
Relating to First Nationwide Trust Series 1999-2 (cont'd)
Balance or Notional Amount, as applicable, immediately prior to such
Distribution Date. Interest will be calculated and payable on the basis of a
360-day year divided into twelve 30-day months.
In the event that, on a particular Distribution Date, Available Funds for
a Loan Group applied in the order described above under "--Priority of
Distributions Among Certificates" are not sufficient to make a full distribution
or addition to principal, as the case may be, of the interest entitlement on the
Certificates of the related Certificate Group, interest will be distributed or
added to principal, as the case may be, on each Class of Certificates of equal
priority based on the amount of interest each such Class would otherwise have
been entitled to receive or accrete in the absence of such shortfall. Any such
unpaid amount will be carried forward and added to the amount holders of each
such Class of Certificates will be entitled to receive or accrete on the next
Distribution Date. Such a shortfall could occur, for example, if losses realized
on the Mortgage Loans for the related Loan Group were exceptionally high or were
concentrated in a particular month. Any such unpaid amount will not bear
interest.
Distributions of Principal
General. On each Distribution Date, Certificateholders of each Certificate
Group will be entitled to receive principal distributions from the related
Available Funds to the extent and in the priority described herein. See
"--Priority of Distributions Among Certificates" herein. The Group I Senior ...
Certificates [generally] will receive principal collected from the Group I ...
Loans .... The Group C-B ... Certificates will receive principal collected from
the Group I and Group II Loans ....
For any Distribution Date and Loan Group, the "Principal Payment Amount"
is the sum with respect to the Mortgage Loans in such Loan Group of (i)
scheduled principal payments on the Mortgage Loans due on the related Due Date,
(ii) the principal portion of repurchase proceeds received with respect to any
Mortgage Loan which was repurchased as permitted or required by the Agreement
during the calendar month preceding the month of the Distribution Date and (iii)
any other unscheduled payments of principal which were received on the Mortgage
Loans during the preceding calendar month, other than Payoffs, Curtailments or
Liquidation Principal (as defined below). For any Distribution Date and Loan
Group, the "Principal Prepayment Amount" is the sum with respect to the Mortgage
Loans in such Loan Group of all Payoffs and Curtailments relating to the
Mortgage Loans in such Loan Group which were received during the related
Prepayment Period.
With respect to each Distribution Date and each Payoff with respect to a
First Nationwide Loan ... the related "Prepayment Period" will be the calendar
month preceding the month in which the related Distribution Date occurs.... With
respect to each Distribution Date and each Curtailment, the related "Prepayment
Period" will be the month preceding the month in which the related Distribution
Date occurs.
"Liquidation Principal" is the principal portion of Liquidation Proceeds
received with respect to each Mortgage Loan which became a Liquidated Mortgage
Loan (but not in excess of the principal balance thereof) during the calendar
month preceding the month of the Distribution Date, exclusive of the portion
thereof attributable to the applicable Class P Principal Distribution Amount, if
any. A "Liquidated Mortgage Loan" is a defaulted Mortgage Loan as to which the
applicable Servicer has determined that all amounts which it expects to recover
from or on account of such Mortgage Loan, whether from Insurance Proceeds,
Liquidation Proceeds or otherwise have been recovered.
The Class X Certificates will not be entitled to receive any distributions
of principal.
* * *
Senior Principal Distribution Amount. On each Distribution Date, to the
extent of Available Funds therefor, up to the amount of the related Senior
Principal Distribution Amount for such Certificate Group for such Distribution
Date, will be distributed as principal:
A-19
<PAGE>
EXHIBIT A--Excerpts from Underlying Supplement
Relating to First Nationwide Trust Series 1999-2 (cont'd)
(A) with respect to the Group I Certificates, concurrently, to the
following Class of Senior Certificates in the following order of priority:
(i) 73.8348330502% to the Class IPP-A-1 Certificates, until
the Class Principal Balance thereof has been reduced to zero; and
(ii) 26.1651669498% [to the remaining Classes of Senior
Certificates (other than the Class IPP-A-1 Certificates).]
* * *
Notwithstanding the foregoing, on each Distribution Date on and after the
Senior Credit Support Depletion Date for the Group I Certificates, the Senior
Principal Distribution Amount for such Certificate Group will be distributed,
concurrently, as principal of the Classes of the Group I Senior Certificates
(other than the Class I-P Certificates) pro rata, in accordance with their
respective Class Principal Balances immediately prior to such Distribution Date.
* * *
The "Senior Credit Support Depletion Date" for a Certificate Group is the
date on which the aggregate Class Principal Balance of the Group C-B
Certificates, in the case of the Group I and Group II Certificates..., has been
reduced to zero.
The "Senior Principal Distribution Amount" for any Distribution Date and
Certificate Group will equal the sum of (i) the related Senior Percentage of the
Principal Payment Amount for the related Loan Group (exclusive of the portion
thereof attributable to the applicable Class P Principal Distribution Amount, if
any), (ii) the related Senior Prepayment Percentage of the Principal Prepayment
Amount for the related Loan Group (exclusive of the portion thereof attributable
to the applicable Class P Principal Distribution Amount, if any), and (iii) the
Senior Liquidation Amount for the related Loan Group.
The "Senior Liquidation Amount" for a Loan Group is the aggregate, for
each Mortgage Loan in such Loan Group which became a Liquidated Mortgage Loan
during the calendar month preceding the month of the Distribution Date, of the
lesser of (i) the Senior Percentage for the related Certificate Group of the
Stated Principal Balance of such Mortgage Loan (exclusive of the related Class P
Fraction thereof, if applicable) and (ii) the Senior Prepayment Percentage for
the related Certificate Group of the Liquidation Principal with respect to such
Mortgage Loan.
"Stated Principal Balance" means, as to any Mortgage Loan and Due Date,
the unpaid principal balance of such Mortgage Loan as of such Due Date, as
specified in the amortization schedule at the time relating thereto (before any
adjustment to such amortization schedule by reason of any moratorium or similar
waiver or grace period), after giving effect to any previous partial principal
prepayments and Liquidation Proceeds (to the extent allocable to principal)
received and to the payment of principal due on such Due Date and irrespective
of any delinquency in payment by the related Mortgagor.
The "Senior Percentage" for any Distribution Date for a Certificate Group
is the percentage equivalent of a fraction the numerator of which is the
aggregate Class Principal Balance of the Classes of Senior Certificates of such
Certificate Group (other than the related Class P Certificates, if any)
immediately prior to such date and the denominator of which is the aggregate
Stated Principal Balance of the Mortgage Loans in the related Loan Group (less
the applicable Class P Principal Balance, if any), as of the Due Date in the
month of such Distribution Date; provided, however, in no event will the Senior
Percentage for a Certificate Group exceed 100%. The "Subordinate Percentage" for
a Certificate Group for any Distribution Date will be calculated as the
difference between 100% and the related Senior Percentage for such date.
A-20
<PAGE>
EXHIBIT A--Excerpts from Underlying Supplement
Relating to First Nationwide Trust Series 1999-2 (cont'd)
The Senior Prepayment Percentage for any Distribution Date for a
Certificate Group occurring during the five years beginning on the first
Distribution Date will equal 100%. Thereafter, such Senior Prepayment Percentage
will, except as described below, be subject to gradual reduction as described in
the following paragraph. This disproportionate allocation of certain unscheduled
payments in respect of principal will have the effect of accelerating the
amortization of the Senior Certificates in a Certificate Group while, in the
absence of Realized Losses, increasing the interest in the aggregate Stated
Principal Balance of the applicable Loan Group evidenced by the related Class or
Classes of Subordinate Certificates in such Certificate Group. Increasing the
respective interest of such Subordinate Certificates relative to that of the
related Senior Certificates is intended to preserve the availability of the
subordination provided by such Subordinate Certificates.
The Senior Prepayment Percentage for any Distribution Date for a
Certificate Group occurring on or after the fifth anniversary of the first
Distribution Date will be as follows: for any Distribution Date in the first
year thereafter, the related Senior Percentage plus 70% of the related
Subordinate Percentage for such Distribution Date; for any Distribution Date in
the second year thereafter, the related Senior Percentage plus 60% of the
related Subordinate Percentage for such Distribution Date; for any Distribution
Date in the third year thereafter, the related Senior Percentage plus 40% of the
related Subordinate Percentage for such Distribution Date; for any Distribution
Date in the fourth year thereafter, the related Senior Percentage plus 20% of
the related Subordinate Percentage for such Distribution Date; and for any
Distribution Date thereafter, the related Senior Percentage for such
Distribution Date (unless on any of the foregoing Distribution Dates the related
Senior Percentage exceeds the initial Senior Percentage for the Senior
Certificates of such Certificate Group, in which case such Senior Prepayment
Percentage for such Distribution Date will once again equal 100%). In the event
the Senior Prepayment Percentage for the Group I or Group II Certificates will
once again equal 100% in accordance with the parenthetical in the preceding
sentence, the Senior Prepayment Percentage for the other Certificate Group will
also equal 100%....
Notwithstanding the foregoing no decrease in the reduction to the Senior
Prepayment Percentage for the Senior Certificates of a Certificate Group as
described above will occur if as of the first Distribution Date as to which any
such decrease applies (i) with respect to each Certificate Group, the
outstanding principal balance of the related Mortgage Loans, delinquent 60 days
or more (averaged over the preceding six month period), as a percentage of the
aggregate principal balance of, with respect to the Group I ... Certificates,
the related Group C-B Loan Group Component Balance as of such Distribution Date
... is equal to or greater than 50% or (ii) cumulative Realized Losses with
respect to the Mortgage Loans in the related Loan Group exceed (a) with respect
to the Distribution Date on the fifth anniversary of the first Distribution
Date, 30% of the aggregate principal balance of, with respect to the Group I
Certificates ..., the related Group C-B Loan Group Component Balance ..., as of
the Closing Date (...an "Original Subordinate Principal Balance"), (b) with
respect to the Distribution Date on the sixth anniversary of the first
Distribution Date, 35% of such Original Subordinate Principal Balance, (c) with
respect to the Distribution Date on the seventh anniversary of the first
Distribution Date, 40% of such Original Subordinate Principal Balance, (d) with
respect to the Distribution Date on the eighth anniversary of the first
Distribution Date, 45% of such Original Subordinate Principal Balance and (e)
with respect to the Distribution Date on the ninth anniversary of the first
Distribution Date, 50% of such Original Subordinate Principal Balance. In the
event that the Senior Prepayment Percentage for the Group I or Group II
Certificates is not permitted to reduce due to the limitations set forth above,
the Senior Prepayment Percentage for the other Certificate Group will also be
prevented from any such reduction....
If on any Distribution Date the allocation to the Class of Senior
Certificates of a Certificate Group then entitled to distributions of Payoffs
and Curtailments and other amounts in the percentage required above would reduce
the outstanding Class Principal Balance of such Class below zero, the
distribution to such Class of Certificates of the related Senior Prepayment
Percentage of such amounts for such Distribution Date will be limited to the
percentage necessary to reduce the related Class Principal Balance to zero.
* * *
Subordinate Principal Distribution Amount. On each Distribution Date, to
the extent of Available Funds therefor, up to the amount of the related
Subordinate Principal Distribution Amount for such Distribution Date and
Certificate Group, will be distributed as principal of the related Class or
Classes of Subordinate Certificates. Except
A-21
<PAGE>
EXHIBIT A--Excerpts from Underlying Supplement
Relating to First Nationwide Trust Series 1999-2 (cont'd)
as provided in the following paragraph, each Class of Subordinate Certificates
in a Certificate Group will be entitled to receive its pro rata share (based
upon its respective Class Principal Balance) of such Subordinate Principal
Distribution Amount, in each case to the extent of the amount available from
Available Funds for the related Loan Groups (which, in the case of the Group C-B
Certificates, is the remaining Available Funds for the Group I and Group II
Loans ...) for distribution of principal of such Class. Distributions of
principal of the Subordinate Certificates of a Certificate Group will be made on
each Distribution Date sequentially to the Classes of Subordinate Certificates
in the order of their numerical Class designation (beginning with the Class with
the lowest numerical Class designation) until each such Class of Subordinate
Certificates has received its respective pro rata share of the Subordinate
Principal Distribution Amount for such Certificate Group for such Distribution
Date.
With respect to each Class of Subordinate Certificates in a specified
Certificate Group, if on any Distribution Date the related Subordination Level
of such Class is less than such percentage as of the Closing Date, no
distributions of Payoffs and Curtailments with respect to the related Loan
Groups will be made to any Class or Classes of Subordinate Certificates in the
related Certificate Group junior to such Class (the "Restricted Classes") and
the amount otherwise distributable to the Restricted Classes in respect of such
Payoffs and Curtailments will be allocated among the remaining Classes of
Subordinate Certificates in such Certificate Group, pro rata, based upon their
respective Class Principal Balances.
The "Subordination Level" on any Distribution Date with respect to any
Class of Subordinate Certificates is the percentage obtained by dividing the sum
of the Class Principal Balances of all Classes of Certificates in the related
Certificate Group which are subordinate in right of payment to such Class by the
sum of the Class Principal Balances of all Classes of Certificates in the
related Certificate Group, in each case immediately prior to such Distribution
Date.
The "Subordinate Principal Distribution Amount" for any Distribution Date
and the Group C-B Certificates will equal (A) the sum of (i) the Subordinate
Percentage for the Group I Certificates of the Principal Payment Amount for the
Group I Loans (exclusive of the portion thereof attributable to the Class I-P
Principal Distribution Amount), (ii) the Subordinate Percentage for the Group II
Certificates of the Principal Payment Amount for the Group II Loans, (iii) the
Subordinate Prepayment Percentage for the Group I Certificates of the Principal
Prepayment Amount for the Group I Loans (exclusive of the portion thereof
attributable to the Class I-P Principal Distribution Amount), (iv) the
Subordinate Prepayment Percentage for the Group II Certificates of the Principal
Prepayment Amount for the Group II Loans and (v) the Subordinate Liquidation
Amount for the Group I and Group II Loans less (B) the sum of (x) the Class PO
Deferred Amounts required to be paid to the Class I-P Certificates on such
Distribution Date, (y) in the event that the Class Principal Balance of either
the Group I or Group II Senior Certificates has been reduced to zero, principal
paid from Available Funds of the Loan Group related to such Certificate Group to
the other Certificate Group as described in [the related prospectus supplement]
and (z) the amounts in respect of principal paid from Available Funds of any
Overcollateralized Group to any Undercollateralized Group, as described in [the
related prospectus supplement].
* * *
Any reduction to a Subordinate Principal Distribution Amount described
above shall first offset amounts in respect of the related Principal Payment
Amounts, second the related Subordinate Liquidation Amounts and then the related
Principal Prepayment Amounts.
The "Subordinate Liquidation Amount" for a Loan Group will equal the
excess, if any, of the aggregate Liquidation Principal of all Mortgage Loans in
such Loan Group which became Liquidated Mortgage Loans during the calendar month
preceding the month of such Distribution Date over the sum of the related Senior
Liquidation Amount for such Distribution Date.
Class I-P Principal Distribution Amount. On each Distribution Date, the
Class I-P Certificates will receive a portion of the Available Funds for the
Group I Loans attributable to principal received on or in respect of any Group I
Loan with a Net Rate of less than 6.50% per annum (a "Class I-P Mortgage Loan"),
equal to the amount of
A-22
<PAGE>
EXHIBIT A--Excerpts from Underlying Supplement
Relating to First Nationwide Trust Series 1999-2 (cont'd)
such principal so attributable multiplied by a fraction, the numerator of which
is 6.50% minus the Net Rate on such Class I-P Mortgage Loan and the denominator
of which is 6.50% (the "Class I-P Fraction"). In addition, on each Distribution
Date for so long as any of the Group C-B Certificates remains outstanding, the
Class I-P Certificates will also be allocated principal, to the extent of
amounts available to pay the related Subordinate Principal Distribution Amount
(without regard to clause (B) of such definition) on such Distribution Date, in
an amount generally equal to the Class PO Deferred Amounts for such Certificate
Group not previously reimbursed; provided, that such payments in respect of
Class PO Deferred Amounts shall not cause a further reduction of the outstanding
Class I-P Principal Balance. The aggregate of the amounts payable to the Class
I-P Certificates described in this paragraph are referred to herein as the
"Class I-P Principal Distribution Amount."
* * *
Residual Certificates. The Class A-R Certificates will remain outstanding
for so long as the Trust Fund shall exist, whether or not they are receiving
current distributions of principal or interest. In addition to distributions of
interest and principal as described above, on each Distribution Date the holders
of the Class A-R Certificates will be entitled to receive Available Funds for
any Loan Group remaining after payment of interest and principal on the Senior
Certificates, Class PO Deferred Amounts on the Class P Certificates, if any, and
interest and principal on the Subordinate Certificates for such Distribution
Date, as described above. It is not anticipated that there will be any
significant amounts remaining for any such distribution.
Allocation of Losses
On each Distribution Date, the applicable Class P Fraction of any Realized
Loss, including any Excess Loss, on a Class P Mortgage Loan in a Loan Group will
be allocated to the related Class P Certificates until the Class Principal
Balance thereof is reduced to zero. The amount of any such Realized Loss, other
than an Excess Loss, allocated on or prior to the Senior Credit Support
Depletion Date for a Certificate Group will be treated as a Class PO Deferred
Amount for such Certificate Group. To the extent funds are available on such
Distribution Date or on any future Distribution Date from amounts that would
otherwise be allocable to the Subordinate Principal Distribution Amount for such
Certificate Group, Class PO Deferred Amounts for such Certificate Group will be
paid on the related Class P Certificates prior to distributions of principal on
the Subordinate Certificates for such Certificate Group. See "--Priority of
Distributions Among Certificates." Any distribution in respect of unpaid Class
PO Deferred Amounts will not further reduce the Class Principal Balance of the
Class P Certificates. The Class PO Deferred Amounts will not bear interest. The
Class Principal Balance of the Class of Subordinate Certificates then
outstanding with the highest numerical Class designation for such Certificate
Group will be reduced by the amount of any payments in respect of Class PO
Deferred Amounts. After the Senior Credit Support Depletion Date for a
Certificate Group, no new Class PO Deferred Amounts will be created in respect
of the related Class P Certificates.
On each Distribution Date, any Realized Loss (other than the Class P
Fraction thereof, if applicable), other than any Excess Loss, experienced by a
Loan Group will be allocated first to the Subordinate Certificates for the
related Certificate Group, in decreasing order of their numerical Class
designations (beginning with the Class of Subordinate Certificates then
outstanding with the highest numerical Class designation), in each case until
the Class Principal Balance of the respective Class of Certificates has been
reduced to zero, and then to the Senior Certificates for such Certificate Group
(other than the related Class X and Class P Certificates, if any) pro rata,
based upon their respective Class Certificate Balances.
On each Distribution Date, Excess Losses (other than the Class P Fraction
thereof, if applicable) experienced by the Group I Loans and Group II Loans will
be allocated pro rata among the Classes of Group I and Group II Certificates
(other than the related Class P Certificates, if any) based upon their
respective Class Principal Balances. ....
Because principal distributions are paid to certain Classes of Group I
Senior Certificates before other Classes of Senior Certificates for such
Certificate Group, holders of such Senior Certificates that are entitled to
A-23
<PAGE>
EXHIBIT A--Excerpts from Underlying Supplement
Relating to First Nationwide Trust Series 1999-2 (cont'd)
receive principal later for such Certificate Group bear a greater risk of being
allocated Realized Losses on the Mortgage Loans than holders of Classes that are
entitled to receive principal earlier.
* * *
On each Distribution Date, if the aggregate Class Principal Balance of all
Group I and Group II Certificates exceeds the aggregate Stated Principal Balance
of the Group I and Group II Loans (after giving effect to distributions of
principal and the allocation of all losses to the Group I and Group II
Certificates on such Distribution Date), such excess will be deemed a principal
loss and will be allocated to the most junior Class of Group C-B Certificates
then outstanding.
* * *
Investors in the Group I Senior and Class IIPP-A Certificates should be
aware that because the Group C-B Certificates represent interests in both the
Group I and Group II Loans, the Class Principal Balances of the Group C-B
Certificates could be reduced to zero as a result of a disproportionate amount
of Realized Losses on the Mortgage Loans in one of such Loan Groups. Therefore,
notwithstanding that Realized Losses on the Mortgage Loans in one Loan Group may
only be allocated to the related Senior Certificates, other than Excess Losses,
the allocation to the Group C-B Certificates of Realized Losses on the Mortgage
Loans in the other Loan Group will increase the likelihood that losses may be
allocated to such Senior Certificates.
[Generally, the characteristics of the Group I Loans are substantially
similar to those of the Group II Loans.]
* * *
In general, a "Realized Loss" means, with respect to a Liquidated Mortgage
Loan, the amount by which the remaining unpaid principal balance of the Mortgage
Loan exceeds the amount of Liquidation Proceeds applied to the principal balance
of the related Mortgage Loan. "Excess Losses" are (i) Special Hazard Losses in
excess of the applicable Special Hazard Loss Coverage Amount, (ii) Bankruptcy
Losses in excess of the applicable Bankruptcy Loss Coverage Amount, and (iii)
Fraud Losses in excess of the applicable Fraud Loss Coverage Amount. "Special
Hazard Losses" are Realized Losses in respect of Special Hazard Mortgage Loans.
"Bankruptcy Losses" are losses that are incurred as a result of Debt Service
Reductions and Deficient Valuations. "Fraud Losses" are Realized Losses
sustained by reason of a default arising from fraud, dishonesty or
misrepresentation....
A "Special Hazard Mortgage Loan" is a Liquidated Mortgage Loan as to which
the ability to recover the full amount due thereunder was substantially impaired
by a hazard not insured against under a standard hazard insurance policy of the
type described in the [related disclosure documentation].
The Group C-B Subordinate Certificates will provide protection to the
Group I and Group II Certificates of higher relative priority against (i)
Bankruptcy Losses on the Group I and Group II Loans in an initial amount
expected to be up to approximately $100,000 (the "Group I/Group II Bankruptcy
Loss Coverage Amount"), (ii) Fraud Losses on the Group I and Group II Loans in
an initial amount expected to be up to approximately $6,023,430 (the "Group
I/Group II Fraud Loss Coverage Amount") and (iii) Special Hazard Losses on the
Group I and Group II Loans in an initial amount expected to be up to
approximately $4,635,265 (the "Group I/Group II Special Hazard Loss Coverage
Amount").
* * *
As used herein, a "Deficient Valuation" is a bankruptcy proceeding whereby
the bankruptcy court may establish the value of the Mortgaged Property at an
amount less than the then outstanding principal balance of the Mortgage Loan
secured by such Mortgaged Property or may reduce the outstanding principal
balance of a Mortgage Loan. . . . In addition, certain other modifications of
the terms of a Mortgage Loan can result from a bankruptcy
A-24
<PAGE>
EXHIBIT A--Excerpts from Underlying Supplement
Relating to First Nationwide Trust Series 1999-2 (cont'd)
proceeding, including the reduction (a "Debt Service Reduction") of the amount
of the monthly payment on the related Mortgage Loan. . . .
A-25
<PAGE>
EXCERPTS FROM THE UNDERLYING SUPPLEMENT
RELATING TO FIRST NATIONWIDE TRUST SERIES 1999-3(1)
THE MORTGAGE POOL
General
* * *
Certain information with respect to the Mortgage Loans to be included in
the mortgage pool (the "Mortgage Pool") is set forth below. Prior to April 29,
1999 (the "Closing Date"), Mortgage Loans may be removed from the Mortgage Pool
and other Mortgage Loans may be substituted therefor. The Depositor believes
that the information set forth herein with respect to the Mortgage Pool as
presently constituted is representative of the characteristics of the Mortgage
Pool as it will be constituted at the Closing Date, although certain
characteristics of the Mortgage Loans in the Mortgage Pool may vary. Unless
otherwise indicated, information presented below expressed as a percentage
(other than rates of interest) are approximate percentages based on the Stated
Principal Balances of the Mortgage Loans in the related Loan Group as of [April
1, 1999 (the "Cut-off Date")] and have been rounded in order to total 100%.
As of the Cut-off Date, the aggregate Stated Principal Balance of the
Mortgage Loans is expected to be approximately $849,658,723 (the "Cut-off Date
Pool Principal Balance"). [The Mortgage Pool consists of three groups (each, a
"Loan Group") of Mortgage Loans: the "Group I Loans," the "Group II Loans" and
the "Group III Loans." (2) As of the Cut-off Date, the Group I Loans consisted
of 1,183 Mortgage Loans with an aggregate Stated Principal Balance of
approximately $407,897,647. As of the Cut-off Date, the Group II Loans consisted
of 486 Mortgage Loans with an aggregate Stated Principal Balance of
approximately $136,717,984.]
The Mortgage Loans provide for the amortization of the amount financed
over a series of substantially equal monthly payments. All of the Mortgage Loans
provide for payments due on the first day of each month (the "Due Date"). The
Mortgage Loans to be included in the Mortgage Pool were originated or acquired
by the Sellers in the normal course of their business and substantially in
accordance with the underwriting criteria specified herein. At origination, the
Group I Loans had stated terms to maturity which ranged from 20 to 30 years....
Scheduled monthly payments made by the Mortgagors on the Mortgage Loans
("Scheduled Payments") either earlier or later than the scheduled Due Dates
thereof will not affect the amortization schedule or the relative application of
such payments to principal and interest.... [Each] of the First Nationwide Loans
impose certain penalties for early prepayments (except for prepayments due to
the sale of the Mortgaged Property) (each, a "Prepayment Penalty Loan"). During
a specified period for each Prepayment Penalty Loan lasting anywhere from one to
five years after the origination thereof (the "Penalty Period"), the Mortgagor
may not prepay more than 20% of the original principal amount of such Mortgage
Loan in any twelve month period without incurring a penalty. With respect to
each Prepayment Penalty Loan, the penalty is equal to the lesser of (i) six
months' interest on such excess and (ii) the amount authorized by applicable
law. No penalty will be imposed after the Penalty Period.
Each Group I Loan [had] a first payment date on or after March 1, 1998....
- ----------
(1) In this excerpt, the related Underlying Security is referred to as the
"Class IPP-A Certificates" and the Underlying Mortgage Loans are referred
to as the "Group I Loans." Distributions of interest and principal to the
Group I Senior Certificates, including the Class IPP-A Certificates, will
be based on payments received or advanced with respect to the Group I
Loans.
(2) The Group I Loans and the Group II Loans are collectively referred to as
the "First Nationwide Loans" in this excerpt.
A-26
<PAGE>
Exhibit A--Excerpts from Underlying Supplement
Relating to First Nationwide Trust Series 1999-3 (cont'd)
[As of the Cut-off Date, 45.41% of the Group I Loans, by aggregate Stated
Principal Balances of the Group I Loans, were originated under a "reduced
documentation" program. See "--Underwriting Standards" herein.]
The latest stated maturity date of any Group I Loan is April 1, 2029, and
the earliest stated maturity date of any Group I Loan is April 1, 2019....
* * *
No Mortgage Loan is subject to a buydown agreement. No Mortgage Loan
provides for deferred interest or negative amortization.
[As of the Cut-off Date, all of the Group I Loans had Loan-to-Value Ratios
at origination of 95% or less, and the weighted average Loan-to-Value Ratio, by
aggregate Stated Principal Balances of the Group I Loans, was approximately
70.05%. As of the Cut-off Date, approximately 6.97%, 5.61% and 0.84% of the
Group I Loans, by aggregate Stated Principal Balances of the Group I Loans, had
original Loan-to-Value Ratios in excess of 80%, 85% and 90%, respectively.]
Except for 27 Mortgage Loans, representing approximately 2.60% of the Cut-off
Date Pool Principal Balance, each Mortgage Loan with a Loan-to-Value Ratio at
origination of greater than 80% will be covered by a primary mortgage guaranty
insurance policy issued by a mortgage insurance company acceptable to the
Federal National Mortgage Association ("FNMA"), the Federal Home Loan Mortgage
Corporation ("FHLMC") or any nationally recognized statistical rating
organization or the Group PMI Policy (as defined below). Each primary mortgage
guaranty insurance policy provides coverage of a portion of the original
principal balance of the related Mortgage Loan equal to the product of the
original principal balance thereof and a fraction, the numerator of which is the
excess of the original principal balance of the related Mortgage Loan over 75%
of the lesser of the appraised value and selling price of the related Mortgaged
Property and the denominator of which is the original principal balance of the
related Mortgage Loan, plus accrued interest thereon and related foreclosure
expenses. No such primary mortgage guaranty insurance policy will be required
with respect to any such Mortgage Loan after the date on which the related
Loan-to-Value Ratio is 80% or less or, based on a new appraisal, the principal
balance of such Mortgage Loan represents 80% or less of the new appraised value.
See "--Underwriting Standards" herein.
* * *
The "Loan-to-Value Ratio" of a Mortgage Loan at any given time is a
fraction, expressed as a percentage, the numerator of which is the principal
balance of the related Mortgage Loan at the date of determination and the
denominator of which is (a) in the case of a purchase, the lesser of the selling
price of the Mortgaged Property and its appraised value determined in an
appraisal obtained by the originator at origination of such Mortgage Loan, or
(b) in the case of a refinance, the appraised value of the Mortgaged Property at
the time of such refinance. No assurance can be given that the value of any
Mortgaged Property has remained or will remain at the level that existed on the
appraisal or sales date. If residential real estate values generally or in a
particular geographic area decline, the Loan-to-Value Ratios might not be a
reliable indicator of the rates of delinquencies, foreclosures and losses that
could occur with respect to such Mortgage Loans.
* * *
Underwriting Standards
The Mortgage Loans have either been originated by a Seller or purchased by
a Seller from various banks, savings and loan associations, mortgage bankers
(which may or may not be affiliated with a Seller) and other mortgage loan
originators, and were originated generally in accordance with the underwriting
criteria described herein.
All of the Mortgage Loans are "conventional non-conforming mortgage loans"
(i.e., loans which are not insured by the Federal Housing Authority or partially
guaranteed by the Veterans Administration or which do not qualify for sale to
FNMA or FHLMC). The underwriting standards applicable to the Mortgage Loans
typically
A-27
<PAGE>
Exhibit A--Excerpts from Underlying Supplement
Relating to First Nationwide Trust Series 1999-3 (cont'd)
differ from, and are generally less stringent than, the underwriting standards
established by FNMA or FHLMC primarily with respect to original principal
balances, Loan-to-Value Ratios, borrower income, borrower credit history,
borrower employment history, required documentation, interest rates, borrower
occupancy of the mortgaged property and/or property types. To the extent the
programs reflect underwriting standards different from these of FNMA and FHLMC,
the performance of the mortgage loans thereunder may reflect higher delinquency
rates and/or credit losses. In addition, certain exceptions to the underwriting
standards described herein are made in the event that compensating factors are
demonstrated by a prospective borrower. Neither the Depositor nor any affiliate
has re-underwritten any Mortgage Loan. In addition, neither First Nationwide nor
any affiliate has re-underwritten any First Nationwide Loan that was purchased
by First Nationwide rather than originated by First Nationwide....
Generally, each Mortgagor will have been required to complete an
application designed to provide to the original lender pertinent credit
information concerning the Mortgagor. As part of the description of the
Mortgagor's financial condition, such Mortgagor will have furnished information
(which may be supplied solely in such application) with respect to its assets,
liabilities, income (except as described below), credit history, employment
history and personal information, and furnished an authorization to apply for a
credit report which summarizes the Mortgagor's credit history with local
merchants and lenders and any record of bankruptcy. The Mortgagor may also have
been required to authorize verifications of deposits at financial institutions
where the Mortgagor had demand or savings accounts. In the case of investment
properties and two- to four-unit dwellings, income derived from the Mortgaged
Property may have been considered for underwriting purposes, in addition to the
income of the Mortgagor from other sources. With respect to Mortgaged Property
consisting of vacation or second homes, no income derived from the property
generally will have been considered for underwriting purposes. In the case of
certain Mortgagors with acceptable payment histories, no income will be required
to be stated (or verified) in connection with the loan application.
Based on the data provided in the application and certain verification (if
required), a determination is made by the original lender that the Mortgagor's
monthly income (if required to be stated) will be sufficient to enable the
Mortgagor to meet its monthly obligations on the Mortgage Loan and other
expenses related to the Mortgaged Property (such as property taxes, utility
costs, standard hazard insurance and other fixed obligations other than housing
expenses). Generally, scheduled payments on a Mortgage Loan during the first
year of its term plus taxes and insurance and all scheduled payments on
obligations that extend beyond ten months (including those mentioned above and
other fixed obligations) equal no more than a specified percentage of the
prospective Mortgagor's gross income. The percentage applied varies on a case by
case basis depending on a number of underwriting criteria, including the
Loan-to-Value Ratio of the Mortgage Loan. The originator may also consider the
amount of liquid assets available to the Mortgagor after origination.
Certain of the Mortgage Loans have been originated under "reduced
documentation" ... programs which require less documentation and verification
than do traditional "full documentation" programs. Generally, under a "reduced
documentation" program, no verification of a mortgagor's stated income is
undertaken by the originator ... The underwriting for such Mortgage Loans may be
based primarily or entirely on an appraisal of the Mortgaged Property and the
Loan-to-Value Ratio at origination.
[As of the Cut-off Date, 45.41% of the Group I Loans, by aggregate Stated
Principal Balances of the Group I Loans, were originated under a "reduced
documentation" program.]
The adequacy of the Mortgaged Property as security for repayment of the
related Mortgage Loan will generally have been determined by an appraisal in
accordance with pre-established appraisal procedure guidelines for appraisals
established by or acceptable to the originator. All appraisals conform to the
Uniform Standards of Professional Appraisal Practice adopted by the Appraisal
Standards Board of the Appraisal Foundation and must be on forms acceptable to
FNMA and/or FHLMC. Appraisers may be staff appraisers employed by the originator
or independent appraisers selected in accordance with pre-established appraisal
procedure guidelines established by or acceptable to the originator. The
appraisal procedure guidelines generally will have required the appraiser or an
agent on its behalf to personally inspect the property and to verify whether the
property was in good condition and that construction, if new, had been
substantially completed. The appraisal generally will have been based upon a
market data analysis of recent sales of comparable properties and, when deemed
applicable, an analysis based on
A-28
<PAGE>
Exhibit A--Excerpts from Underlying Supplement
Relating to First Nationwide Trust Series 1999-3 (cont'd)
income generated from the property or a replacement cost analysis based on the
current cost of constructing or purchasing a similar property.
* * *
Voting Rights
Voting rights of the Trust Fund in general will be allocated 1% to each
Class of Notional Amount Certificates with the balance allocated among the other
Classes of Certificates based upon their respective Class Principal Balances.
DESCRIPTION OF THE CERTIFICATES
General
The Certificates will be issued pursuant to the Agreement. Set forth below
are summaries of the specific terms and provisions pursuant to which the
Certificates will be issued....
The Mortgage Pass-Through Certificates, Series 1999-3 will consist of the
Class IPP-A, Class IIPP-A-1, Class IIPP-A-2, Class IIPP-A-3, Class III-A-1,
Class III-A-2, Class III-A-3, Class III-A-4 Class III-A-5, Class III-A-6, Class
II-P, Class III-P, Class III-X and Class A-R Certificates (collectively, the
"Senior Certificates") and the Class C-B-1, Class C-B-2, Class C-B-3, Class
C-B-4, Class C-B-5, Class C-B-6, Class III-B-1, Class III-B-2, Class III-B-3,
Class III-B-4, Class III-B-5 and Class III-B-6 Certificates (collectively, the
"Subordinate Certificates"). The Senior Certificates and the Subordinate
Certificates are collectively referred to herein as the "Certificates." Only the
Senior Certificates and the Class C-B-1, Class C-B-2, Class C-B-3, Class
III-B-1, Class III-B-2 and Class III-B-3 Certificates (collectively, the
"Offered Certificates") are offered [by the related disclosure documentation].
The Classes of Offered Certificates will have the respective initial Class
Principal Balances or initial Notional Amounts (subject to the permitted
variance) and Pass-Through Rates set forth or described [in the related
prospectus supplement(1)].
The "Class Principal Balance" of any Class of Certificates as of any
Distribution Date is the initial Class Principal Balance thereof reduced by the
sum of (i) all amounts previously distributed to holders of Certificates of such
Class as payments of principal, (ii) the amount of Realized Losses (including
Excess Losses) allocated to such Class and (iii) in the case of any Subordinate
Certificates any amounts allocated to such Class in reduction of its Class
Principal Balance in respect of payment of Class PO Deferred Amounts or certain
other adjustments, each as described below under "--Allocation of Losses." The
Notional Amount Certificates do not have a principal balance and are not
entitled to any distributions in respect of principal of the Mortgage Loans.
The [Group I] Senior Certificates ... will evidence in the aggregate an
initial beneficial ownership interest of approximately 96.10% ... of the [Group
I] Loans ... as of the Closing Date....
[The Certificates are divided into three Certificate groups (each, a
"Certificate Group"): the Group I Certificates, the Group II Certificates and
the Group III Certificates. The "Group I Certificates" consist of the Class
IPP-A Certificates and the Group C-B Certificates. The "Group C-B Certificates"
consist of the Class C-B-1, Class C-B-2, Class C-B-3, Class C-B-4, Class C-B-5
and Class C-B-6 Certificates.]
* * *
- ----------
(1) The related prospectus supplement indicates that the Class IPP-A
Certificates have an initial Class Principal Balance of $391,989,639 and a
Pass-Through Rate of 6.500% per annum.
A-29
<PAGE>
Exhibit A--Excerpts from Underlying Supplement
Relating to First Nationwide Trust Series 1999-3 (cont'd)
Distributions
Distributions on the Certificates will be made by the Trustee on the 19th
day of each month, with respect to the Group I ... Certificates..., or if ...
such day is not a business day, on the first business day thereafter, commencing
in May 1999 (each, a "Distribution Date"), to the persons in whose names such
Certificates are registered at the close of business on the last business day of
the month preceding the month of such Distribution Date (the "Record Date").
Distributions on each Distribution Date will be made by check mailed to
the address of the person entitled thereto as it appears on the applicable
certificate register or, in the case of a Certificateholder who holds 100% of a
Class of Certificates or who holds a Notional Amount Certificate or who holds
Certificates with an aggregate initial certificate balance of $1,000,000 or more
and who has so notified the Trustee in writing in accordance with the Agreement,
by wire transfer in immediately available funds to the account of such
Certificateholder at a bank or other depository institution having appropriate
wire transfer facilities; provided, however, that the final distribution in
retirement of the Certificates will be made only upon presentment and surrender
of such Certificates at the Corporate Trust Office of the Trustee.
Priority of Distributions Among Certificates
Distributions with respect to a Certificate Group will in general be made
to the extent of the Available Funds for the related Loan Group in the order and
priority as follows: (1) first, to the related Class P Certificates, if any, a
certain portion of the principal received in respect of each related Class P
Mortgage Loan, as described in "--Distributions of Principal" herein; (2)
second, to the Senior Certificates of such Certificate Group entitled to
interest, accrued and unpaid interest, as described in "--Interest" herein; (3)
third, to the Senior Certificates of such Certificate Group entitled to
principal (other than the related Class P Certificates, if any), principal in
the order described for the Senior Certificates of such Certificate Group as set
forth in "--Distributions of Principal--Senior Principal Distribution Amount;"
(4) fourth, to the Class P Certificates, if any, of such Certificate Group, any
related Class PO Deferred Amounts; (5) fifth, to each Class of Subordinate
Certificates of such Certificate Group, interest and then principal in
increasing order of numerical Class designation, with both interest and
principal being paid to one Class before any payments are made to the next
Class; provided, however, that since the Group C-B Certificates relate to the
Group I and Group II Loans, such Certificates receive payments from the
remaining Available Funds for the Group I and Group II Loans; and (6) sixth, to
the Class A-R Certificates, the remainder (which is expected to be zero) of all
Available Funds.
* * *
"Available Funds" with respect to any Distribution Date and the Mortgage
Loans in a Loan Group will be equal to the sum of (i) all scheduled installments
of interest (net of the related Expense Fees) and principal due on the Due Date
in the month in which such Distribution Date occurs and received prior to the
related Determination Date, together with any Advances in respect thereof; (ii)
all proceeds of any primary mortgage guaranty insurance policies and any other
insurance policies with respect to the Mortgage Loans, to the extent such
proceeds are not applied to the restoration of the related Mortgaged Property or
released to the Mortgagor in accordance with the applicable Servicer's normal
servicing procedures (collectively, "Insurance Proceeds") and all other cash
amounts received and retained in connection with the liquidation of defaulted
Mortgage Loans, by foreclosure or otherwise ("Liquidation Proceeds") during the
month preceding the month of such Distribution Date (in each case, net of
unreimbursed expenses incurred in connection with a liquidation or foreclosure
and unreimbursed Advances, if any); (iii) all partial or full prepayments
received during the related Prepayment Period applicable to such Distribution
Date, exclusive of prepayment penalties; (iv) amounts received with respect to
such Distribution Date as the Substitution Adjustment Amount or Purchase Price
in respect of a Deleted Mortgage Loan or a Mortgage Loan repurchased by a Seller
or a Servicer as of such Distribution Date, reduced (in the case of clauses (i)
through (iv) above) by amounts in reimbursement for Advances previously made and
other amounts as to which each Servicer is entitled to be reimbursed pursuant to
the Agreement; and (v) any amounts payable as Compensating Interest by such
Servicer on such Distribution Date relating to such Mortgage Loans.
A-30
<PAGE>
Exhibit A--Excerpts from Underlying Supplement
Relating to First Nationwide Trust Series 1999-3 (cont'd)
Distributions of Interest
The Pass-Through Rate for each interest-bearing Class of Offered
Certificates for each Distribution Date (the "Pass-Through Rate") is as set
forth or described [in the related prospectus supplement(1)].
* * *
On each Distribution Date, to the extent of funds available therefor, each
interest-bearing Class of Certificates will be entitled to receive an amount
allocable to interest (as to each such Class, the "Interest Distribution
Amount") with respect to the related Interest Accrual Period. The Interest
Distribution Amount for any interest-bearing Class will be equal to the sum of
(i) interest at the applicable Pass-Through Rate on the related Class Principal
Balance or Notional Amount, as the case may be, and (ii) the sum of the amounts,
if any, by which the amount described in clause (i) above on each prior
Distribution Date exceeded the amount actually distributed as interest on such
prior Distribution Dates and not subsequently distributed. The Class P
Certificates will not bear interest.
With respect to each Distribution Date, the "Interest Accrual Period" for
each interest-bearing Class of Certificates will be the calendar month preceding
the month of such Distribution Date.
The interest entitlement described above for each interest-bearing Class
of Certificates will be reduced by "Net Interest Shortfalls" experienced by the
related Loan Group or, with respect to the Group C-B Certificates, the related
Loan Groups, for such Distribution Date.
With respect to any Distribution Date, the "Net Interest Shortfall" for a
Loan Group is equal to the sum of (i) the amount of interest which would
otherwise have been received with respect to any Mortgage Loan in such Loan
Group that was the subject of (x) a Relief Act Reduction or (y) a Special Hazard
Loss, Fraud Loss, Debt Service Reduction or Deficient Valuation, after the
exhaustion of the respective amounts of coverage provided by the applicable
Subordinate Certificates for such types of losses and (ii) any Net Prepayment
Interest Shortfalls. Net Interest Shortfalls for a Loan Group on any
Distribution Date will be allocated pro rata among all Classes of Certificates
in the related Certificate Group entitled to receive distributions of interest
on such Distribution Date from the related Loan Group, based on the amount of
interest each such Class of Certificates would otherwise be entitled to receive
on such Distribution Date in respect of such Loan Group before taking into
account any reduction in such amounts resulting from such Net Interest
Shortfalls. The amount of interest a Class of Group C-B Certificates would
otherwise be entitled to receive from either the Group I or Group II Loans
before taking into account any such reduction will be based upon the amount of
interest accruing at the applicable Pass-Through Rate on such Class'
proportionate share (based upon Class Principal Balance) of the applicable Group
C-B Loan Group Component Balance for such Distribution Date. A "Relief Act
Reduction" is a reduction in the amount of monthly interest payment on a
Mortgage Loan pursuant to the Soldiers' and Sailors' Civil Relief Act of
1940.... With respect to any Distribution Date, the "Net Prepayment Interest
Shortfall" for a Loan Group is the amount by which the aggregate of Prepayment
Interest Shortfalls experienced by the related Loan Group during the applicable
Prepayment Period applicable to such Distribution Date exceeds the available
Compensating Interest for such Loan Group for such period. A "Prepayment
Interest Shortfall" is the amount by which interest paid by a borrower in
connection with a prepayment of principal on a Mortgage Loan is less than one
month's interest at the related Mortgage Rate (net of the related Servicing Fee)
on the Stated Principal Balance of such Mortgage Loan.
Accrued interest to be distributed on any Distribution Date will be
calculated on the basis of the related Class Principal Balance or Notional
Amount, as applicable, immediately prior to such Distribution Date. Interest
will be calculated and payable on the basis of a 360-day year divided into
twelve 30-day months.
- ----------
(1) The related prospectus supplement indicates that the Class IPP-A
Certificates have a Pass-Through Rate of 6.500% per annum.
A-31
<PAGE>
Exhibit A--Excerpts from Underlying Supplement
Relating to First Nationwide Trust Series 1999-3 (cont'd)
In the event that, on a particular Distribution Date, Available Funds for
a Loan Group applied in the order described above under "--Priority of
Distributions Among Certificates" are not sufficient to make a full distribution
of the interest entitlement on the Certificates of the related Certificate
Group, interest will be distributed on each Class of Certificates of equal
priority based on the amount of interest each such Class would otherwise have
been entitled to receive in the absence of such shortfall. Any such unpaid
amount will be carried forward and added to the amount holders of each such
Class of Certificates will be entitled to receive on the next Distribution Date.
Such a shortfall could occur, for example, if losses realized on the Mortgage
Loans for the related Loan Group were exceptionally high or were concentrated in
a particular month. Any such unpaid amount will not bear interest.
Distributions of Principal
General. On each Distribution Date, Certificateholders of each Certificate
Group will be entitled to receive principal distributions from the related
Available Funds to the extent and in the priority described herein. See
"--Priority of Distributions Among Certificates" herein. The Group I Senior ...
Certificates [generally] will receive principal collected from the Group I ...
Loans....
For any Distribution Date and Loan Group, the "Principal Payment Amount"
is the sum with respect to the Mortgage Loans in such Loan Group of (i)
scheduled principal payments on the Mortgage Loans due on the related Due Date,
(ii) the principal portion of repurchase proceeds received with respect to any
Mortgage Loan which was repurchased as permitted or required by the Agreement
during the calendar month preceding the month of the Distribution Date and (iii)
any other unscheduled payments of principal which were received on the Mortgage
Loans during the preceding calendar month, other than Payoffs, Curtailments or
Liquidation Principal (as defined below). For any Distribution Date and Loan
Group, the "Principal Prepayment Amount" is the sum with respect to the Mortgage
Loans in such Loan Group of all Payoffs and Curtailments relating to the
Mortgage Loans in such Loan Group which were received during the related
Prepayment Period.
With respect to each Distribution Date and each Payoff with respect to a
First Nationwide Loan, the related "Prepayment Period" will be the calendar
month preceding the month in which the related Distribution Date occurs.... With
respect to each Distribution Date and each Curtailment, the related "Prepayment
Period" will be the month preceding the month in which the related Distribution
Date occurs.
"Liquidation Principal" is the principal portion of Liquidation Proceeds
received with respect to each Mortgage Loan which became a Liquidated Mortgage
Loan (but not in excess of the principal balance thereof) during the calendar
month preceding the month of the Distribution Date, exclusive of the portion
thereof attributable to the applicable Class P Principal Distribution Amount, if
any. A "Liquidated Mortgage Loan" is a defaulted Mortgage Loan as to which the
applicable Servicer has determined that all amounts which it expects to recover
from or on account of such Mortgage Loan, whether from Insurance Proceeds,
Liquidation Proceeds or otherwise have been recovered.
The Notional Amount Certificates will not be entitled to receive any
distributions of principal.
Senior Principal Distribution Amount. On each Distribution Date, to the
extent of Available Funds therefor, up to the amount of the related Senior
Principal Distribution Amount for such Certificate Group for such Distribution
Date, will be distributed as principal:
(A) with respect to the Group I Certificates, to the Class IPP-A
Certificates, until the Class Principal Balance thereof has been reduced
to zero;...
* * *
The "Senior Credit Support Depletion Date" for a Certificate Group is the
date on which the aggregate Class Principal Balance of the Group C-B
Certificates, in the case of the Group I and Group II Certificates... has been
reduced to zero.
A-32
<PAGE>
Exhibit A--Excerpts from Underlying Supplement
Relating to First Nationwide Trust Series 1999-3 (cont'd)
The "Senior Principal Distribution Amount" for any Distribution Date and
Certificate Group will equal the sum of (i) the related Senior Percentage of the
Principal Payment Amount for the related Loan Group (exclusive of the portion
thereof attributable to the applicable Class P Principal Distribution Amount, if
any), (ii) the related Senior Prepayment Percentage of the Principal Prepayment
Amount for the related Loan Group (exclusive of the portion thereof attributable
to the applicable Class P Principal Distribution Amount, if any), and (iii) the
Senior Liquidation Amount for the related Loan Group.
The "Senior Liquidation Amount" for a Loan Group is the aggregate, for
each Mortgage Loan in such Loan Group which became a Liquidated Mortgage Loan
during the calendar month preceding the month of the Distribution Date, of the
lesser of (i) the Senior Percentage for the related Certificate Group of the
Stated Principal Balance of such Mortgage Loan (exclusive of the related Class P
Fraction thereof, if applicable) and (ii) the Senior Prepayment Percentage for
the related Certificate Group of the Liquidation Principal with respect to such
Mortgage Loan.
"Stated Principal Balance" means, as to any Mortgage Loan and Due Date,
the unpaid principal balance of such Mortgage Loan as of such Due Date, as
specified in the amortization schedule at the time relating thereto (before any
adjustment to such amortization schedule by reason of any moratorium or similar
waiver or grace period), after giving effect to any previous partial principal
prepayments and Liquidation Proceeds (to the extent allocable to principal)
received and to the payment of principal due on such Due Date and irrespective
of any delinquency in payment by the related Mortgagor.
The "Senior Percentage" for any Distribution Date for a Certificate Group
is the percentage equivalent of a fraction the numerator of which is the
aggregate Class Principal Balance of the Classes of Senior Certificates of such
Certificate Group (other than the related Class P Certificates, if any)
immediately prior to such date and the denominator of which is the aggregate
Stated Principal Balance of the Mortgage Loans in the related Loan Group (less
the applicable Class P Principal Balance, if any), as of the Due Date in the
month of such Distribution Date; provided, however, in no event will the Senior
Percentage for a Certificate Group exceed 100%. The "Subordinate Percentage" for
a Certificate Group for any Distribution Date will be calculated as the
difference between 100% and the related Senior Percentage for such date.
The Senior Prepayment Percentage for any Distribution Date for a
Certificate Group occurring during the five years beginning on the first
Distribution Date will equal 100%. Thereafter, such Senior Prepayment Percentage
will, except as described below, be subject to gradual reduction as described in
the following paragraph. This disproportionate allocation of certain unscheduled
payments in respect of principal will have the effect of accelerating the
amortization of the Senior Certificates in a Certificate Group while, in the
absence of Realized Losses, increasing the interest in the aggregate Stated
Principal Balance of the applicable Loan Group evidenced by the related Class or
Classes of Subordinate Certificates in such Certificate Group. Increasing the
respective interest of such Subordinate Certificates relative to that of the
related Senior Certificates is intended to preserve the availability of the
subordination provided by such Subordinate Certificates.
The Senior Prepayment Percentage for any Distribution Date for a
Certificate Group occurring on or after the fifth anniversary of the first
Distribution Date will be as follows: for any Distribution Date in the first
year thereafter, the related Senior Percentage plus 70% of the related
Subordinate Percentage for such Distribution Date; for any Distribution Date in
the second year thereafter, the related Senior Percentage plus 60% of the
related Subordinate Percentage for such Distribution Date; for any Distribution
Date in the third year thereafter, the related Senior Percentage plus 40% of the
related Subordinate Percentage for such Distribution Date; for any Distribution
Date in the fourth year thereafter, the related Senior Percentage plus 20% of
the related Subordinate Percentage for such Distribution Date; and for any
Distribution Date thereafter, the related Senior Percentage for such
Distribution Date (unless on any of the foregoing Distribution Dates the related
Senior Percentage exceeds the initial Senior Percentage for the Senior
Certificates of such Certificate Group, in which case such Senior Prepayment
Percentage for such Distribution Date will once again equal 100%). In the event
the Senior Prepayment Percentage for the Group I or Group II Certificates will
once again equal 100% in accordance with the parenthetical in the preceding
sentence, the Senior Prepayment Percentage for the other Certificate Group will
also equal 100%.
A-33
<PAGE>
Exhibit A--Excerpts from Underlying Supplement
Relating to First Nationwide Trust Series 1999-3 (cont'd)
Notwithstanding the foregoing no decrease in the reduction to the Senior
Prepayment Percentage for the Senior Certificates of a Certificate Group as
described above will occur if as of the first Distribution Date as to which any
such decrease applies (i) with respect to each Certificate Group, the
outstanding principal balance of the related Mortgage Loans, delinquent 60 days
or more (averaged over the preceding six month period), as a percentage of the
aggregate principal balance of, with respect to the Group I or Group II
Certificates, the related Group C-B Loan Group Component Balance as of such
Distribution Date ..., is equal to or greater than 50% or (ii) cumulative
Realized Losses with respect to the Mortgage Loans in the related Loan Group
exceed (a) with respect to the Distribution Date on the fifth anniversary of the
first Distribution Date, 30% of the aggregate principal balance of, with respect
to the Group I Certificates or Group II Certificates, the related Group C-B Loan
Group Component Balance ..., as of the Closing Date (each, an "Original
Subordinate Principal Balance"), (b) with respect to the Distribution Date on
the sixth anniversary of the first Distribution Date, 35% of such Original
Subordinate Principal Balance, (c) with respect to the Distribution Date on the
seventh anniversary of the first Distribution Date, 40% of such Original
Subordinate Principal Balance, (d) with respect to the Distribution Date on the
eighth anniversary of the first Distribution Date, 45% of such Original
Subordinate Principal Balance and (e) with respect to the Distribution Date on
the ninth anniversary of the first Distribution Date, 50% of such Original
Subordinate Principal Balance. In the event that the Senior Prepayment
Percentage for the Group I or Group II Certificates is not permitted to reduce
due to the limitations set forth above, the Senior Prepayment Percentage for the
other Certificate Group will also be prevented from any such reduction.
If on any Distribution Date the allocation to the Class of Senior
Certificates of a Certificate Group then entitled to distributions of Payoffs
and Curtailments and other amounts in the percentage required above would reduce
the outstanding Class Principal Balance of such Class below zero, the
distribution to such Class of Certificates of the related Senior Prepayment
Percentage of such amounts for such Distribution Date will be limited to the
percentage necessary to reduce the related Class Principal Balance to zero.
* * *
Subordinate Principal Distribution Amount. On each Distribution Date, to
the extent of Available Funds therefor, up to the amount of the related
Subordinate Principal Distribution Amount for such Distribution Date and
Certificate Group, will be distributed as principal of the related Class or
Classes of Subordinate Certificates. Except as provided in the following
paragraph, each Class of Subordinate Certificates in a Certificate Group will be
entitled to receive its pro rata share (based upon its respective Class
Principal Balance) of such Subordinate Principal Distribution Amount, in each
case to the extent of the amount available from Available Funds for the related
Loan Group (which, in the case of the Group C-B Certificates, is the remaining
Available Funds for the Group I and Group II Loans) for distribution of
principal of such Class. Distributions of principal of the Subordinate
Certificates of a Certificate Group will be made on each Distribution Date
sequentially to the Classes of Subordinate Certificates in the order of their
numerical Class designation (beginning with the Class with the lowest numerical
Class designation) until each such Class of Subordinate Certificates has
received its respective pro rata share of the Subordinate Principal Distribution
Amount for such Certificate Group for such Distribution Date.
With respect to each Class of Subordinate Certificates in a specified
Certificate Group, if on any Distribution Date the related Subordination Level
of such Class is less than such percentage as of the Closing Date, no
distributions of Payoffs and Curtailments with respect to the related Loan Group
or Loan Groups, in the case of the Group C-B Certificates, will be made to any
Class or Classes of Subordinate Certificates in the related Certificate Group
junior to such Class (the "Restricted Classes") and the amount otherwise
distributable to the Restricted Classes in respect of such Payoffs and
Curtailments will be allocated among the remaining Classes of Subordinate
Certificates in such Certificate Group, pro rata, based upon their respective
Class Principal Balances.
The "Subordination Level" on any Distribution Date with respect to any
Class of Subordinate Certificates is the percentage obtained by dividing the sum
of the Class Principal Balances of all Classes of Certificates in the related
Certificate Group which are subordinate in right of payment to such Class by the
sum of the Class Principal Balances of all Classes of Certificates in the
related Certificate Group, in each case immediately prior to such Distribution
Date.
A-34
<PAGE>
The "Subordinate Principal Distribution Amount" for any Distribution Date
and the Group C-B Certificates will equal (A) the sum of (i) the Subordinate
Percentage for the Group I Certificates of the Principal Payment Amount for the
Group I Loans, (ii) the Subordinate Percentage for the Group II Certificates of
the Principal Payment Amount for the Group II Loans (exclusive of the portion
thereof attributable to the Class II-P Principal Distribution Amount), (iii) the
Subordinate Prepayment Percentage for the Group I Certificates of the Principal
Prepayment Amount for the Group I Loans, (iv) the Subordinate Prepayment
Percentage for the Group II Certificates of the Principal Prepayment Amount for
the Group II Loans (exclusive of the portion thereof attributable to the Class
II-P Principal Distribution Amount) and (v) the Subordinate Liquidation Amount
for the Group I and Group II Loans less (B) the sum of (x) the Class PO Deferred
Amounts required to be paid to the Class II-P Certificates on such Distribution
Date, (y) in the event that the Class Principal Balance of either the Group I or
Group II Senior Certificates has been reduced to zero, principal paid from
Available Funds of the Loan Group related to such Certificate Group to the other
Certificate Group as described in [the related prospectus supplement] and (z)
the amounts in respect of principal paid from Available Funds of any
Overcollateralized Group to any Undercollateralized Group, as described in [the
related prospectus supplement].
Any reduction to a Subordinate Principal Distribution Amount described
above shall first offset amounts in respect of the related Principal Payment
Amounts, second the related Subordinate Liquidation Amounts and then the related
Principal Prepayment Amounts.
The "Subordinate Liquidation Amount" for a Loan Group will equal the
excess, if any, of the aggregate Liquidation Principal of all Mortgage Loans in
such Loan Group which became Liquidated Mortgage Loans during the calendar month
preceding the month of such Distribution Date over the sum of the related Senior
Liquidation Amount for such Distribution Date.
* * *
Residual Certificates. The Class A-R Certificates will remain outstanding
for so long as the Trust Fund shall exist, whether or not they are receiving
current distributions of principal or interest. In addition to distributions of
interest and principal as described above, on each Distribution Date the holders
of the Class A-R Certificates will be entitled to receive Available Funds for
any Loan Group remaining after payment of interest and principal on the Senior
Certificates, Class PO Deferred Amounts on the Class P Certificates, if any, and
interest and principal on the Subordinate Certificates for such Distribution
Date, as described above. It is not anticipated that there will be any
significant amounts remaining for any such distribution.
Allocation of Losses
* * *
On each Distribution Date, any Realized Loss (other than the Class P
Fraction thereof, if applicable), other than any Excess Loss, experienced by a
Loan Group will be allocated first to the Subordinate Certificates for the
related Certificate Group, in decreasing order of their numerical Class
designations (beginning with the Class of Subordinate Certificates then
outstanding with the highest numerical Class designation), in each case until
the Class Principal Balance of the respective Class of Certificates has been
reduced to zero, and then to the Senior Certificates for such Certificate Group
(other than the related Notional Amount and Class P Certificates, if any) pro
rata, based upon their respective Class Principal Balances.
On each Distribution Date, Excess Losses (other than the Class P Fraction
thereof, if applicable) experienced by the Group I ... Loans will be allocated
pro rata among the Classes of Group I ... Certificates ... based upon their
respective Class Principal Balances....
* * *
A-35
<PAGE>
Exhibit A--Excerpts from Underlying Supplement
Relating to First Nationwide Trust Series 1999-3 (cont'd)
On each Distribution Date, if the aggregate Class Principal Balance of all
Group I and Group II Certificates exceeds the aggregate Stated Principal Balance
of the Group I and Group II Loans (after giving effect to distributions of
principal and the allocation of all losses to the Group I and Group II
Certificates on such Distribution Date), such excess will be deemed a principal
loss and will be allocated to the most junior Class of Group C-B Certificates
then outstanding.
* * *
Investors in the Group I Senior and Group II Senior Certificates should be
aware that because the Group C-B Certificates represent interests in both the
Group I and Group II Loans, the Class Principal Balances of the Group C-B
Certificates could be reduced to zero as a result of a disproportionate amount
of Realized Losses on the Mortgage Loans in one of such Loan Groups. Therefore,
notwithstanding that Realized Losses on the Mortgage Loans in one Loan Group may
only be allocated to the related Senior Certificates, other than Excess Losses,
the allocation to the Group C-B Certificates of Realized Losses on the Mortgage
Loans in the other Loan Group will increase the likelihood that losses may be
allocated to such Senior Certificates.
[Generally, the characteristics of the Group I Loans are substantially
similar to those of the Group II Loans.]
In general, a "Realized Loss" means, either (i) a Bankruptcy Loss or (ii)
with respect to a Liquidated Mortgage Loan, the amount by which the remaining
unpaid principal balance of the Mortgage Loan exceeds the amount of Liquidation
Proceeds applied to the principal balance of the related Mortgage Loan. "Excess
Losses" are (i) Special Hazard Losses in excess of the applicable Special Hazard
Loss Coverage Amount, (ii) Bankruptcy Losses in excess of the applicable
Bankruptcy Loss Coverage Amount, and (iii) Fraud Losses in excess of the
applicable Fraud Loss Coverage Amount. "Special Hazard Losses" are Realized
Losses in respect of Special Hazard Mortgage Loans. "Bankruptcy Losses" are
losses that are incurred as a result of Debt Service Reductions and Deficient
Valuations. "Fraud Losses" are Realized Losses sustained by reason of a default
arising from fraud, dishonesty or misrepresentation....
A "Special Hazard Mortgage Loan" is a Liquidated Mortgage Loan as to which
the ability to recover the full amount due thereunder was substantially impaired
by a hazard not insured against under a standard hazard insurance policy of the
type described in the [related disclosure documentation].
* * *
The Group C-B Certificates will provide protection to the Group I and
Group II Certificates of higher relative priority against (i) Bankruptcy Losses
on the Group I and Group II Loans in an initial amount expected to be up to
approximately $144,715.45 (the "Group I/Group II Bankruptcy Loss Coverage
Amount"), (ii) Fraud Losses on the Group I and Group II Loans in an initial
amount expected to be up to approximately $10,892,321.65 (the "Group I/Group II
Fraud Loss Coverage Amount") and (iii) Special Hazard Losses on the Group I and
Group II Loans in an initial amount expected to be up to approximately
$8,099,343.01 (the "Group I/Group II Special Hazard Loss Coverage Amount").
* * *
As used herein, a "Deficient Valuation" is a bankruptcy proceeding whereby
the bankruptcy court may establish the value of the Mortgaged Property at an
amount less than the then outstanding principal balance of the Mortgage Loan
secured by such Mortgaged Property or may reduce the outstanding principal
balance of a Mortgage Loan....... In addition, certain other modifications of
the terms of a Mortgage Loan can result from a bankruptcy proceeding, including
the reduction (a "Debt Service Reduction") of the amount of the monthly payment
on the related Mortgage Loan .......
A-36
<PAGE>
EXHIBIT B
---------
REMITTANCE DATE STATEMENT FOR THE
FIRST NATIONWIDE TRUST SERIES 1998-3
FEBRUARY 2000 DISTRIBUTION DATE
THE Distribution Date: 2/19/00
BANK OF
NEW
YORK
101 Barclay Street 12E
New York, NY 10286
Attn: David Gresser
212-815-8171
First Nationwide Trust
Mortgage Pass-Through Certificates, Series 1998-3
Certificateholder Monthly Distribution Summary
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
Certificate Pass
Class Rate Beginning Through
Class Cusip Description Type Balance Rate (%)
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
IPP-A-1 23321PT65 Senior Fix-30/360 492,823,327.41 6.500000
IIPP-A-1 23321PT73 Senior Fix-30/360 38,784,326.63 6.500000
I-P 23321PT81 Strip PO Fix-30/360 87,581.38 0.000000
I-X 23321PT99 Strip IO Fix-30/360 25,784,481.69 6.500000
II-X 23321PU22 Strip IO Fix-30/360 2,337,577.65 6.500000
A-R 23321PU30 Senior Fix-30/360 0.00 6.500000
- ---------------------------------------------------------------------------
C-B-1 23321PU48 Junior Fix-30/360 8,395,337.84 6.500000
C-B-2 23321PU55 Junior Fix-30/360 5,789,887.69 6.500000
C-B-3 23321PU63 Junior Fix-30/360 2,605,449.16 6.500000
C-B-4 23321PU71 Junior Fix-30/360 1,736,966.11 6.500000
C-B-5 23321PU89 Junior Fix-30/360 1,447,471.43 6.500000
C-B-6 23321PU97 Junior Fix-30/360 1,737,265.17 6.500000
- ---------------------------------------------------------------------------
Totals 553,407,612.82
- ---------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------
Current Cumulative
Principal Interest Total Realized Ending Realized
Class Distribution Distribution Distribution Losses Balance Losses
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
IPP-A-1 2,924,425.07 2,669,459.69 5,593,884.76 0.00 489,898,902.34 0.00
IIPP-A-1 46,134.23 210,081.77 256,216.00 0.00 38,738,192.40 0.00
I-P 111.15 0.00 111.15 0.00 87,470.23 0.00
I-X 0.00 139,665.94 139,665.94 0.00 25,605,156.74 0.00
II-X 0.00 12,661.88 12,661.88 0.00 2,335,001.75 0.00
A-R 0.00 0.00 0.00 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------
C-B-1 7,864.22 45,474.75 53,338.96 0.00 8,387,473.63 0.00
C-B-2 5,423.60 31,361.89 36,785.49 0.00 5,784,464.10 0.00
C-B-3 2,440.62 14,112.85 16,553.47 0.00 2,603,008.54 0.00
C-B-4 1,627.08 9,408.57 11,035.65 0.00 1,735,339.03 0.00
C-B-5 1,355.90 7,840.47 9,196.37 0.00 1,446,115.53 0.00
C-B-6 1,604.10 9,410.19 11,014.29 23.26 1,735,637.81 64.54
- ----------------------------------------------------------------------------------------
Totals 2,990,985.97 3,149,478.00 6,140,463.96 23.26 550,416,603.61 64.54
- ----------------------------------------------------------------------------------------
</TABLE>
B-1
<PAGE>
THE Distribution Date: 2/19/00
BANK OF
NEW
YORK
101 Barclay Street 12E
New York, NY 10286
Attn: David Gresser
212-815-8171
First Nationwide Trust
Mortgage Pass-Through Certificates, Series 1998-3
Principal Distribution Detail
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Original Beginning Scheduled
Certificate Certificate Principal Accretion
Class Cusip Balance Balance Distribution Principal
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
IPP-A-1 23321PT65 524,317,220.00 492,823,327.41 2,924,425.07 0.00
- -------------------------------------------------------------------------------------------------
IIPP-A-1 23321PT73 41,507,740.00 38,784,326.63 46,134.23 0.00
- -------------------------------------------------------------------------------------------------
I-P 23321PT81 89,462.88 87,581.38 111.15 0.00
- -------------------------------------------------------------------------------------------------
I-X 23321PT99 27,715,898.00 25,784,481.69 0.00 0.00
- -------------------------------------------------------------------------------------------------
II-X 23321PU22 2,541,637.00 2,337,577.65 0.00 0.00
- -------------------------------------------------------------------------------------------------
A-R 23321PU30 100.00 0.00 0.00 0.00
- -------------------------------------------------------------------------------------------------
C-B-1 23321PU48 8,525,470.00 8,395,337.84 7,864.22 0.00
- -------------------------------------------------------------------------------------------------
C-B-2 23321PU55 5,879,634.00 5,789,887.69 5,423.60 0.00
- -------------------------------------------------------------------------------------------------
C-B-3 23321PU63 2,645,835.00 2,605,449.16 2,440.62 0.00
- -------------------------------------------------------------------------------------------------
C-B-4 23321PU71 1,763,890.00 1,736,966.11 1,627.08 0.00
- -------------------------------------------------------------------------------------------------
C-B-5 23321PU89 1,469,908.00 1,447,471.43 1,355.90 0.00
- -------------------------------------------------------------------------------------------------
C-B-6 23321PU97 1,763,893.00 1,737,265.17 1,604.10 0.00
- -------------------------------------------------------------------------------------------------
Totals 587,963,152.88 553,407,612.82 2,990,985.97 0.00
- -------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------
Unscheduled Ending Ending
Principal Net Principal Current Certificate Certificate
Class Adjustments Distribution Realized Losses Balance Factor
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
IPP-A-1 0.00 2,924,425.07 0.00 489,898,902.34 0.93435592739
- ------------------------------------------------------------------------------------------------
IIPP-A-1 0.00 46,134.23 0.00 38,738,192.40 0.93327635763
- ------------------------------------------------------------------------------------------------
I-P 0.00 111.15 0.00 87,470.23 0.97772656174
- ------------------------------------------------------------------------------------------------
I-X 0.00 0.00 0.00 25,605,156.74 0.92384366341
- ------------------------------------------------------------------------------------------------
II-X 0.00 0.00 0.00 2,335,001.75 0.91869993611
- ------------------------------------------------------------------------------------------------
A-R 0.00 0.00 0.00 0.00 0.00000000000
- ------------------------------------------------------------------------------------------------
C-B-1 0.00 7,864.22 0.00 8,387,473.63 0.98381363448
- ------------------------------------------------------------------------------------------------
C-B-2 0.00 5,423.60 0.00 5,784,464.10 0.98381363469
- ------------------------------------------------------------------------------------------------
C-B-3 0.00 2,440.62 0.00 2,603,008.54 0.98381363312
- ------------------------------------------------------------------------------------------------
C-B-4 0.00 1,627.08 0.00 1,735,339.03 0.98381363499
- ------------------------------------------------------------------------------------------------
C-B-5 0.00 1,355.90 0.00 1,446,115.53 0.98381363558
- ------------------------------------------------------------------------------------------------
C-B-6 0.00 1,604.10 23.26 1,735,637.81 0.98398134831
- ------------------------------------------------------------------------------------------------
Totals 0.00 2,990,985.97 23.26 550,416,603.61
- ------------------------------------------------------------------------------------------------
</TABLE>
B-2
<PAGE>
THE Distribution Date: 2/19/00
BANK OF
NEW
YORK
101 Barclay Street 12E
New York, NY 10286
Attn: David Gresser
212-815-8171
First Nationwide Trust
Mortgage Pass-Through Certificates, Series 1998-3
Interest Distribution Detail
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Beginning Pass Accrued Cumulative
Certificate Through Optimal Unpaid
Class Balance Rate (%) Interest Interest
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
IPP-A-1 492,823,327.41 6.500000 2,669,459.69 0.00
IIPP-A-1 38,784,326.63 6.500000 210,081.77 0.00
I-P 87,581.38 0.000000 0.00 0.00
I-X 25,784,481.69 6.500000 139,665.94 0.00
II-X 2,337,577.65 6.500000 12,661.88 0.00
A-R 0.00 6.500000 0.00 0.00
- -----------------------------------------------------------------------------------
C-B-1 8,395,337.84 6.500000 45,474.75 0.00
C-B-2 5,789,887.69 6.500000 31,361.89 0.00
C-B-3 2,605,449.16 6.500000 14,112.85 0.00
C-B-4 1,736,966.11 6.500000 9,408.57 0.00
C-B-5 1,447,471.43 6.500000 7,840.47 0.00
C-B-6 1,737,265.17 6.500000 9,410.19 0.00
- -----------------------------------------------------------------------------------
Totals 553,407,612.82 3,149,478.00 0.00
- -----------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------
Total Unscheduled
Deferred Interest Net Prepayment Interest Interest
Class Interest Due Int Shortfall Adjustment Paid
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
IPP-A-1 0.00 2,669,459.69 0.00 0.00 2,669,459.69
IIPP-A-1 0.00 210,081.77 0.00 0.00 210,081.77
I-P 0.00 0.00 0.00 0.00 0.00
I-X 0.00 139,665.94 0.00 0.00 139,665.94
II-X 0.00 12,661.88 0.00 0.00 12,661.88
A-R 0.00 0.00 0.00 0.00 0.00
- -----------------------------------------------------------------------------------------------
C-B-1 0.00 45,474.75 0.00 0.00 45,474.75
C-B-2 0.00 31,361.89 0.00 0.00 31,361.89
C-B-3 0.00 14,112.85 0.00 0.00 14,112.85
C-B-4 0.00 9,408.57 0.00 0.00 9,408.57
C-B-5 0.00 7,840.47 0.00 0.00 7,840.47
C-B-6 0.00 9,410.19 00.00 0.00 9,410.19
- -----------------------------------------------------------------------------------------------
Totals 0.00 3,149,478.00 0.00 0.00 3,149,478.00
- -----------------------------------------------------------------------------------------------
</TABLE>
B-3
<PAGE>
THE Distribution Date: 2/19/00
BANK OF
NEW
YORK
101 Barclay Street 12E
New York, NY 10286
Attn: David Gresser
212-815-8171
First Nationwide Trust
Mortgage Pass-Through Certificates, Series 1998-3
Current Payment Information Factors per $1,000
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Original Pass
Certificate Beginning Cert. Principal Interest Ending Cert. Through
Class Cusip Balance Notional Balance Distribution Distribution Notional Balance Rate (%)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
IPP-A-1 23321PT65 524,317,220.00 939.933514687 5.577587296 5.091306538 934.355927391 6.500000
IIPP-A-1 23321PT73 41,507,740.00 934.387818480 1.111460853 5.061267350 933.276357627 6.500000
I-P 23321PT81 89,462.88 978.968978453 1.242416709 0.000000000 977.726561744 0.000000
I-X 23321PT99 27,715,898.00 930.313774703 0.000000000 5.039199613 923.843663408 6.500000
II-X 23321PU22 2,541,637.00 919.713415912 0.000000000 4.981781003 918.699936112 6.500000
A-R 23321PU30 100.00 0.000000000 0.000000000 0.000000000 0.000000000 6.500000
- ----------------------------------------------------------------------------------------------------------------------------
C-B-1 23321PU48 8,525,470.00 984.736072250 0.922437773 5.333987058 983.813634478 6.500000
C-B-2 23321PU55 5,879,634.00 984.736072464 0.922437773 5.333987059 983.813634692 6.500000
C-B-3 23321PU63 2,645,835.00 984.736070895 0.922437771 5.333987051 983.813633123 6.500000
C-B-4 23321PU71 1,763,890.00 984.736072760 0.922437773 5.333987061 983.813634987 6.500000
C-B-5 23321PU89 1,469,908.00 984.736073351 0.922437774 5.333987064 983.813635578 6.500000
C-B-6 23321PU97 1,763,893.00 984.903943336 0.909409263 5.334896360 983.981348311 6.500000
- ----------------------------------------------------------------------------------------------------------------------------
Totals 587,963,152.88 941.228391795 5.087029613 5.356590774 936.141322656
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
B-4
<PAGE>
THE Distribution Date: 2/19/00
BANK OF
NEW
YORK
101 Barclay Street 12E
New York, NY 10286
Attn: David Gresser
212-815-8171
First Nationwide Trust
Mortgage Pass-Through Certificates, Series 1998-3
Current Payment Information Factors per $1,000
<TABLE>
<S> <C>
Pool Level Data 2/19/00
Distribution Date 7/1/98
Cut-off Date 2/1/00
Determination Date 1/1/00
Accrual Period Begin 2/1/00
End
Number of Days in Accrual
Period 31
- ----------------------
Collateral Information
- ----------------------
Group 1
- -------
Cut-off Date Balance 0.00
Beginning Aggregate Pool Stated Principal Balance 513,030,147.37
Ending Aggregate Pool Stated Principal Balance 510,086,746.05
Beginning Aggregate Certificate Stated Principal Balance 553,407,612.83
Ending Aggregate Certificate Stated Principal Balance 550,416,603.62
Beginning Aggregate Loan Count 1471
Loans Paid Off or Otherwise Removed Pursuant to Pooling and Servicing 0
Agreement
</TABLE>
B-5
<PAGE>
THE Distribution Date: 2/19/00
BANK OF
NEW
YORK
101 Barclay Street 12E
New York, NY 10286
Attn: David Gresser
212-815-8171
First Nationwide Trust
Mortgage Pass-Through Certificates, Series 1998-3
Current Payment Information Factors per $1,000
Ending Aggregate Loan Count 1471
Beginning Weighted Average Loan Rate (WAC) 7.255627%
Ending Weighted Average Loan Rate (WAC) 7.254890%
Beginning Net Weighted Average Loan Rate 6.825524%
Ending Net Weighted Average Loan Rate 6.825119%
Weighted Average Maturity (WAM) (Months) 340
Servicer Advances 0
Aggregate Pool Prepayment 2,462,340.24
Pool Prepayment Rate 5,6099 CPR
Group 2
- -------
Cut-Off Date Balance 0.00
Beginning Aggregate Pool Stated Principal Balance 40,377,465.46
Ending Aggregate Pool Stated Principal Balance 40,329,857.57
Beginning Aggregate Certificate Stated Principal Balance 553,407,612.83
Ending Aggregate Certificated Stated Principal Balance 550,416,603.62
B-6
<PAGE>
THE Distribution Date: 2/19/00
BANK OF
NEW
YORK
101 Barclay Street 12E
New York, NY 10286
Attn: David Gresser
212-815-8171
First Nationwide Trust
Mortgage Pass-Through Certificates, Series 1998-3
Current Payment Information Factors per $1,000
<TABLE>
<S> <C>
Beginning Aggregate Loan Count 252
Loans Paid Off or Otherwise Removed Pursuant to Pooling and Servicing 1
Agreement
Ending Aggregate Loan Count 251
Group 2
- -------
Beginning Weighted Average Loan Rate (WAC) 7.318553%
Ending Weighted Average Loan Rate (WAC) 7.318593%
Beginning Net Weighted Average Loan Rate 6.876258%
Ending Net Weighted Average Loan Rate 6.876287%
Weighted Average Maturity (WAM) (Months) 341
Servicer Advances 0.00
Aggregate Pool Prepayment 10,258.52
Pool Prepayment Rate 0.3045 CPR
Certificate Account
Beginning Balance 0.00
Deposit
</TABLE>
B-7
<PAGE>
THE Distribution Date: 2/19/00
BANK OF
NEW
YORK
101 Barclay Street 12E
New York, NY 10286
Attn: David Gresser
212-815-8171
First Nationwide Trust
Mortgage Pass-Through Certificates, Series 1998-3
Current Payment Information Factors per $1,000
<TABLE>
<S> <C>
Payments of Interest and Principal 6,329,183.14
Liquidation Proceeds 0.00
All Other Proceeds 0.00
Other Amounts 0.00
Total Deposits 6,329,183.14
Withdrawals
Reimbursement of Servicer Advances 0.00
Payment of Master Servicer Fees 259,401.34
Payment of Sub Servicer Fees 81,623.94
Payment of Other Fees 190,563.89
Payment of Insurances Premium(s) 0.00
Payment of Personal Mortgage Insurance 0.00
Other Permitted Withdrawal per the Pooling and Service Agreement 0.00
Payment of Principal and Interest 6,140,463.94
------------
Total Withdrawals 6,672,053.11
Ending Balance -152,306.08
Prepayment Compensation
Total Gross Prepayment Interest Shortfall 8,197.99
Compensation for Gross PPIS from Servicing Fees 8,197.99
Other Gross PPIS Compensation 0.00
------------
</TABLE>
B-8
<PAGE>
THE Distribution Date: 2/19/00
BANK OF
NEW
YORK
101 Barclay Street 12E
New York, NY 10286
Attn: David Gresser
212-815-8171
First Nationwide Trust
Mortgage Pass-Through Certificates, Series 1998-3
Current Payment Information Factors per $1,000
Total Net PPIS (Non-Supported PPIS) 0.00
Master Servicing Fees Paid 259,401.34
Sub Servicing Fees Paid 81,623.94
Insurance Premium(s) Paid 0.00
Personal Mortgage Insurance Fees Paid 0.00
Other Fees Paid 190,563.89
Total Fees 531,589.17
-----------------------
Delinquency Information
-----------------------
Group 1
- -------
<TABLE>
<CAPTION>
Delinquency 30-59 Days 60-89 Days 90+ Days Totals
<S> <C> <C> <C> <C>
Scheduled Principal Balance 0.00 0.00 0.00 0.00
Percentage of Total Pool Balance 0.000000% 0.000000% 0.000000% 0.000000%
Number of Loans 0 0 0 0
Percentage of Total Loans 0.000000% 0.000000% 0.000000% 0.000000%
Foreclosure
Scheduled Principal Balance 0.00 0.00 0.00 0.0
Percentage of Total Pool Balance 0.000000% 0.000000% 0.000000% 0.000000%
Number of Loans 0 0 0 0
</TABLE>
B-9
<PAGE>
THE Distribution Date: 2/19/00
BANK OF
NEW
YORK
101 Barclay Street 12E
New York, NY 10286
Attn: David Gresser
212-815-8171
First Nationwide Trust
Mortgage Pass-Through Certificates, Series 1998-3
Current Payment Information Factors per $1,000
<TABLE>
<S> <C> <C> <C> <C>
Percentage of Total Loans 0.000000% 0.000000% 0.000000% 0.000000%
Bankruptcy
Scheduled Principal Balance 0.00 0.00 0.00 0.00
Percentage of total Pool Balance 0.000000% 0.000000% 0.000000% 0.000000%
Number of Loans 0 0 0 0
Percentage of Total Loans 0.000000% 0.000000% 0.000000% 0.000000%
REO
Scheduled Principal Balance 0.00 0.00 0.00 0.00
Percentage of Total Pool Balance 0.000000% 0.000000% 0.000000% 0.000000%
Number of Loans 0 0 0
Percentage of Total Loans 0.000000% 0.000000% 0.000000% 0.000000%
Book Value of all REO Loans 0.00
Percentage of Total Pool Balance 0.000000%
Current Realized Losses 0.00
Additional Gains (Recoveries)/Losses 0.00
Total Realized Losses 0.00
</TABLE>
B-10
<PAGE>
THE Distribution Date: 2/19/00
BANK OF
NEW
YORK
101 Barclay Street 12E
New York, NY 10286
Attn: David Gresser
212-815-8171
First Nationwide Trust
Mortgage Pass-Through Certificates, Series 1998-3
Current Payment Information Factors per $1,000
<TABLE>
<CAPTION>
Group 2
- -------
Delinquency 30-59 Days 60-89 Days 90+ Days Totals
- ----------- ---------- ---------- -------- ------
<S> <C> <C> <C> <C>
Scheduled Principal Balance 0.00 0.00 0.00 0.00
Percentage of Total Pool Balance 0.000000% 0.00000% 0.000000% 0.000000%
Number of Loans 0 0 0 0
Percentage of Total Loans 0.000000% 0.00000% 0.000000% 0.000000%
Foreclosure
- -----------
Scheduled Principal Balance 0.00 0.00 0.00 0.00
Percentage of Total Pool Balance 0.000000% 0.00000% 0.000000% 0.000000%
Number of Loans 0 0 0 0
Percentage of Total Loans 0.000000% 0.00000% 0.000000% 0.000000%
Bankruptcy
- ----------
Scheduled Principal Balance 0.00 0.00 0.00 0.00
Percentage of Total Pool Balance 0.000000% 0.00000% 0.000000% 0.000000%
Number of Loans 0 0 0 0
Percentage of Total Loans 0.000000% 0.00000% 0.000000% 0.000000%
</TABLE>
B-11
<PAGE>
THE Distribution Date: 2/19/00
BANK OF
NEW
YORK
101 Barclay Street 12E
New York, NY 10286
Attn: David Gresser
212-815-8171
First Nationwide Trust
Mortgage Pass-Through Certificates, Series 1998-3
Current Payment Information Factors per $1,000
<TABLE>
<S> <C> <C> <C> <C>
REO
Scheduled Principal Balance 0.00 0.00 0.00 0.00
Percentage of Total Pool Balance 0.000000% 0.00000% 0.000000% 0.000000%
Number of Loans 0 0 0 0
Percentage of Total Loans 0.000000% 0.00000% 0.000000% 0.000000%
Book Value of all REO Loans 0
Percentage of Total Pool Balance 0.000000%
0
Current Realized Losses
Additional Gains 0.00
(Recoveries)/Losses
Total Realized Losses 0.00
-------------------------------------------
Subordinated/Credit Enhancement Information
-------------------------------------------
Protection Original Current
- ---------- -------- -------
Bankruptcy Loss 0.00 0.00
Bankruptcy Percentage 0.000000% 0.000000%
Credit/Fraud Loss 0.00 0.00
Credit/Fraud Loss Percentage 0.000000% 0.000000%
</TABLE>
B-12
<PAGE>
THE Distribution Date: 2/19/00
BANK OF
NEW
YORK
101 Barclay Street 12E
New York, NY 10286
Attn: David Gresser
212-815-8171
First Nationwide Trust
Mortgage Pass-Through Certificates, Series 1998-3
Current Payment Information Factors per $1,000
<TABLE>
<S> <C> <C>
Special Hazard Loss 0.00 0.00
Special Hazard Loss Percentage 0.000000% 0.000000%
Credit Support Original Current
- -------------- -------- -------
Class A 565,914,522.88 528,724,564.98
Class A Percentage 96.249998% 96.058978%
Class C-B-1 8,525,470.00 8,387,473.63
Class C-B-1 Percentage 1.450001% 1.523841%
Class C-B-2 5,879,634.00 5,784.464.10
Class C-B-2 Percentage 1.000000% 1.050925%
Class C-B-3 2,645,835.00 2,603,008.54
Class C-B-3 Percentage 0.450000% 0.472916%
Class C-B-4 1,763,890.00 1,735,339.03
Class C-B-4 Percentage 0.300000% 0.315277%
Class C-B-5 1,469,908.00 1,446,115.53
Class C-B-5 Percentage 0.2500000% 0.26273131%
Class C-B-6 1,763,893.00 1,735,637.81
Class C-B-6 Percentage 0.300001% 0.315332%
</TABLE>
B-13
<PAGE>
EXHIBIT B (cont.)
REMITTANCE DATE STATEMENT FOR THE FIRST NATIONWIDE TRUST SERIES 1999-2
JANUARY 2000 DISTRIBUTION DATE
<TABLE>
<S> <C>
====================================================================================================================================
First Nationwide Trust Series 1999-2 Administrator: Mary Fonti
Mortgage Pass-Through Certificates, Series 1999-2 Bank One, NA
153 West 51st Street
STATEMENT TO CERTIFICATEHOLDERS New York, NY 10019
====================================================================================================================================
Distribution Date: 22-Feb-00
<CAPTION>
- ------------------------------------
DISTRIBUTION SUMMARY
----------------------------------------------------------
Current
Period Class Accrued
Original Face Beginning Current Principal Pass-Through Interest
Class Value (1) Principal Amount Distribution Rate Distributed (2)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
IPP-A-1 $181,704,000.00 $174,070,245.05 $429,959.73 6.50000% $942,880.49
IPP-A-2 $51,726,000.00 $49,020,793.46 $152,366.68 6.50000% $265,529.30
IPP-A-3 $6,232,000.00 $6,232,000.00 $0.00 6.50000% $33,756.67
IPP-A-4 $6,433,227.00 $6,433,227.00 $0.00 6.50000% $34,846.65
IIPP-A $41,384,024.00 $39,987,803.18 $ 39,715.17 6.50000% $216,600.60
III-A-1 $80,828,061.00 $70,328,601.78 $682,389.18 7.00000% $410,250.18
I-P $139,485.00 $137,313.25 $166.63 NA NA
III-X-1 $6,966,931.00 $6,186,767.65 NA 7.00000% $36,089.48
III-X-2 $3,529,549.00 $2,640,564.21 NA 7.00000% $15,403.29
C-B-1 $6,324,000.00 $6,268,939.64 $5,758.66 6.50000% $33,956.76
C-B-2 $3,162,900.00 $3,135,361.99 $2,880.15 6.50000% $16,983.21
C-B-3 $1,355,271.00 $1,343,471.23 $1,234.11 6.50000% $7,277.14
C-B-4 $1,204,685.00 $1,194,196.33 $1,096.99 6.50000% $6,468.56
C-B-5 $602,342.00 $597,097.66 $548.49 6.50000% $3,234.28
C-B-6 $903,518.36 $895,652.26 $822.75 6.50000% $4,851.45
- ----------------------------------------------------------------------------------------------
TOTAL: $381,999,513.36 $359,644,702.83 $1,316,938.54 $2,028,128.06
- ----------------------------------------------------------------------------------------------
<CAPTION>
- --------------------
DISTRIBUTION SUMMARY
----------------------------------------------------------
Realized Loss
Class Net of Principal Certificate Ending Current
PPIS and/or Interest Principal Amount
Class Allocation Writedown Shortfall (3) (4)
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
IPP-A-1 $0.00 $0.00 $0.00 $173,640,285.32
IPP-A-2 $0.00 $0.00 $0.00 $48,868,426.78
IPP-A-3 $0.00 $0.00 $0.00 $6,232,000.00
IPP-A-4 $0.00 $0.00 $0.00 $6,433,227.00
IIPP-A $0.00 $0.00 $0.00 $39,948,088.01
III-A-1 $0.00 $0.00 $0.00 $69,646,212.60
I-P NA $0.00 NA $137,146.62
III-X-1 $0.00 $0.00 $0.00 $6,147,574.15
III-X-2 $0.00 $0.00 $0.00 $2,604,413.25
C-B-1 $0.00 $0.00 $0.00 $6,263,180.98
C-B-2 $0.00 $0.00 $0.00 $3,132,481.84
C-B-3 $0.00 $0.00 $0.00 $1,342,237.12
C-B-4 $0.00 $0.00 $0.00 $1,193,099.34
C-B-5 $0.00 $0.00 $0.00 $596,549.17
C-B-6 $0.00 $0.00 $0.00 $894,829.51
- ----------------------------------------------------------------------
TOTAL: $0.00 $0.00 $0.00 $358,327,764.29
- ----------------------------------------------------------------------
</TABLE>
(1) Classes III-X-1 and III-X-2 are IO Certs, and the Balances reflected for
these Certs are Notional Amounts
(2) Represents payment of Deferred Amount for Class I-P
(3) Negative reflects repayment of Interest Shortfalls in prior periods
- --------------------------------------------------------------------------------
B-14
<PAGE>
<TABLE>
<S> <C>
====================================================================================================================================
First Nationwide Trust Series 1999-2 Administrator: Mary Fonti
Mortgage Pass-Through Certificates, Series 1999-2 Bank One, NA
153 West 51st Street
STATEMENT TO CERTIFICATEHOLDERS New York, NY 10019
====================================================================================================================================
</TABLE>
Distribution Date February 22, 2000
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Beginning Current Principal Interest Ending Current
Class Cusip Principal Amount Distribution Distribution Principal Amount
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
IPP-A-1 23321PV62 957.98796422 2.36626453 5.18910145 955.62169969
IPP-A-2 23321PV70 947.70122298 2.94564977 5.13338166 944.75557321
IPP-A-3 23321PV88 1000.00000000 0.00000000 5.41666720 1000.00000000
IPP-A-4 23321PV96 1000.00000000 0.00000000 5.41666725 1000.00000000
IIPP-A 23321PW20 966.26184008 0.95967396 5.23391829 965.30216612
III-A-1 23321PW38 870.10131024 8.44247866 5.07559101 861.65883158
I-P 23321PW87 984.43022547 1.19460874 NA 983.23561673
III-X-1 23321PX60 888.01907968 NA 5.18011159 882.39343110
III-X-2 23321PX78 748.13077091 NA 4.36409581 737.88839645
C-B-1 23321PY28 991.29342821 0.91060405 5.36950664 990.38282416
C-B-2 23321PY36 991.29343008 0.91060419 5.36950583 990.38282589
C-B-3 23321PY44 991.29342397 0.91060017 5.36950912 990.38282380
C-B-4 23321PY85 991.29343355 0.91060319 5.36950323 990.38283037
C-B-5 23321PY93 991.29341802 0.91059564 5.36950769 990.38282238
C-B-6 23321PZ27 991.29392346 0.91060684 5.36950904 990.38331662
- ------------------------------------------------------------------------------------------------
</TABLE>
B-15
<PAGE>
<TABLE>
<S> <C>
====================================================================================================================================
First Nationwide Trust Series 1999-2 Administrator: Mary Fonti
Mortgage Pass-Through Certificates, Series 1999-2 Bank One, NA
153 West 51st Street
STATEMENT TO CERTIFICATEHOLDERS New York, NY 10019
====================================================================================================================================
</TABLE>
Distribution Date February 22, 2000
Statement to Certificateholders
Pooling and Servicing Agreement Section 4.06 Dated March 1, 1999
i) Number and aggregate Stated Principal
balance of the Mortgage Loans
<TABLE>
<CAPTION>
Group 1 Group 2 Group 3 Group 4
------- ------- ------- -------
<S> <C> <C> <C> <C>
Number of Loans (excluding REO) 809 274 762 378
Scheduled Principal Balance $246,800,890.06 $41,880,661.27 $77,402,955.92 $129,725,814.38
Scheduled Principal $230,083.47 $35,683.39 $60,599.78 $95,652.89
Principal Prepayment (incl. curtailments) $363,104.34 $5,678.16 $634,545.82 $1,114,533.33
Insurance Proceeds $0.00 $0.00 $0.00 $0.00
Purchase Price $0.00 $0.00 $0.00 $0.00
Substitution Adjustment Amounts $0.00 $0.00 $0.00 $0.00
Liquidation Proceeds $0.00 $0.00 $0.00 $0.00
ii) Certificate Group principal percentages
Subordinate
Senior Senior Prepayment Subordinate Prepayment
Percentage Percentage Percentage Percentage
---------- ---------- ---------- ----------
Certificate Group 1 95.348763% 100.000000% NA NA
Certificate Group 2 95.386149% 100.000000% NA NA
Certificate Group C-B (related to Group 1) NA NA 4.651237% 0.000000%
Certificate Group C-B (related to Group 2) NA NA 4.613851% 0.000000%
Certificate Group 3 90.382516% 100.000000% NA NA
Certificate Group 4 89.784931% 100.000000% NA NA
Certificate Group D-B (related to Group 3) NA NA 9.617484% 0.000000%
Certificate Group D-B (related to Group 4) NA NA 10.215069% 0.000000%
iii) Fees and Penalties
Group 1 Group 2 Group 3 Group 4
------- ------- ------- -------
Servicing Fees 53,891.63 8,733.75 18,903.91 35,262.28
Excess Servicing Fees 88,860.52 18,005.02 NA 47,877.97
Prepayment Penalties 0.00 0.00 NA NA
</TABLE>
B-16
<PAGE>
<TABLE>
<S> <C>
====================================================================================================================================
First Nationwide Trust Series 1999-2 Administrator: Mary Fonti
Mortgage Pass-Through Certificates, Series 1999-2 Bank One, NA
153 West 51st Street
STATEMENT TO CERTIFICATEHOLDERS New York, NY 10019
====================================================================================================================================
</TABLE>
Distribution Date February 22, 2000
iv) Advances (based on Payments made
through the Determination Date)
Current Outstanding
------- -----------
Group 1 $753,110.58 $782,974.11
Group 2 $115,362.99 $128,707.70
Group 3 $450,945.16 $465,142.78
Group 4 $842,968.42 $919,941.72
------------------------------------
Aggregate $2,162,387.15 $2,296,766.31
v) Delinquency Information for Mortgage Loans a of the end of the Prior
Calendar Month (exclusive of Mortgage Loans in Foreclosure)
B-17
<PAGE>
<TABLE>
<S> <C>
====================================================================================================================================
First Nationwide Trust Series 1999-2 Administrator: Mary Fonti
Mortgage Pass-Through Certificates, Series 1999-2 Bank One, NA
153 West 51st Street
STATEMENT TO CERTIFICATEHOLDERS New York, NY 10019
====================================================================================================================================
</TABLE>
Distribution Date February 22, 2000
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
1-30 Days Delinquent 31-60 Days Delinquent 61-90 Days Delinquent 91 or more Days Delinquent
---------------------------------------------------------------------------------------------------------------------------
Count Scheduled Balance Count Scheduled Balance Count Scheduled Balance Count Schedule Balance
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Group 1 5 1,109,339.67 0 0.00 1 534,720.77 0 0.00
Group 2 6 943,450.88 0 0.00 0 0.00 0 0.00
Group 3 0 0.00 3 380,941.23 2 349,736.90 0 0.00
Group 4 12 4,063,383.26 4 1,236,460.84 2 716,115.88 0 0.00
---------------------------------------------------------------------------------------------------------------------------
Total 23 6,116,173.81 7 1,617,402.07 5 1,600,573.55 0 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Delinquency Information for Mortgage Loans in Foreclosure as of the end of the
Prior Calendar Month
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
1-30 Days Delinquent 31-60 Days Delinquent 61-90 Days Delinquent 91 or more Days Delinquent
---------------------------------------------------------------------------------------------------------------------------
Count Scheduled Balance Count Scheduled Balance Count Scheduled Balance Count Schedule Balance
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Group 1 0 0.00 0 0.00 0 0.00 2 367,139.27
Group 2 0 0.00 0 0.00 0 0.00 1 160,463.28
Group 3 0 0.00 0 0.00 0 0.00 0 0.00
Group 4 0 0.00 0 0.00 1 446,154.34 0 0.00
---------------------------------------------------------------------------------------------------------------------------
Total 0 $0.00 0 $0.00 1 $446,154.34 3 $527,602.55
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
iv) Scheduled Payments
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
Group 1 Group 2
-----------------------------------------------------------------------
Payments Due Delinq >= 60 Days Payments Due Delinq >= 60 Days
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
January - 00 $1,714,204.77 $19,829.95 $289,849.29 $8,951.20
December - 99 $1,721,060.12 $9,600.81 $290,629.70 $7,832.30
November - 99 $1,728,877.66 $7,015.85 $292,771.02 $6,713.40
October - 99 $1,738,061.44 $9,547.76 $294,334.19 $5,594.50
September - 99 $1,750,185.62 $4,684.72 $294,334.19 $4,475.60
August - 99 $1,751,920.44 $3,513.54 $295,853.68 $3,356.70
July - 99 $1,753,318.90 $2,342.36 $296,392.65 $2,237.80
June - 99 $1,757,785.60 $4,893.09 $296,773.72 $1,118.90
May - 99 $1,762,967.05 $1,171.18 $296,773.72 $0.00
April - 99 $1,765,872.03 $1,171.18 $296,773.72 $0.00
March - 99 $1,768,793.80 $0.00 $296,773.72 $0.00
- -------------------------------------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------------
Group 3 Group 4
--------------------------------------------------------------------
Payments Due Delinq >= 60 Days Payments Due Delinq >= 60 Days
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
January - 00 $587,834.28 $5,617.32 $983,224.38 $17,580.46
December - 99 $592,269.75 $0.00 $1,004,684.42 $13,102.10
November - 99 $599,702.67 $0.00 $1,015,294.92 $24,292.18
October - 99 $604,019.17 $0.00 $1,025,933.12 $7,861.26
September - 99 $611,725.33 $0.00 $1,039,396.91 $5,240.84
August - 99 $622,343.01 $7,860.05 $1,057,608.78 $0.00
July - 99 $629,269.46 $6,288.04 $1,086,475.49 $3,646.80
June - 99 $637,213.41 $10,013.48 $1,133,895.97 $8,391.11
May - 99 $646,758.22 $3,413.14 $1,147,156.58 $1,945.79
April - 99 $656,422.92 $1,572.01 $1,163,991.54 $2,184.48
March - 99 $662,955.92 $0.00 $1,187,818.23 $0.00
- ----------------------------------------------------------------------------------------
</TABLE>
B-18
<PAGE>
<TABLE>
<S> <C>
====================================================================================================================================
First Nationwide Trust Series 1999-2 Administrator: Mary Fonti
Mortgage Pass-Through Certificates, Series 1999-2 Bank One, NA
153 West 51st Street
STATEMENT TO CERTIFICATEHOLDERS New York, NY 10019
====================================================================================================================================
</TABLE>
Distribution Date February 22, 2000
vii) Mortgage Loans as to which the Mortgaged Property is an REO Property
<TABLE>
<CAPTION>
Count Outstanding Balance Market Value
----- ------------------- ------------
<S> <C> <C> <C>
Group 1 0 0.00 0.00
Group 2 0 0.00 0.00
Group 3 0 0.00 0.00
Group 4 0 0.00 0.00
-----------------------------------------------------
Total 0 0.00 0.00
viii) Realized Losses:
<CAPTION>
Current Outstanding
------- -----------
<S> <C> <C>
Group 1 0.00 0.00
Group 2 0.00 0.00
Group 3 0.00 0.00
Group 4 0.00 0.00
----------------------------------
Aggregate 0.00 0.00
<CAPTION>
ix) Loss Coverage Amounts:
Group 1 and 2 Group 3 and 4
------------- -------------
<S> <C> <C>
Special Hazard Loss Coverage Amount 4,586,491.46 2,967,676.62
Fraud Loss Coverage Amount 6,023,430.00 14,134,320.00
Bankruptcy Loss Coverage Amount 100,000.00 100,000.00
x) Loans becoming REO in the Preceding Month
Group Loan Number Principal Balance Date of Acquisition
----- ----------- ----------------- -------------------
</TABLE>
B-19
<PAGE>
RECONCILIATION REPORT
First Nationwide Trust Series 1999-2 ISSUE DATE : 30-Dec-97
Mortgage Pass-Through Certificates, DISTRIBUTION DATE: 25-Feb-00
Series 1999-2 DETERMINATION DATE: 15-Feb-00
RUN DATE: 15-Feb-00
11:36 AM
I. CASH RECONCILIATION
A. Computed Information
Total Collections - per Servicer Report A 2,023,801.07
Total Advances - per Servicer Report 2,300,367.13
-------------------
4,324,168.20
B.Cash Receipts from Servicer, net of service fees B 4,324,168.20
-------------------
-------------------
Difference between A and B 0.00
-------------------
- --------------------------------------------------------------------------------
II. DISTRIBUTION SUMMARY AND RECONCILIATION
- --------------------------------------------------------------------------------
A. Amounts Distributed:
Principal Distributed 1,458,738.39
Interest Distributed 2,861,276.89
Trustee Fee 4,152.19
A. 4,324,168.20
==================
B. Amounts Available:
Cash Receipts from Servicer, net of 4,324,168.20
service fees*
B. 4,324,168.20
==================
==================
Difference between A and B ($0.00)
==================
First Nationwide Remittance 2,203,345.45
IndyMac Remittance 1,201,193.54
PNC Remittance 919,629.21
-------------------
4,324,168.20
Total Remittance 4,324,168.20
-------------------
-------------------
Check
-------------------
B-20
<PAGE>
<TABLE>
<S> <C>
====================================================================================================================================
First Nationwide Trust Series 1999-3 Administrator: Mary Fonti
Mortgage Pass-Through Certificates, Series 1999-3 Bank One, NA
153 West 51st Street
STATEMENT TO CERTIFICATEHOLDERS New York, NY 10019
====================================================================================================================================
</TABLE>
Distribution Date February 22, 2000
<TABLE>
<CAPTION>
- ----------------------------------------
DISTRIBUTION SUMMARY
- --------------------------------------------------------------------------------------
Original Face Beginning Current Principal Current Period
Class Value Principal Amount Distribution Pass-Through Rate
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
IPP-A $391,989,639.00 $383,917,540.71 $793,322.36 6.50000%
IIPP-A-1 $95,867,000.00 $94,000,842.31 $575,247.71 6.50000%
IIPP-A-2 $22,364,000.00 $22,364,000.00 $0.00 6.50000%
IIPP-A-3 $13,136,228.00 $13,136,228.00 $0.00 6.50000%
II-P $18,655.00 $18,487.71 $20.66 N/A
C-B-1 $9,802,000.00 $9,726,084.92 $8,751.21 6.50000%
C-B-2 $4,902,621.00 $4,864,650.90 $4,377.05 6.50000%
C-B-3 $2,178,463.00 $2,161,591.12 $1,944.93 6.50000%
C-B-4 $1,906,155.00 $1,891,392.11 $1,701.81 6.50000%
C-B-5 $1,089,231.00 $1,080,795.05 $972.46 6.50000%
C-B-6 $1,361,540.38 $1,350,995.80 $1,215.58 6.50000%
A-R $100.00 $0.00 $0.00 6.50000%
- --------------------------------------------------------------------------------------
TOTAL: $544,615,632.38 $534,512,608.63 $1,387,553.77
- --------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------
DISTRIBUTION SUMMARY
- ------------------------------------------------------------------------------------------
Class Accrued Realized Loss of
Interest Principal and/or Certificate Interest Ending Current
Class Distributed (1) Writedown Shortfall (2) Principal Amount
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
IPP-A $2,079,553.35 $0.00 $0.00 $383,124,218.35
IIPP-A-1 $509,171.23 $0.00 $0.00 $93,425,594.60
IIPP-A-2 $121,138.33 $0.00 $0.00 $22,364,000.00
IIPP-A-3 $71,154.57 $0.00 $0.00 $13,136,228.00
II-P $0.00 $0.00 N/A $18,467.05
C-B-1 $52,682.96 $0.00 $0.00 $9,717,333.71
C-B-2 $26,350.19 $0.00 $0.00 $4,860,273.85
C-B-3 $11,708.62 $0.00 $0.00 $2,159,646.19
C-B-4 $10,245.04 $0.00 $0.00 $1,889,690.30
C-B-5 $5,854.31 $0.00 $0.00 $1,079,822.59
C-B-6 $7,317.89 $0.00 $0.00 $1,349,780.22
A-R $0.05 $0.00 $0.00 $0.00
- ------------------------------------------------------------------------------------------
TOTAL: $2,895,176.54 $0.00 $0.00 $533,125,054.86
- ------------------------------------------------------------------------------------------
</TABLE>
(1) Represents payment of Deferred Amount for Class II-P
(2) Negative reflects repayment of Interest Shortfalls in prior periods
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
Beginning Current Ending Current Principal
Class Cusip Principal Amount Principal Distribution Interest Distribution Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
IPP-A 23321PZ68 979.40736824 2.02383502 5.30512326 977.38353322
IIPP-A-1 23321PZ76 980.53388872 6.00047681 5.31122524 974.53341191
IIPP-A-2 23321PZ84 1000.00000000 0.00000000 5.41666652 1000.00000000
IIPP-A-3 23321PZ92 1000.00000000 0.00000000 5.41666679 1000.00000000
II-P 23321P2H0 991.03243098 1.10747789 0.00000000 989.92495310
C-B-1 23321P2M9 992.25514385 0.89279841 5.37471536 991.36234544
C-B-2 23321P2N7 992.25514271 0.89279795 5.37471487 991.36234475
C-B-3 23321P2P2 992.25514503 0.89279919 5.37471603 991.36234584
C-B-4 23321P2T4 992.25514714 0.89279728 5.37471507 991.36234986
C-B-5 23321P2U1 992.25513229 0.89279501 5.37471849 991.36233728
C-B-6 23321P2V9 992.25540413 0.89279761 5.37471390 991.36260652
A-R 23321P2L1 0.00000000 0.00000000 0.05000000 0.00000000
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
B-21
<PAGE>
<TABLE>
<S> <C>
====================================================================================================================================
First Nationwide Trust Series 1999-3 Administrator: Mary Fonti
Mortgage Pass-Through Certificates, Series 1999-3 Bank One, NA
153 West 51st Street
STATEMENT TO CERTIFICATEHOLDERS New York, NY 10019
====================================================================================================================================
</TABLE>
Distribution Date February 22, 2000
Statement to Certificateholders
Pooling and Servicing Agreement Section 4.06 Dated April 1, 1999
i) Number and aggregate Stated Principal Balance of the Mortgage Loans
<TABLE>
<CAPTION>
Group 1 Group 2 Group 3 Group 4
------- ------- ------- -------
<S> <C> <C> <C> <C>
Number of Loans (excluding REO) 1,168 480 764 2,412
Scheduled Principal Balance $398,894,500.18 $134,230,554.52 $268,343,525.36 $801,468,580.06
Scheduled Principal $360,437.03 $120,496.13 $208,115.77
Principal Prepayment (incl. curtailments) $447,119.24 $459,501.37 $1,302,490.67
Insurance Proceeds - Principal $0.00 $0.00 $0.00
Purchase Price - Principal $0.00 $0.00 $0.00
Substitution Adjustment Amounts - Principal $0.00 $0.00 $0.00
Liquidation Proceeds - Principal $0.00 $0.00 $0.00
ii) Certificate Group principal percentages
Subordinate
Senior Senior Prepayment Subordinate Prepayment
Percentage Percentage Percentage Percentage
---------- ---------- ---------- ----------
Certificate Group 1 96.050930% 100.000000% NA NA
Certificate Group 2 96.074699% 100.000000% NA NA
Certificate Group C-B (related to Group 1) NA NA 3.949070% 0.000000%
Certificate Group C-B (related to Group 2) NA NA 3.925301% 0.000000%
Certificate Group 3 92.138443% 100.000000% NA NA
Certificate Group III-B (related to Group 3) NA NA 7.861557% 0.000000%
iii) Fees and Penalties
Group 1 Group 2 Group 3
------- ------- -------
Servicing Fees 82,591.53 28,014.86 68,876.47
Excess Servicing Fees 66,533.83 44,365.64 104,674.85
Prepayment Penalties 0.00 0.00 0.00
iv) Advances (Based on Payments made through the Determination Date)
<CAPTION>
Current Outstanding
------- -----------
<S> <C> <C>
Group 1 $856,511.08 $859,236.18
Group 2 $338,525.15 $343,647.79
Group 3 $1,633,370.66 $1,920,370.35
------------- -------------
Aggregate $2,828,406.89 $3,123,254.32
</TABLE>
v) Delinquency Information for Mortgage Loans as of the end of the Prior
Calendar Month (exclusive of Mortgage Loans in Foreclosure)
B-22
<PAGE>
<TABLE>
<S> <C>
====================================================================================================================================
First Nationwide Trust Series 1999-3 Administrator: Mary Fonti
Mortgage Pass-Through Certificates, Series 1999-3 Bank One, NA
153 West 51st Street
STATEMENT TO CERTIFICATEHOLDERS New York, NY 10019
====================================================================================================================================
</TABLE>
Distribution Date February 22, 2000
Distribution Date: February-00
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
1-30 Days Delinquent 31-60 Days Delinquent 61-90 Days Delinquent 91 or more Days Delinquent
---------------------------------------------------------------------------------------------------------------------------
Count Scheduled Balance Count Scheduled Balance Count Scheduled Balance Count Schedule Balance
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Group 1 3 966,926.08 0 0.00 0 0 0 0.00
Group 2 1 237,220.89 1 253,053.37 0 0 0 0.00
Group 3 16 5,834,419.10 9 3,294,727.67 0 - 8 3,444,908.73
---------------------------------------------------------------------------------------------------------------------------
Total 20 7,038,566.07 10 3,547,781.04 0 0.00 8 3,444,908.73
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Delinquency Information for Mortgage loans in Foreclosure as of the end of the
Prior Calendar Month
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
1-30 Days Delinquent 31-60 Days Delinquent 61-90 Days Delinquent 91 or more Days Delinquent
---------------------------------------------------------------------------------------------------------------------------
Count Scheduled Balance Count Scheduled Balance Count Scheduled Balance Count Schedule Balance
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Group 1 0 0.00 0 0.00 0 0.00 0 0.00
Group 2 0 0.00 0 0.00 0 0.00 0 0.00
Group 3 0 0.00 0 0.00 0 0.00 0 0.00
---------------------------------------------------------------------------------------------------------------------------
Total 0 $0.00 0 $0.00 0 0.00 0 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
iv) Scheduled Payments
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Group 1 Group 2 Group 3
----------------------------------------------------------------------------------------------------------------
Payments Due Delinq >= 60 Days Payments Due Delinq >= 60 Days Payments Due Delinq >= 60 Days
- -------------------
<S> <C> <C> <C> <C> <C> <C>
January - 00 $2,677,946.08 $0.00 $924,123.68 $0.00 $1,975,617.80 $166,806.00
December - 99 $2,682,627.63 $0.00 $924,123.68 $0.00 $1,991,120.63 $146,423.46
November - 99 $2,684,524.78 $0.00 $924,123.68 $0.00 $2,016,253.18 $108,577.64
October - 99 $2,685,575.87 $0.00 $926,522.44 $0.00 $2,038,705.13 $86,177.00
September - 99 $2,687,843.08 $0.00 $926,522.44 $0.00 $2,062,897.46 $65,670.56
August - 99 $2,700,915.33 $0.00 $926,522.44 $13,813.50 $2,090,156.47 $56,498.40
July - 99 $2,702,279.69 $0.00 $926,522.44 $0.00 $2,126,689.15 $37,665.60
June - 99 $2,705,919.08 $0.00 $927,542.61 $1,783.00 $2,168,454.15 $18,832.80
May - 99 $2,707,232.94 $0.00 $927,542.61 $0.00 $2,209,999.20 $0.00
April - 99 $2,707,233.94 $0.00 $928,517.99 $0.00 $2,167,897.48 $0.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
B-23
<PAGE>
<TABLE>
<S> <C>
====================================================================================================================================
First Nationwide Trust Series 1999-3 Administrator: Mary Fonti
Mortgage Pass-Through Certificates, Series 1999-3 Bank One, NA
153 West 51st Street
STATEMENT TO CERTIFICATEHOLDERS New York, NY 10019
====================================================================================================================================
</TABLE>
Distribution Date February 22, 2000
vii) Mortgage Loans as to which the Mortgaged Property is an REO Property
<TABLE>
<CAPTION>
Count Outstanding Balance Market Value
----- ------------------- ------------
<S> <C> <C> <C>
Group 1 0
Group 2 0
Group 3 0
Group 4 0
---------------------------------------------------------------------
Total 0
viii) Realized Losses:
Current Cumulative
------- ----------
Group 1
Group 2
Group 3
Aggregate
ix) Loss Coverage Amounts:
Group 1 and 2 Group 3 and 4
------------- -------------
Special Hazard Loss Coverage Amount 8,033,648.55 3,092,416.58
Fraud Loss Coverage Amount 10,892,312.65 6,100,861.81
Bankruptcy Loss Coverage Amount 144,715.45 100,000.00
x) Loans becoming REO in the Preceding Mont
Group Loan Number Principal Balance Date of Acquisition
----- ----------- ----------------- -------------------
</TABLE>
B-24
<PAGE>
RECONCILIATION REPORT
First Nationwide Trust Series 1999-3 ISSUE DATE :
Mortgage Pass-Through Certificates, Series 1999-3 DISTRIBUTION DATE:
DETERMINIATION DATE:
RUN DATE:
- --------------------------------------------------------------------------------
I. CASH RECONCILIATION
- --------------------------------------------------------------------------------
A. Computed Information
Total Collection - per Servicer Report A 3,092,148.35
Total Advances - per Servicer Report 1,195,036.23
-----------------
4,287,184.58
B. Cash Receipts from Servicer, net of service fees B 4,287,184.58
-----------------
-----------------
Difference between A and B 0.00
-----------------
- --------------------------------------------------------------------------------
II. DISTRIBUTION SUMMARY AND RECONCILIATION
- --------------------------------------------------------------------------------
A. Amounts Distributed:
Principal Distributed 1,387,553.77
Interest Distributed 2,895,176.54
Trustee Fee 4,454.27
-----------------
A. 4,287,184.58
=================
B. Amounts Available:
Cash Receipts from Servicer, net of service fees* 4,287,184.58
B. 4,287,184.58
=================
=================
Difference between A and B $ 0.00
=================
First Nationwide Remittance 4,287,184.58
PNC Remittance 0.00
-----------------
4,287,184.58
Total Remittance 4,287,184.58
-----------------
Check 0.00
-----------------
B-25
<PAGE>
[This page intentionally left blank]
<PAGE>
EXHIBIT C
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered
Resecuritization Mortgage Trust Certificates, Series 2000-A (the "Global
Securities"), will be available only in book-entry form. Investors in the Global
Securities may hold such Global Securities through DTC, Clearstream or
Euroclear. The Global Securities will be traceable as home market instruments in
both the European and U.S. domestic markets. Initial settlement and all
secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through Clearstream and Euroclear will be conducted in the ordinary way in
accordance with their normal rules and operating procedures and in accordance
with conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between participants of Clearstream or
Euroclear and Participants holding Certificates will be effected on a
delivery-against-payment basis through the Relevant Depositaries of Clearstream
and Euroclear (in such capacity) and as Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
Initial Settlement
All Global Securities will be held in book-entry form by DTC in the name
of Cede & Co., as nominee of DTC. Investors' interests in the Global Securities
will be represented through financial institutions acting on their behalf as
direct and indirect participants in DTC. As a result, Clearstream and Euroclear
will hold positions on behalf of their participants through their Relevant
Depositaries, which in turn will hold such positions in accounts as
Participants.
Investors selecting to hold their Global Securities through DTC will
follow DTC settlement practice. Investor securities custody accounts will be
credited with their holdings against payment in same-day funds on the settlement
date.
Investors electing to hold their Global Securities through Clearstream or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to
securities custody accounts on the settlement date against payment in same-day
funds.
Secondary Market Trading
Because the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between Participants. Secondary market trading between
Participants will be settled using the procedures applicable to prior
asset-backed issues in same-day funds.
C-1
<PAGE>
Trading between Clearstream and/or Euroclear Participants. Secondary
market trading between Clearstream Participants or Euroclear Participants will
be settled using the Procedures applicable to conventional eurobonds in same day
funds.
Trading between DTC Seller and Clearstream or Euroclear Participants. When
Global Securities are to be transferred from the account of a Participant to the
account of a Clearstream Participant or a Euroclear Participant, the purchaser
will send instructions to Clearstream or Euroclear through a Clearstream
Participant or Euroclear Participant at least one Business Day prior to
settlement. Clearstream or Euroclear will instruct the respective Depositary, as
the case may be, to receive the Global Securities against payment. Payment will
include interest accrued on the Global Securities from and including the last
coupon payment date to and excluding the settlement date, on the basis of the
actual number of days in such accrual period and a year assumed to consist of
360 days. For transactions settling on the 31st of the month, payment will
include interest accrued to and excluding the first day of the following month.
Payment will then be made by the respective Depositary to the Participant's
account against delivery of the Global Securities. After settlement has been
completed, the Global Securities will be credited to the respective clearing
system and by the clearing system, in accordance with its usual procedures, to
the Clearstream Participant's or Euroclear Participant's account. The securities
credit will appear the next day (European time) and the cash debt will be
back-valued to, and the interest on the Global Securities will accrue from, the
value date (which would be the preceding day when settlement occurred in New
York). If settlement is not completed on the intended value date (I.E., the
trade fails), the Clearstream or Euroclear cash debt will be valued instead as
of the actual settlement date.
Clearstream Participants and Euroclear Participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to preposition
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within Clearstream or Euroclear. Under
this approach, they may take on credit exposure to Clearstream or Euroclear
until the Global Securities are credited to their accounts one day later.
As an alternative, if Clearstream or Euroclear has extended a line of
credit to them, Clearstream Participants or Euroclear Participants can elect not
to preposition funds and allow that credit line to be drawn upon to finance
settlement. Under this procedure, Clearstream Participants or Euroclear
Participants purchasing Global Securities would incur overdraft charges for one
day, assuming they clear the overdraft when the Global Securities are credited
to their accounts. However, interest on the Global Securities would accrue from
the value date. Therefore, in many cases the investment income on the Global
Securities earned during that one-day period may substantially reduce or offset
the amount of such overdraft charges, although this result will depend on each
Clearstream Participant's or Euroclear Participant's particular cost of funds.
Because the settlement is taking place during New York business hours,
Participants can employ their usual procedures for sending Global Securities to
the respective European Depositary for the benefit of Clearstream Participants
or Euroclear Participants. The sale proceeds will be available to the DTC seller
on the settlement date. Thus, to the Participants a cross-market transaction
will settle no differently than a trade between two Participants.
Trading between Clearstream or Euroclear Seller and DTC Purchaser. Due to
time zone differences in their favor, Clearstream Participants and Euroclear
Participants may employ their customary procedures for transactions in which
Global Securities are to be transferred by the respective clearing system,
through the respective Depositary, to a Participant. The seller will send
instructions to Clearstream or Euroclear through a Clearstream Participant or
Euroclear Participant at least one Business Day prior to settlement. In these
cases, Clearstream or Euroclear will instruct the Relevant Depositary, as
appropriate, to deliver the Global Securities to the Participant's account
against payment. Payment will include interest accrued on the Global Securities
from and including the last coupon payment to and excluding the settlement date
on the basis of the actual number of days in such accrual period and a year
assumed to consist of 360 days. For transactions settling on the 31st of the
month, payment will include interest accrued to and excluding the first day of
the following month. The payment will then be reflected in the account of the
Clearstream Participant or Euroclear Participant the following day, and receipt
of the cash proceeds in the Clearstream Participant's or Euroclear Participant's
account would be back-valued to the value date (which would be the preceding
day, when settlement occurred in New York). Should the Clearstream
C-2
<PAGE>
Participant or Euroclear Participant have a line of credit with its respective
clearing system and elect to be in debt in anticipation of receipt of the sale
proceeds in its account, the back valuation will extinguish any overdraft
incurred over that one-day period. If settlement is not completed on the
intended value date (i.e., the trade fails), receipt of the cash proceeds in the
Clearstream Participant's or Euroclear Participant's account would instead be
valued as of the actual settlement date.
Finally, day traders that use Clearstream or Euroclear and that purchase
Global Securities from Participants for delivery to Clearstream Participants or
Euroclear Participants should note that these trades would automatically fail on
the sale side unless affirmative action were taken. At least three techniques
should be readily available to eliminate this potential problem:
(a) borrowing through Clearstream or Euroclear for one day (until the
purchase side of the day trade is reflected in their Clearstream or Euroclear
accounts) in accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a Participant no
later than one day prior to settlement, which would give the Global Securities
sufficient time to be reflected in their Clearstream or Euroclear account in
order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the Participant is at least one day
prior to the value date for the sale to the Clearstream Participant or Euroclear
Participant.
Certain U.S. Federal Income Tax Documentation Requirements
A beneficial owner of Global Securities holding securities through
Clearstream or Euroclear (or through DTC if the holder has an address outside
the U.S.) will be subject to the 30% U.S. withholding tax that generally applies
to payments of interest (including original issue discount) on registered debt
issued by U.S. Persons, unless (i) each clearing system, bank or other financial
institution that holds customers' securities in the ordinary course of its trade
or business in the chain of intermediaries between such beneficial owner and the
U.S. entity required to withhold tax complies with applicable certification
requirements and (ii) such beneficial owner takes one of the following steps to
obtain an exemption or reduced tax rate:
Exemptions for non-U.S. Persons (Form W-8). Beneficial owners of
Global Securities that are Non-U.S. Persons can obtain a complete
exemption from the withholding tax by filing a signed Form W-8
(Certificate of Foreign Status). If the information shown on Form W-8
changes, a new Form W-8 must be filed within 30 days of such change.
Exemptions for non-U.S. Persons with Effectively Connected Income
(Form 4224). A non-U.S. Person, including a non U.S. corporation or bank
with a U.S. branch, for which the interest income is effectively connected
with its conduct of a trade or business in the United States, can obtain
an exemption from the withholding tax by filing Form 4224 (Exemption from
Withholding of Tax on Income Effectively Connected with the Conduct of a
Trade of Business in the United States).
Exemption or Reduced Rate for Non-U.S. Persons Resident in Treaty
Countries (Form 1001). Non-U.S. Persons residing in a country that has a
tax treaty with the United States can obtain an exemption or reduced tax
rate depending on the treaty terms) by filing Form 1001 (Ownership,
Exemption or Reduced Rate Certificate). If the treaty provides only for a
reduced rate, withholding tax will be imposed at that rate unless the
filer alternatively files Form W-8. Form 1001 may be filed by the
beneficial owners or their agents.
C-3
<PAGE>
Exemptions for U.S. Persons (Form W-9). U.S. Persons can obtain a
complete exemption from the withholding tax by filing Form W-9 (Payer's
Request for Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The beneficial owner of
a Global Security or, in the case of a Form 1001 or a Form 4224 filer, his
agent, files by submitting the appropriate form to the person through whom
it holds (the clearing agency, in the case of persons holding directly on
the books of the clearing agency). Form W-8 and Form 1001 are effective
for three calendar years, and Form 4224 is effective for one calendar
year.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States, any state thereof or the District of Columbia, (iii) an estate
that is subject to United States federal income tax, regardless of the source of
its income or (iv) a trust if (a) a court in the United States is able to
exercise primary supervision over the administration of the trust, and (b) one
or more United States persons have the authority to control all substantial
decisions of the trust. The term "Non-U.S. Person means any person who is not a
U.S. Person. This summary does not deal with all aspects of U.S. federal income
tax withholding that may be relevant to foreign holders of Global Securities or
with the application of recently issued Treasury Regulations relating to tax
documentation requirements that are generally effective with respect to payments
made after December 31, 2000. Investors are advised to consult their own tax
advisors for specific tax advice concerning their holding and disposing of
Global Securities.
C-4
<PAGE>
PROSPECTUS
Mortgage Pass-Through Certificates
(Issuable in Series)
GREENWICH CAPITAL ACCEPTANCE, INC.
Depositor
- --------------------------------------------------------------------------------
Consider carefully the risk factors beginning on page 5 of this prospectus.
The certificates represent obligations of the trust only and do not represent an
interest in or obligation of the depositor, the seller, the master servicer or
any of their affiliates.
This prospectus may be used to offer and sell the securities only if
accompanied by a prospectus supplement.
- --------------------------------------------------------------------------------
The Certificates
Greenwich Capital Acceptance, Inc., as depositor, will sell the certificates.
Each issue of certificates will have its own series designation and will
evidence the ownership of certain trust assets.
Each series of certificates will consist of one or more classes. Each class of
certificates will represent the entitlement to a specified portion of future
interest payments and a specified portion of future principal payments on the
assets in the related trust. In each case, the specified portion may equal from
100% to 0%. A series may include one or more classes of securities that are
senior in right of payment to one or more other classes. One or more classes of
securities may be entitled to receive distributions of principal, interest or
both prior to one or more other classes or before or after certain specified
events have occurred. The related prospectus supplement will specify each of
these features.
The Trust and Its Assets
As specified in the related prospectus supplement, the assets of a trust will
include primarily the following:
o mortgage loans secured by senior liens on one- to four-family
residential properties or participation interests in loans of this
type;
o mortgage loans secured by senior liens on multifamily residential
properties (including cooperative apartment buildings) or
participation interests in loans of this type;
o conditional sales contracts, installment sales agreements or loan
agreements secured by manufactured housing;
o mortgage pass-through securities issued or guaranteed by the
Government National Mortgage Association (Ginnae Mae), the Federal
National Mortgage Association (Fannie Mae) or the Federal Home Loan
Mortgage Corporation (Freddie Mac); or
o private mortgage-backed securities.
Each trust may be subject to early termination in certain circumstances.
Market for the Certificates
No market will exist for the certificates of any series before they are issued.
In addition, even after the certificates of a series have been issued and sold,
there can be no assurance that a resale market will develop.
Offers of the Certificates
Offers of the certificates may be made through one or more different methods,
including through underwriters. All certificates will be distributed by, or sold
through underwriters managed by, Greenwich Capital Markets, Inc.
Neither the Securities and Exchange Commission nor any state securities
commission has approved these securities or determined that this prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.
February 25, 2000
<PAGE>
TABLE OF CONTENTS
IMPORTANT NOTICE ABOUT INFORMATION IN THIS PROSPECTUS
AND EACH ACCOMPANYING PROSPECTUS SUPPLEMENT ............................. 4
RISK FACTORS .............................................................. 5
THE TRUST FUND ............................................................ 12
The Mortgage Loans--General ............................................... 12
Single Family Loans ....................................................... 15
Multifamily Loans ......................................................... 15
Contracts ................................................................. 16
Agency Securities ......................................................... 16
Private Mortgage-Backed Securities ........................................ 21
Incorporation of Certain Information by Reference ......................... 22
USE OF PROCEEDS ........................................................... 22
THE DEPOSITOR ............................................................. 22
MORTGAGE LOAN PROGRAM ..................................................... 23
Underwriting Standards .................................................... 23
Qualifications of Sellers ................................................. 24
Representations by Sellers; Repurchases ................................... 24
DESCRIPTION OF THE CERTIFICATES ........................................... 25
General ................................................................... 25
Distributions on Certificates ............................................. 27
Advances .................................................................. 29
Reports to Certificateholders ............................................. 30
CREDIT ENHANCEMENT ........................................................ 31
General ................................................................... 31
Subordination ............................................................. 32
Mortgage Pool Insurance Policies .......................................... 32
FHA Insurance; VA Guarantees .............................................. 33
Special Hazard Insurance Policies ......................................... 35
Bankruptcy Bonds .......................................................... 36
FHA Insurance on Multifamily Loans ........................................ 36
Reserve Accounts .......................................................... 37
Cross Support ............................................................. 37
Other Insurance, Surety Bonds, Guaranties, Letters of
Credit and Similar Instruments or Agreements ............................ 38
YIELD AND PREPAYMENT CONSIDERATIONS ....................................... 38
THE POOLING AND SERVICING AGREEMENT ....................................... 39
Assignment of Mortgage Assets ............................................. 40
Payments on Mortgage Loans; Deposits to Certificate Account ............... 41
Sub-Servicing by Sellers .................................................. 43
Collection Procedures ..................................................... 44
Hazard Insurance .......................................................... 45
Realization upon Defaulted Mortgage Loans ................................. 46
Servicing and Other Compensation and Payment of Expenses .................. 47
Evidence as to Compliance ................................................. 48
Certain Matters Regarding the Master Servicer and the Depositor ........... 48
Events of Default ......................................................... 49
Rights upon Event of Default .............................................. 49
Amendment ................................................................. 49
Termination; Optional Termination ......................................... 50
The Trustee ............................................................... 50
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS ............................... 50
General ................................................................... 51
Foreclosure/Repossession .................................................. 53
Environmental Risks ....................................................... 55
2
<PAGE>
Rights of Redemption ...................................................... 56
Anti-Deficiency Legislation and Other Limitations on Lenders .............. 57
Due-on-Sale Clauses ....................................................... 58
Prepayment Charges ........................................................ 58
Applicability of Usury Laws ............................................... 58
Soldiers' and Sailors' Civil Relief Act ................................... 59
CERTAIN FEDERAL INCOME TAX CONSEQUENCES ................................... 59
General ................................................................... 59
NON-REMIC CERTIFICATES .................................................... 59
Single Class of Senior Certificates ....................................... 59
Multiple Classes of Senior Certificates ................................... 63
Possible Application of Contingent Payment Regulations
to Certain Non-REMIC Certificates ........................................ 66
Sale or Exchange of a Senior Certificate .................................. 66
Non-U.S. Persons .......................................................... 67
Information Reporting and Backup Withholding .............................. 67
New Withholding Regulations ............................................... 68
REMIC CERTIFICATES ........................................................ 68
Tiered REMIC Structures ................................................... 69
Regular Certificates ...................................................... 69
Residual Certificates ..................................................... 77
Prohibited Transactions and Other Taxes ................................... 81
Liquidation and Termination ............................................... 81
Administrative Matters .................................................... 81
Tax-Exempt Investors ...................................................... 82
Non-U.S. Persons .......................................................... 82
Tax-Related Restrictions on Transfers of Residual Certificates ............ 82
STATE TAX CONSIDERATIONS .................................................. 84
ERISA CONSIDERATIONS ...................................................... 85
LEGAL INVESTMENT .......................................................... 87
METHOD OF DISTRIBUTION .................................................... 88
LEGAL MATTERS ............................................................. 89
FINANCIAL INFORMATION ..................................................... 90
AVAILABLE INFORMATION ..................................................... 90
RATINGS ................................................................... 90
INDEX OF DEFINED TERMS .................................................... 91
3
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION IN THIS PROSPECTUS
AND EACH ACCOMPANYING PROSPECTUS SUPPLEMENT
Information about each series of certificates is contained in two separate
documents:
o this prospectus, which provides general information, some of which
may not apply to a particular series; and
o the accompanying prospectus supplement for a particular series,
which describes the specific terms of the certificates of that
series. If the prospectus supplement contains information about a
particular series that differs from the information contained in
this prospectus, you should rely on the information in the
prospectus supplement.
You should rely only on the information contained in this prospectus and the
accompanying prospectus supplement. We have not authorized anyone to provide you
with information that is different from that contained in this prospectus and
the accompanying prospectus supplement. The information in this prospectus is
accurate only as of the date of this prospectus.
Beginning with the section titled "The Trust Fund", certain capitalized terms
are used in this prospectus to assist you in understanding the terms of the
certificates. The capitalized terms used in this prospectus are defined on the
pages indicated under the caption "Index of Defined Terms" beginning on page 90
of this prospectus.
---------------------
If you require additional information, the mailing address of our principal
executive offices is Financial Asset Securities Corp., 600 Steamboat Road,
Greenwich, Connecticut 06830 and the telephone number is (203) 625-2756. For
other means of acquiring additional information about us or a series of
securities, see "The Trust Fund --- Incorporation of Certain Information by
Reference" beginning on page 22 of this prospectus.
--------------------
4
<PAGE>
RISK FACTORS
You should carefully consider the following information, since it identifies
certain significant sources of risk associated with an investment in the
certificates.
Limited Liquidity .................... No market will exist for the
certificates of any series before they
are issued. In addition, there can be no
assurance that a resale market will
develop following the issuance and sale
of any series of the certificates. Even
if a resale market does develop, it
might not provide investors with
liquidity of investment or continue for
the life of the certificates.
Limited Assets ....................... Unless the applicable prospectus
supplement provides otherwise, the
certificates of each series will be
payable solely from the assets of the
related trust, including any applicable
credit enhancement, and will not have a
claim against the assets of any other
trust. Moreover, at the times specified
in the related prospectus supplement,
certain assets of the trust (and/or the
related security account) may be
released to the depositor, master
servicer, any servicer, credit
enhancement provider or other specified
person, if:
o all payments then due on the
related certificates have been
made;
o adequate provision for future
payments on certain classes of the
certificates has been made; and
o any other payments specified in the
related prospectus supplement have
been made.
Once released, such assets will no
longer be available to make payments to
certificateholders.
There will be no recourse against the
depositor or the master servicer if any
required distribution on the
certificates is not made.
The certificates will not represent an
interest in the depositor, the master
servicer, any servicer or any of their
respective affiliates, nor will the
certificates represent an obligation of
any of them. The only obligations of the
depositor with respect to the related
trust or the certificates would arise
from the representations and warranties
that the depositor may make concerning
the related trust assets. The depositor
does not have significant assets and is
unlikely to have significant assets in
the future. If the depositor should be
required to repurchase a loan from a
trust because of the breach of a
representation or warranty, the
depositor's sole source of funds for the
5
<PAGE>
repurchase would be:
o funds obtained from enforcing any
similar obligation of the seller or
originator of the loan, or
o funds from a reserve account or
similar credit enhancement
established to pay for loan
repurchases.
In addition, the master servicer may be
obligated to make certain advances if
loans are delinquent, but only to the
extent it deems the advances to be
recoverable from amounts it expects to
receive on those loans.
Credit Enhancement ................... Credit enhancement is intended to reduce
the effect of delinquent payments or
loan losses on those classes of
certificates that have the benefit of
the credit enhancement. Nevertheless,
the amount of any credit enhancement is
subject to the limits described in the
related prospectus supplement. Moreover,
the amount of credit enhancement may
decline or be depleted under certain
circumstances before the certificates
are paid in full. As a result,
certificateholders may suffer losses. In
addition, credit enhancement may not
cover all potential sources of risk of
loss, such as fraud or negligence by a
loan originator or other parties.
Prepayment and Yield Considerations .. The timing of principal payments on the
certificates of a series will be
affected by a number of factors,
including the following:
o the extent of prepayments on the
underlying loans in the trust or,
if the trust is comprised of
underlying securities, on the loans
backing the underlying securities;
o how payments of principal are
allocated among the classes of
certificates of that series as
specified in the related prospectus
supplement;
o if any party has an option to
terminate the related trust early,
the effect of the exercise of the
option;
o the rate and timing of defaults and
losses on the assets in the related
trust; and
o repurchases of assets in the
related trust as a result of
material breaches of
representations and warranties made
by the depositor or master
servicer.
The rate of prepayment of the loans
included in or underlying the assets in
each trust may affect the yield to
maturity of the certificates.
6
<PAGE>
Interest payable on the certificates on
any given distribution date will include
all interest accrued during the related
interest accrual period. The interest
accrual period for the certificates of
each series will be specified in the
applicable prospectus supplement. If the
interest accrual period ends two or more
days before the related distribution
date, your effective yield will be less
than it would be if the interest accrual
period ended the day before the
distribution date. As a result, your
effective yield at par would be less
than the indicated coupon rate.
Balloon Payments ..................... Certain of the underlying loans may not
be fully amortizing and may require a
substantial principal payment (i.e., a
"balloon" payment) at their stated
maturity. Loans of this type involve a
greater degree of risk than fully
amortizing loans since the related
borrower must generally be able to
refinance the loan or sell the related
property prior to the loan's maturity
date. The borrower's ability to do so
will depend on such factors as the level
of available mortgage rates at the time
of sale or refinancing, the relative
strength of the local housing market,
the borrower's equity in the property,
the borrower's general financial
condition and tax laws.
Nature of Mortgages .................. The following factors, among others,
could adversely affect property values
in such a way that the outstanding
balance of the related loans would equal
or exceed those values:
o an overall decline in the
residential real estate markets
where the properties are located,
o failure of borrowers to maintain
their properties adequately, and
o natural disasters that are not
necessarily covered by hazard
insurance, such as earthquakes and
floods.
If property values decline, actual rates
of delinquencies, foreclosures and
losses on the underlying loans could be
higher than those currently experienced
by the mortgage lending industry in
general.
Even if you assume that the properties
provide adequate security for the loans,
substantial delays could occur before
defaulted loans are liquidated and the
proceeds forwarded to investors.
Property foreclosure actions are
regulated by state statutes and rules
and are subject to many of the delays
and expenses that characterize other
types of lawsuits if defenses or
counterclaims are made. As a result,
foreclosure actions can sometimes take
several years to complete. Moreover,
some states prohibit a mortgage lender
from obtaining a judgment against the
borrower for amounts not covered by
property proceeds if the property is
sold outside of a judicial proceeding.
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As a result, if a borrower defaults,
these restrictions may impede the
servicer's ability to dispose of the
borrower's property and obtain
sufficient proceeds to repay the loan in
full. In addition, the servicer is
entitled to deduct from liquidation
proceeds all the expenses it reasonably
incurs in trying to recover on the
defaulted loan, including legal fees and
costs, real estate taxes, and property
preservation and maintenance expenses.
State laws generally regulate interest
rates and other loan charges, require
certain disclosures, and often require
licensing of loan originators and
servicers. In addition, most states have
other laws and public policies for the
protection of consumers that prohibit
unfair and deceptive practices in the
origination, servicing and collection of
loans. Depending on the provisions of
the particular law or policy and the
specific facts and circumstances
involved, violations may limit the
ability of the servicer to collect
interest or principal on the loans.
Also, the borrower may be entitled to a
refund of amounts previously paid and
the servicer may be subject to damage
claims and administrative sanctions.
Environmental Risks .................. Federal, state and local laws and
regulations impose a wide range of
requirements on activities that may
affect the environment, health and
safety. In certain circumstances, these
laws and regulations impose obligations
on owners or operators of residential
properties such as those that secure the
loans included in a trust. Failure to
comply with these laws and regulations
can result in fines and penalties that
could be assessed against the trust as
owner of the related property.
In some states, a lien on the property
due to contamination has priority over
the lien of an existing mortgage.
Further, a mortgage lender may be held
liable as an "owner" or "operator" for
costs associated with the release of
petroleum from an underground storage
tank under certain circumstances. If the
trust is considered the owner or
operator of a property, it will suffer
losses as a result of any liability
imposed for environmental hazards on the
property.
Certain Other Legal Considerations
Regarding the Loans .................. The loans may also be subject to federal
laws relating to the origination and
underwriting. These laws
o require certain disclosures to the
borrowers regarding the terms of
the loans;
o prohibit discrimination on the
basis of age, race, color, sex,
religion, marital status, national
origin, receipt of public
assistance or the exercise of any
right under the consumer
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credit protection act, in the
extension of credit;
o regulate the use and reporting of
information related to the
borrower's credit experience; and
o require additional application
disclosures, limit changes that may
be made to the loan documents
without the borrower's consent and
restrict a lender's ability to
declare a default or to suspend or
reduce a borrower's credit limit to
certain enumerated events.
Certain loans are also subject to
federal laws which impose additional
disclosure requirements on creditors
with respect to non-purchase money
mortgage loans with high interest rates
or high up-front fees and charges. These
laws can impose specific statutory
liabilities upon creditors that fail to
comply and may affect the enforceability
of the related loans. In addition, any
assignee of the creditor (including the
trust) would generally be subject to all
claims and defenses that the borrower
could assert against the creditor,
including the right to rescind the loan.
Certain loans relating to home
improvement contracts are subject to
federal laws that protect the borrower
from defective or incomplete work by a
contractor. These laws permit the
borrower to withhold payment if the work
does not meet the quality and durability
standards agreed to between the borrower
and the contractor. These laws have the
effect of subjecting any assignee of the
seller (including the trust) to all
claims and defenses which the borrower
in a sale transaction could assert
against the seller of defective goods.
If certain provisions of these federal
laws are violated, the master servicer
may be unable to collect all or part of
the principal or interest on the loans.
The trust also could be subject to
damages and administrative enforcement.
Ratings of the Certificates .......... Any class of certificates issued under
this prospectus and the accompanying
prospectus supplement will be rated in
one of the four highest rating
categories of a nationally recognized
rating agency. A rating is based on the
adequacy of the value of the trust
assets and any credit enhancement for
that class and reflects the rating
agency's assessment of how likely it is
that holders of the class of
certificates will receive the payments
to which they are entitled. A rating
does not constitute an assessment of how
likely it is that principal prepayments
on the underlying loans will be made,
the degree to which the rate of
prepayments might differ from that
originally anticipated or the likelihood
of early, optional termination of the
certificates. You must not view a rating
as a recommendation to purchase, hold or
sell certificates because it does not
address the market price
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<PAGE>
or suitability of the certificates for
any particular investor.
There is no assurance that any rating
will remain in effect for any given
period of time or that the rating agency
will not lower or withdraw it entirely
in the future. The rating agency could
lower or withdraw its rating due to:
o any decrease in the adequacy of the
value of the trust assets or any
related credit enhancement,
o an adverse change in the financial
or other condition of a credit
enhancement provider or
o a change in the rating of the
credit enhancement provider's
long-term debt.
Book-Entry Registration .............. Limit on Liquidity of Certificates.
Certificates issued in book-entry form
may have only limited liquidity in the
resale market, since investors may be
unwilling to purchase certificates for
which they cannot obtain physical
instruments.
Limit on Ability to Transfer or Pledge.
Transactions in book-entry certificates
can be effected only through The
Depository Trust Company ("DTC"), its
participating organizations, its
indirect participants and certain banks.
As a result, your ability to transfer or
pledge certificates issued in book-entry
form may be limited.
Delays in Distributions. You may
experience some delay in the receipt of
distributions on book-entry certificates
since the distributions will be
forwarded by the trustee to DTC for DTC
to credit the accounts of its
participants. In turn, these
participants will thereafter credit the
distributions to your account either
directly or indirectly through indirect
participants.
Pre-Funding Accounts ................. The related prospectus supplement may
provide that the depositor deposit a
specified amount in a pre-funding
account on the date the securities are
issued. In this case, the deposited
funds may only be used to acquire
additional assets for the trust during a
set period after the initial issuance of
the certificates. Any amounts remaining
in the account at the end of the period
will be distributed as a prepayment of
principal to the holders of the related
certificates.
Lower Credit Quality Trust
Fund Assets .......................... Certain of the trust assets may have
been made to lower credit quality
borrowers who fall into one of two
categories:
o customers with moderate income,
limited assets and other income
characteristics that cause
difficulty in borrowing
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<PAGE>
from banks and other traditional
lenders; and
o customers with a history of
irregular employment, previous
bankruptcy filings, repossession of
property, charged-off loans or
garnishment of wages.
The average interest rate charged on
loans made to these types of borrowers
is generally higher than that charged by
lenders that typically impose more
stringent credit requirements. There is
a greater likelihood of late payments on
loans made to these types of borrowers
than on loans to borrowers with a higher
credit quality. Payments from borrowers
with a lower credit quality are more
likely to be sensitive to changes in the
economic climate in the areas in which
they reside.
Delinquent Trust Fund Assets ......... No more than 20% (by principal balance)
of the trust assets for any particular
series of certificates will be
contractually delinquent as of the
related cut-off date.
Other Considerations ................. There is no assurance that the value of
the trust assets for any series of
certificates at any time will equal or
exceed the principal amount of the
outstanding certificates of the series.
If trust assets have to be sold because
of an event of default or otherwise,
providers of services to the trust
(including the trustee, the master
servicer and the credit enhancer, if
any) generally will be entitled to
receive the proceeds of the sale to the
extent of their unpaid fees and other
amounts due them before any proceeds are
paid to investors. As a result, the
proceeds of such a sale may be
insufficient to pay the full amount of
interest and principal of the related
certificates.
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<PAGE>
THE TRUST FUND
The trust fund (each, a "Trust Fund") for each series (each, a "Series")
of Mortgage Pass-Through Certificates (the "Certificates") will be held by the
Trustee for the benefit of the related Certificateholders. Each Trust Fund will
consist of certain mortgage-related assets (the "Mortgage Assets") consisting of
(A) a mortgage pool (a "Mortgage Pool") comprised of (i) first lien mortgage
loans (or participation interests therein) secured by one- to four-family
residential properties ("Single Family Loans"), (ii) first lien mortgage loans
(or participation interests therein) secured by multifamily residential
properties, including cooperative apartment buildings ("Multifamily Loans"),
(iii) conditional sales contracts and installment sales or loan agreements
secured by manufactured housing ("Contracts"), (iv) mortgage pass-through
securities (the "Agency Securities") issued or guaranteed by the Government
National Mortgage Association ("GNMA"), the Federal National Mortgage
Association ("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC") or
(v) Private Mortgage-Backed Securities (as defined herein), in each case, as
specified in the related Prospectus Supplement, together with payments in
respect of such Mortgage Assets and certain other accounts, obligations or
agreements, in each case as specified in the related Prospectus Supplement.
The Certificates* will be entitled to payment from the assets of the
related Trust Fund or Funds or other assets pledged for the benefit of the
holders of the Certificates as specified in the related Prospectus Supplement
and will not be entitled to payments in respect of the assets of any other trust
fund established by the Depositor. Unless otherwise specified in the related
Prospectus Supplement, the Mortgage Assets of any Trust Fund will consist of
Mortgage Loans, Agency Securities or Private Mortgage-Backed Securities but not
a combination thereof.
The Mortgage Loans and Agency Securities will be acquired by the
Depositor, either directly or through affiliates, from originators or sellers
which may be affiliates of the Depositor (the "Sellers"), and conveyed by the
Depositor to the related Trust Fund. Mortgage Loans acquired by the Depositor
will have been originated in accordance with the underwriting criteria specified
below under "Mortgage Loan Program--Underwriting Standards" or as otherwise
described in a related Prospectus Supplement. See "Mortgage Loan
Program--Underwriting Standards".
The following is a brief description of the Mortgage Assets expected to be
included in the Trust Funds. If specific information respecting the Mortgage
Assets is not known at the time the related Series of Certificates initially is
offered, more general information of the nature described below will be provided
in the related Prospectus Supplement, and specific information will be set forth
in a report on Form 8-K to be filed with the Securities and Exchange Commission
within fifteen days after the initial issuance of such Certificates (the
"Detailed Description"). A copy of the Agreement with respect to each Series of
Certificates will be attached to the Form 8-K and will be available for
inspection at the corporate trust office of the Trustee specified in the related
Prospectus Supplement. A schedule of the Mortgage Assets relating to such Series
will be attached to the Agreement delivered to the Trustee upon delivery of the
Certificates.
The Mortgage Loans--General
For purposes hereof, Single Family Loans, Multifamily Loans and Contracts
are collectively referred to as "Mortgage Loans", and the real property and
Manufactured Homes, as the case may be, which secure repayment of the Mortgage
Loans are collectively referred to as "Mortgaged Properties". The Mortgaged
Properties may be located in any one of the fifty states, the District of
Columbia, Guam, Puerto Rico or any other territory of the United States.
Mortgage Loans with certain Loan-to-Value Ratios and/or certain principal
balances may be covered wholly or partially by primary mortgage guaranty
insurance policies (each, a "Primary Mortgage Insurance
- ----------
* Whenever the terms "Mortgage Pool" and "Certificates" are used in this
Prospectus, such terms will be deemed to apply, unless the context indicates
otherwise, to one specific Mortgage Pool and the Certificates representing
certain undivided interests, as described below, in a single Trust Fund
consisting primarily of the Mortgage Loans in such Mortgage Pool. Similarly, the
term "Pass-Through Rate" will refer to the Pass-Through Rate borne by the
Certificates of one specific Series and the term "Trust Fund" will refer to one
specific Trust Fund.
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<PAGE>
Policy"). The existence, extent and duration of any such coverage will be
described in the applicable Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, all of
the Mortgage Loans in a Mortgage Pool** will have monthly payments due on the
first day of each month. The payment terms of the Mortgage Loans to be included
in a Trust Fund will be described in the related Prospectus Supplement and may
include any of the following features or combination thereof or other features
described in the related Prospectus Supplement:
(a) Interest may be payable at a fixed rate, a rate adjustable from
time to time in relation to an index (which will be specified in the
related Prospectus Supplement), a rate that is fixed for a period of time
or under certain circumstances and is followed by an adjustable rate, a
rate that otherwise varies from time to time or a rate that is convertible
from an adjustable rate to a fixed rate. Changes to an adjustable rate may
be subject to periodic limitations, maximum rates, minimum rates or a
combination of such limitations. Accrued interest may be deferred and
added to the principal of a loan for such periods and under such
circumstances as may be specified in the related Prospectus Supplement.
Mortgage Loans may provide for the payment of interest at a rate lower
than the specified interest rate borne by such Mortgage Loan (the
"Mortgage Rate") for a period of time or for the life of the loan, and the
amount of any difference may be contributed from funds supplied by the
seller of the Mortgaged Property or another source.
(b) Principal may be payable on a level debt service basis to fully
amortize the Mortgage Loan over its term, may be calculated on the basis
of an assumed amortization schedule that is significantly longer than the
original term to maturity or on an interest rate that is different from
the interest rate on the Mortgage Loan or may not be amortized during all
or a portion of the original term. Payment of all or a substantial portion
of the principal may be due on maturity (a "balloon payment"). Principal
may include interest that has been deferred and added to the principal
balance of the Mortgage Loan.
(c) Monthly payments of principal and interest may be fixed for the
life of the Mortgage Loan, may increase over a specified period of time or
may change from period to period. Mortgage Loans may include limits on
periodic increases or decreases in the amount of monthly payments and may
include maximum or minimum amounts of monthly payments.
(d) Prepayments of principal may be subject to a prepayment fee,
which may be fixed for the life of the Mortgage Loan or may decline over
time, and may be prohibited for the life of the Mortgage Loan or for
certain periods ("lockout periods"). Certain Mortgage Loans may permit
prepayments after expiration of the applicable lockout period and may
require the payment of a prepayment fee in connection with any such
subsequent prepayment. Other Mortgage Loans may permit prepayments without
payment of a fee unless the prepayment occurs during specified time
periods. The Mortgage Loans may include "due-on-sale" clauses which permit
the mortgagee to demand payment of the entire Mortgage Loan in connection
with the sale or certain transfers of the related Mortgaged Property.
Other Mortgage Loans may be assumable by persons meeting the then
applicable underwriting standards of the Seller.
Each Prospectus Supplement will contain information, as of the date of
such Prospectus Supplement and to the extent then specifically known to the
Depositor, with respect to the Mortgage Loans contained in the related Mortgage
Pool, including (i) the aggregate outstanding principal balance and the average
outstanding principal balance of the Mortgage Loans as of the applicable Cut-off
Date, (ii) the type of property securing each Mortgage Loan (e.g., one- to
four-family houses, individual units in condominium projects or in buildings
owned by
- ----------
* Whenever the terms "Mortgage Pool" and "Certificates" are used in this
Prospectus, such terms will be deemed to apply, unless the context
indicates otherwise, to one specific Mortgage Pool and the Certificates
representing certain undivided interests, as described below, in a single
Trust Fund consisting primarily of the Mortgage Loans in such Mortgage
Pool. Similarly, the term "Pass-Through Rate" will refer to the
Pass-Through Rate borne by the Certificates of one specific Series and the
term "Trust Fund" will refer to one specific Trust Fund.
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<PAGE>
cooperative housing corporations, vacation and second homes, Manufactured Homes,
multifamily apartments or other real property), (iii) the original terms to
maturity of the Mortgage Loans, (iv) the largest principal balance and the
smallest principal balance of any of the Mortgage Loans, (v) the earliest
origination date and latest maturity date of any of the Mortgage Loans, (vi) the
aggregate principal balance of Mortgage Loans having Loan-to-Value Ratios at
origination exceeding 80%, (vii) the Mortgage Rates or APRs or range of Mortgage
Rates or APRs borne by the Mortgage Loans, and (viii) the geographical location
of the related Mortgaged Properties on a state-by-state basis. If specific
information respecting the Mortgage Loans is not known to the Depositor at the
time the related Certificates are initially offered, more general information of
the nature described above will be provided in the related Prospectus
Supplement, and specific information will be set forth in the Detailed
Description.
The "Loan-to-Value Ratio" of a Mortgage Loan at any given time is the
ratio, expressed as a percentage, of the then outstanding principal balance of
the Mortgage Loan to the Collateral Value of the related Mortgaged Property.
Unless otherwise specified in the related Prospectus Supplement, the "Collateral
Value" of a Mortgaged Property, other than with respect to Contracts and certain
Mortgage Loans the proceeds of which were used to refinance an existing mortgage
loan ("Refinance Loans"), is the lesser of (a) the appraised value determined in
an appraisal obtained by the originator at origination of such Mortgage Loan and
(b) the sales price for such property. In the case of Refinance Loans, the
"Collateral Value" of the related Mortgaged Property is the appraised value
thereof determined in an appraisal obtained at the time of refinancing. Unless
otherwise specified in the related Prospectus Supplement, for purposes of
calculating the Loan-to-Value Ratio of a Contract relating to a new Manufactured
Home, the Collateral Value is no greater than the sum of a fixed percentage of
the list price of the unit actually billed by the manufacturer to the dealer
(exclusive of freight to the dealer site) including "accessories" identified in
the invoice (the "Manufacturer Invoice Price"), plus the actual cost of any
accessories purchased from the dealer, a delivery and set-up allowance,
depending on the size of the unit), and the cost of state and local taxes,
filing fees and up to three years' prepaid hazard insurance premiums. Unless
otherwise specified in the related Prospectus Supplement, the Collateral Value
of a used Manufactured Home is the least of the sales price, appraised value,
and National Automobile Dealers' Association book value plus prepaid taxes and
hazard insurance premiums. The appraised value of a Manufactured Home is based
upon the age and condition of the manufactured housing unit and the quality and
condition of the mobile home park in which it is situated, if applicable.
No assurance can be given that values of the Mortgaged Properties have
remained or will remain at their levels on the dates of origination of the
related Mortgage Loans. If the residential real estate market should experience
an overall decline in property values such that the outstanding principal
balances of the Mortgage Loans, and any secondary financing on the Mortgaged
Properties, in a particular Mortgage Pool become equal to or greater than the
value of the Mortgaged Properties, the actual rates of delinquencies,
foreclosures and losses could be higher than those now generally experienced in
the mortgage lending industry. In addition, adverse economic conditions and
other factors (which may or may not affect real property values) may affect the
timely payment by borrowers of scheduled payments of principal and interest on
the Mortgage Loans and, accordingly, the actual rates of delinquencies,
foreclosures and losses with respect to any Mortgage Pool. In the case of
Multifamily Loans, such other factors could include excessive building resulting
in an oversupply of rental housing stock or a decrease in employment reducing
the demand for rental units in an area; federal, state or local regulations and
controls affecting rents; prices of goods and energy; environmental
restrictions; increasing labor and material costs; and the relative
attractiveness to tenants of the Mortgaged Properties. To the extent that such
losses are not covered by subordination provisions or alternative arrangements,
such losses will be borne, at least in part, by the holders of the Certificates
of the related Series.
The Depositor will cause the Mortgage Loans comprising each Mortgage Pool
to be assigned to the Trustee named in the related Prospectus Supplement for the
benefit of the holders of the Certificates of the related Series. The Master
Servicer named in the related Prospectus Supplement will service the Mortgage
Loans, either directly or through other mortgage servicing institutions (each, a
"Sub-Servicer"), pursuant to a Pooling and Servicing Agreement (each, an
"Agreement") among the Depositor, the Master Servicer and the Trustee, and will
receive a fee for such services. See "Mortgage Loan Program" and "The Pooling
and Servicing Agreement". With respect to Mortgage Loans serviced by the Master
Servicer through a Sub-Servicer, the Master Servicer will remain liable for its
servicing obligations under the related Agreement as if the Master Servicer
alone were servicing such Mortgage Loans.
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<PAGE>
Unless otherwise specified in the related Prospectus Supplement, the only
obligations of the Depositor with respect to a Series of Certificates will be to
obtain certain representations and warranties from the Sellers and to assign to
the Trustee for such Series of Certificates the Depositor's rights with respect
to such representations and warranties. See "The Pooling and Servicing
Agreement--Assignment of Mortgage Assets". The obligations of the Master
Servicer with respect to the Mortgage Loans will consist principally of its
contractual servicing obligations under the related Agreement (including its
obligation to enforce the obligations of the Sub-Servicers or Sellers, or both,
as more fully described herein under "Mortgage Loan Program--Representations by
Sellers; Repurchases" and "The Pooling and Servicing Agreement--Sub-Servicing by
Sellers" and "--Assignment of Mortgage Assets") and its obligation to make
certain cash advances in the event of delinquencies in payments on or with
respect to the Mortgage Loans in the amounts described herein under "Description
of the Certificates--Advances". The obligations of the Master Servicer to make
advances may be subject to limitations, to the extent provided herein and in the
related Prospectus Supplement.
Single Family Loans
Unless otherwise specified in the related Prospectus Supplement, Single
Family Loans will consist of mortgage loans, deeds of trust or participations or
other beneficial interests therein, secured by first liens on one- to
four-family residential properties. If so specified in the related Prospectus
Supplement, Single Family Loans may include cooperative apartment loans
("Cooperative Loans") secured by security interests in shares issued by private,
non-profit, cooperative housing corporations ("Cooperatives") and in the related
proprietary leases or occupancy agreements granting exclusive rights to occupy
specific dwelling units in such Cooperatives' buildings. If so specified in the
related Prospectus Supplement, the Mortgage Assets of the related Trust Fund may
include mortgage participation certificates evidencing interests in Single
Family Loans. Such loans may be conventional loans (i.e., loans that are not
insured or guaranteed by any governmental agency), loans insured by the Federal
Housing Administration (the "FHA") or partially guaranteed by the Veterans
Administration (the "VA"), as specified in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, Single Family
Loans will all have individual principal balances at origination of not less
than $25,000 and not more than $1,000,000, and original terms to stated maturity
of from ten to 40 years.
The Mortgaged Properties relating to Single Family Loans will consist of
detached or semi-detached one-family dwelling units, two- to four-family
dwelling units, townhouses, rowhouses, individual condominium units, individual
units in planned unit developments, and certain other dwelling units. Such
Mortgaged Properties may include vacation and second homes, investment
properties and leasehold interests. In the case of leasehold interests, the term
of the leasehold will exceed the scheduled maturity of the Mortgage Loan by at
least five years, unless otherwise specified in the related Prospectus
Supplement.
Multifamily Loans
Multifamily Loans will consist of mortgage loans, deeds of trust or
participations or other beneficial interests therein, secured by first liens on
rental apartment buildings or projects containing five or more residential
units. If so specified in the related Prospectus Supplement, the Mortgage Assets
of the related Trust Fund may include mortgage participation certificates
evidencing interests in Multifamily Loans. Such loans may be conventional loans
or FHA-insured loans, as specified in the related Prospectus Supplement. Unless
otherwise specified in the related Prospectus Supplement, Multifamily Loans will
all have original terms to stated maturity of not more than 40 years.
Mortgaged Properties which secure Multifamily Loans may include high-rise,
mid-rise and garden apartments. Certain of the Multifamily Loans may be secured
by apartment buildings owned by Cooperatives. A Cooperative owns all the
apartment units in its building and all common areas and is owned by
tenant-stockholders who, through ownership of stock, shares or membership
certificates in the corporation, receive proprietary leases or occupancy
agreements which confer exclusive rights to occupy specific apartments or units.
Generally, a tenant-stockholder of a Cooperative must make a monthly payment to
the Cooperative representing such tenant-stockholder's pro rata share of the
Cooperative's payments for the Cooperative's mortgage loan, real property taxes,
maintenance expenses and other capital or ordinary expenses. Those payments are
in addition to any payments of principal and interest the tenant-stockholder
must make on any loans to the tenant-stockholder secured by his shares in the
Cooperative. The Cooperative will be directly responsible for building
management and, in most cases,
15
<PAGE>
payment of real estate taxes and hazard and liability insurance. A Cooperative's
ability to meet debt service obligations on a Multifamily Loan, as well as all
other operating expenses, will be dependent in large part on the receipt of
maintenance payments from the tenant-stockholders, as well as any rental income
from units or commercial areas the Cooperative might control. Unanticipated
expenditures may in some cases have to be paid by special assessments on the
tenant-stockholders.
Contracts
The Contracts will consist of manufactured housing conditional sales
contracts and installment sales or loan agreements each secured by a
Manufactured Home. Contracts may be conventional, insured by the FHA or
partially guaranteed by the VA, as specified in the related Prospectus
Supplement. Unless otherwise specified in the related Prospectus Supplement,
each Contract will be fully amortizing and will bear interest at a fixed
percentage rate ("APR"). Unless otherwise specified in the related Prospectus
Supplement, Contracts will all have individual principal balances at origination
of not less than $10,000 and not more than $1,000,000 and original terms to
stated maturity of from five to 30 years.
"Manufactured Homes" securing the Contracts will consist of manufactured
homes within the meaning of 42 U.S.C. Section 5402(6) which defines a
"manufactured home" as "a structure, transportable in one or more sections
which, in the traveling mode, is eight body feet or more in width or forty body
feet or more in length or, when erected on site, is three hundred twenty or more
square feet, and which is built on a permanent chassis and designed to be used
as a dwelling with or without a permanent foundation when connected to the
required utilities, and includes the plumbing, heating, air conditioning, and
electrical systems contained therein; except that such term shall include any
structure which meets all the requirements of this paragraph except the size
requirements and with respect to which the manufacturer voluntarily files a
certification required by the Secretary of Housing and Urban Development and
complies with the standards established under this chapter."
The related Prospectus Supplement will specify for the Contracts contained
in the related Trust Fund, among other things, the dates of origination of the
Contracts, the APRs on the Contracts, the Loan-to-Value Ratios of the Contracts,
the minimum and maximum outstanding principal balances as of the Cut-off Date
and the average outstanding principal balance, the outstanding principal
balances of the Contracts included in the related Trust Fund, and the original
maturities of the Contracts and the last maturity date of any Contract.
Agency Securities
Government National Mortgage Association. GNMA is a wholly-owned corporate
instrumentality of the United States within the Department of Housing and Urban
Development. Section 306(g) of Title II of the National Housing Act of 1934, as
amended (the "Housing Act"), authorizes GNMA to guarantee the timely payment of
the principal of and interest on certificates which represent an interest in a
pool of mortgage loans insured by the FHA under the Housing Act or under Title V
of the Housing Act of 1949 ("FHA Loans"), or partially guaranteed by the VA
under the Servicemen's Readjustment Act of 1944, as amended, or Chapter 37 of
Title 38 of the United States Code ("VA Loans").
Section 306(g) of the Housing Act provides that "the full faith and credit
of the United States is pledged to the payment of all amounts which may be
required to be paid under any guaranty under this subsection." In order to meet
its obligations under any such guarantee, GNMA may, under Section 306(d) of the
Housing Act, borrow from the United States Treasury in an unlimited amount which
is at any time sufficient to enable GNMA to perform its obligations under its
guarantee.
GNMA Certificates. Each "GNMA Certificate" held in a Trust Fund will be a
"fully modified pass-through" mortgage-backed certificate issued and serviced by
a mortgage banking company or other financial concern (a "GNMA Issuer") approved
by GNMA or approved by FNMA as a seller-servicer of FHA Loans and/or VA Loans.
The GNMA Certificates may be issued under either the GNMA I program ("GNMA I
Certificates") or under the GNMA II program ("GNMA II Certificates"). The
mortgage loans underlying the GNMA Certificates will consist of FHA Loans and/or
VA Loans. Each such mortgage loan is secured by a one- to four-family or
multifamily residential property. GNMA will approve the issuance of each such
GNMA Certificate in accordance with a guaranty agreement (each, a "Guaranty
Agreement") between GNMA and the GNMA Issuer. Pursuant to
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its Guaranty Agreement, a GNMA Issuer will be required to advance its own funds
in order to make timely payments of all amounts due on each such GNMA
Certificate, even if the payments received by the GNMA Issuer on the FHA Loans
or VA Loans underlying each such GNMA Certificate are less than the amounts due
on each such GNMA Certificate.
The full and timely payment of principal of and interest on each GNMA
Certificate will be guaranteed by GNMA, which obligation is backed by the full
faith and credit of the United States. Each such GNMA Certificate will have an
original maturity of not more than 30 years (but may have original maturities of
substantially less than 30 years). Each such GNMA Certificate will be based on
and backed by a pool of FHA Loans or VA Loans secured by one- to four-family
residential properties and will provide for the payment by or on behalf of the
GNMA Issuer to the registered holder of such GNMA Certificate scheduled monthly
payments of principal and interest equal to the registered holder's
proportionate interest in the aggregate amount of the monthly principal and
interest payment on each FHA Loan or VA Loan underlying such GNMA Certificate,
less the applicable servicing and guarantee fee which together equal the
difference between the interest on the FHA Loan or VA Loan and the pass-through
rate on the GNMA Certificate. In addition, each payment will include
proportionate pass-through payments of any prepayments of principal on the FHA
Loans or VA Loans underlying such GNMA Certificate and liquidation proceeds in
the event of a foreclosure or other disposition of any such FHA Loans or VA
Loans.
If a GNMA Issuer is unable to make the payments on a GNMA Certificate as
it becomes due, it must promptly notify GNMA and request GNMA to make such
payment. Upon notification and request, GNMA will make such payments directly to
the registered holder of such GNMA Certificate. In the event no payment is made
by a GNMA Issuer and the GNMA Issuer fails to notify and request GNMA to make
such payment, the holder of such GNMA Certificate will have recourse only
against GNMA to obtain such payment. The Trustee or its nominee, as registered
holder of the GNMA Certificates held in a Trust Fund, will have the right to
proceed directly against GNMA under the terms of the Guaranty Agreements
relating to such GNMA Certificates for any amounts that are not paid when due.
All mortgage loans underlying a particular GNMA I Certificate must have
the same interest rate (except for pools of mortgage loans secured by
manufactured homes) over the term of the loan. The interest rate on such GNMA I
Certificate will equal the interest rate on the mortgage loans included in the
pool of mortgage loans underlying such GNMA I Certificate, less one-half
percentage point per annum of the unpaid principal balance of the mortgage
loans.
Mortgage loans underlying a particular GNMA II Certificate may have per
annum interest rates that vary from each other by up to one percentage point.
The interest rate on each GNMA II Certificate will be between one-half
percentage point and one and one-half percentage points lower than the highest
interest rate on the mortgage loans included in the pool of mortgage loans
underlying such GNMA II Certificate (except for pools of mortgage loans secured
by manufactured homes).
Regular monthly installment payments on each GNMA Certificate held in a
Trust Fund will be comprised of interest due as specified on such GNMA
Certificate plus the scheduled principal payments on the FHA Loans or VA Loans
underlying such GNMA Certificate due on the first day of the month in which the
scheduled monthly installments on such GNMA Certificate are due. Such regular
monthly installments on each such GNMA Certificate are required to be paid to
the Trustee as registered holder by the 15th day of each month in the case of a
GNMA I Certificate and are required to be mailed to the Trustee by the 20th day
of each month in the case of a GNMA II Certificate. Any principal prepayments on
any FHA Loans or VA Loans underlying a GNMA Certificate held in a Trust Fund or
any other early recovery of principal on such loan will be passed through to the
Trustee as the registered holder of such GNMA Certificate.
GNMA Certificates may be backed by graduated payment mortgage loans or by
"buydown" mortgage loans for which funds will have been provided (and deposited
into escrow accounts) for application to the payment of a portion of the
borrowers' monthly payments during the early years of such mortgage loans.
Payments due the registered holders of GNMA Certificates backed by pools
containing "buydown" mortgage loans will be computed in the same manner as
payments derived from other GNMA Certificates and will include amounts to be
collected from both the borrower and the related escrow account. The graduated
payment mortgage loans will provide for graduated interest payments that, during
the early years of such mortgage loans, will be less than the amount of
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stated interest on such mortgage loans. The interest not so paid will be added
to the principal of such graduated payment mortgage loans and, together with
interest thereon, will be paid in subsequent years. The obligations of GNMA and
of a GNMA Issuer will be the same irrespective of whether the GNMA Certificates
are backed by graduated payment mortgage loans or "buydown" mortgage loans. No
statistics comparable to the FHA's prepayment experience on level payment,
non-"buydown" mortgage loans are available in respect of graduated payment or
"buydown" mortgages. GNMA Certificates related to a Series of Certificates may
be held in book-entry form.
If specified in a Prospectus Supplement, GNMA Certificates may be backed
by multifamily mortgage loans having the characteristics specified in such
Prospectus Supplement.
Federal Home Loan Mortgage Corporation. FHLMC is a shareholder-owned,
government sponsored enterprise created pursuant to Title III of the Emergency
Home Finance Act of 1970, as amended (the "FHLMC Act"). FHLMC was established
primarily for the purpose of increasing the availability of mortgage credit for
the financing of urgently needed housing. It seeks to provide an enhanced degree
of liquidity for residential mortgage investments primarily by assisting in the
development of secondary markets for conventional mortgages. The principal
activity of FHLMC currently consists of the purchase of first lien conventional
mortgage loans or participation interests in such mortgage loans and the sale of
the mortgage loans or participations so purchased in the form of mortgage
securities, primarily FHLMC Certificates. FHLMC is confined to purchasing, so
far as practicable, mortgage loans that it deems to be of such quality, type and
class as to meet generally the purchase standards imposed by private
institutional mortgage investors.
FHLMC Certificates. Each FHLMC Certificate represents an undivided
interest in a pool of mortgage loans that may consist of first lien conventional
loans, FHA Loans or VA Loans (a "FHLMC Certificate Group"), FHLMC Certificates
are sold under the terms of a Mortgage Participation Certificate Agreement. A
FHLMC Certificate may be issued under either FHLMC's Cash Program or its
Guarantor Program.
Mortgage loans underlying the FHLMC Certificates held by a Trust Fund will
consist of mortgage loans with original terms to maturity of from ten to 40
years. Each such mortgage loan must meet the applicable standards set forth in
the FHLMC Act. A FHLMC Certificate Group may include whole loans, participation
interests in whole loans and undivided interests in whole loans and/or
participations comprising another FHLMC Certificate Group. Under the Guarantor
Program, any such FHLMC Certificate Group may include only whole loans or
participation interests in whole loans.
FHLMC guarantees to each registered holder of a FHLMC Certificate the
timely payment of interest on the underlying mortgage loans to the extent of the
applicable Certificate rate on the registered holder's pro rata share of the
unpaid principal balance outstanding on the underlying mortgage loans in the
FHLMC Certificate Group represented by such FHLMC Certificate, whether or not
received. FHLMC also guarantees to each registered holder of a FHLMC Certificate
collection by such holder of all principal on the underlying mortgage loans,
without any offset or deduction, to the extent of such holder's pro rata share
thereof, but does not, except if and to the extent specified in the related
Prospectus Supplement for a Series of Certificates, guarantee the timely payment
of scheduled principal. Under FHLMC's Gold PC Program, FHLMC guarantees the
timely payment of principal based on the difference between the pool factor,
published in the month preceding the month of distribution, and the pool factor
published in such month of distribution. Pursuant to its guarantees, FHLMC
indemnifies holders of FHLMC Certificates against any diminution in principal by
reason of charges for property repairs, maintenance and foreclosure. FHLMC may
remit the amount due on account of its guaranty of collection of principal at
any time after default on an underlying mortgage loan, but not later than (i) 30
days following foreclosure sale, (ii) 30 days following payment of the claim by
any mortgage insurer or (iii) 30 days following the expiration of any right of
redemption, whichever occurs later, but in any event no later than one year
after demand has been made upon the mortgagor for accelerated payment of
principal. In taking actions regarding the collection of principal after default
on the mortgage loans underlying FHLMC Certificates, including the timing of
demand for acceleration, FHLMC reserves the right to exercise its judgment with
respect to the mortgage loans in the same manner as for mortgage loans which it
has purchased but not sold. The length of time necessary for FHLMC to determine
that a mortgage loan should be accelerated varies with the particular
circumstances of each mortgagor, and FHLMC has not adopted standards which
require that the demand be made within any specified period.
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FHLMC Certificates are not guaranteed by the United States or by any
Federal Home Loan Bank and do not constitute debts or obligations of the United
States or any Federal Home Loan Bank. The obligations of FHLMC under its
guarantee are obligations solely of FHLMC and are not backed by, or entitled to,
the full faith and credit of the United States. If FHLMC were unable to satisfy
such obligations, distributions to holders of FHLMC Certificates would consist
solely of payments and other recoveries on the underlying mortgage loans and,
accordingly, monthly distributions to holders of FHLMC Certificates would be
affected by delinquent payments and defaults on such mortgage loans.
Registered holders of FHLMC Certificates are entitled to receive their
monthly pro rata share of all principal payments on the underlying mortgage
loans received by FHLMC, including any scheduled principal payments, full and
partial repayments of principal and principal received by FHLMC by virtue of
condemnation, insurance, liquidation or foreclosure, and repurchases of the
mortgage loans by FHLMC or the seller thereof. FHLMC is required to remit each
registered FHLMC Certificateholder's pro rata share of principal payments on the
underlying mortgage loans, interest at the FHLMC pass-through rate and any other
sums such as prepayment fees, within 60 days of the date on which such payments
are deemed to have been received by FHLMC.
Under FHLMC's Cash Program, there is no limitation on the amount by which
interest rates on the mortgage loans underlying a FHLMC Certificate may exceed
the pass-through rate on the FHLMC Certificate. Under such program, FHLMC
purchases groups of whole mortgage loans from sellers at specified percentages
of their unpaid principal balances, adjusted for accrued or prepaid interest,
which, when applied to the interest rate of the mortgage loans and
participations purchased, results in the yield (expressed as a percentage)
required by FHLMC. The required yield, which includes a minimum servicing fee
retained by the servicer, is calculated using the outstanding principal balance.
The range of interest rates on the mortgage loans and participations in a FHLMC
Certificate Group under the Cash Program will vary since mortgage loans and
participations are purchased and assigned to a FHLMC Certificate Group based
upon their yield to FHLMC rather than on the interest rate on the underlying
mortgage loans. Under FHLMC's Guarantor Program, the pass-through rate on a
FHLMC Certificate is established based upon the lowest interest rate on the
underlying mortgage loans, minus a minimum servicing fee and the amount of
FHLMC's management and guaranty income as agreed upon between the seller and
FHLMC.
FHLMC Certificates duly presented for registration of ownership on or
before the last business day of a month are registered effective as of the first
day of the month. The first remittance to a registered holder of a FHLMC
Certificate will be distributed so as to be received normally by the 15th day of
the second month following the month in which the purchaser becomes a registered
holder of the FHLMC Certificates. Thereafter, such remittance will be
distributed monthly to the registered holder so as to be received normally by
the 15th day of each month. The Federal Reserve Bank of New York maintains
book-entry accounts with respect to FHLMC Certificates sold by FHLMC on or after
January 2, 1985, and makes payments of principal and interest each month to the
registered holders thereof in accordance with such holders' instructions.
Federal National Mortgage Association. FNMA is a federally chartered and
privately owned corporation organized and existing under the Federal National
Mortgage Association Charter Act, as amended (the "Charter Act"). FNMA was
originally established in 1938 as a United States government agency to provide
supplemental liquidity to the mortgage market and was transformed into a
stockholder-owned and privately-managed corporation by legislation enacted in
1968.
FNMA provides funds to the mortgage market primarily by purchasing
mortgage loans from lenders, thereby replenishing their funds for additional
lending. FNMA acquires funds to purchase mortgage loans from many capital market
investors that may not ordinarily invest in mortgages, thereby expanding the
total amount of funds available for housing. Operating nationwide, FNMA helps to
redistribute mortgage funds from capital-surplus to capital-short areas.
FNMA Certificates. FNMA Certificates are Guaranteed Mortgage Pass-Through
Certificates representing fractional undivided interests in a pool of mortgage
loans formed by FNMA. Each mortgage loan must meet the applicable standards of
the FNMA purchase program. Mortgage loans comprising a pool are either provided
by FNMA from its own portfolio or purchased pursuant to the criteria of the FNMA
purchase program.
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Mortgage loans underlying FNMA Certificates held by a Trust Fund will
consist of conventional mortgage loans, FHA Loans or VA Loans. Original
maturities of substantially all of the conventional, level payment mortgage
loans underlying a FNMA Certificate are expected to be from eight to 15 years or
from 20 to 40 years. The original maturities of substantially all of the fixed
rate level payment FHA Loans or VA Loans are expected to be 30 years.
Mortgage loans underlying a FNMA Certificate may have annual interest
rates that vary by as much as two percentage points from one another. The rate
of interest payable on a FNMA Certificate is equal to the lowest interest rate
of any mortgage loan in the related pool, less a specified minimum annual
percentage representing servicing compensation and FNMA's guaranty fee. Under a
regular servicing option (pursuant to which the mortgagee or each other servicer
assumes the entire risk of foreclosure losses), the annual interest rates on the
mortgage loans underlying a FNMA Certificate will be between 50 basis points and
250 basis points greater than is its annual pass-through rate and under a
special servicing option (pursuant to which FNMA assumes the entire risk for
foreclosure losses), the annual interest rates on the mortgage loans underlying
a FNMA Certificate will generally be between 55 basis points and 255 basis
points greater than the annual FNMA Certificate pass-through rate. If specified
in the related Prospectus Supplement, FNMA Certificates may be backed by
adjustable rate mortgages.
FNMA guarantees to each registered holder of a FNMA Certificate that it
will distribute amounts representing such holder's proportionate share of
scheduled principal and interest payments at the applicable pass-through rate
provided for by such FNMA Certificate on the underlying mortgage loans, whether
or not received, and such holder's proportionate share of the full principal
amount of any foreclosed or other finally liquidated mortgage loan, whether or
not such principal amount is actually recovered. The obligations of FNMA under
its guarantees are obligations solely of FNMA and are not backed by, or entitled
to, the full faith and credit of the United States. Although the Secretary of
the Treasury of the United States has discretionary authority to lend FNMA up to
$2.25 billion outstanding at any time, neither the United States nor any agency
thereof is obligated to finance FNMA's operations or to assist FNMA in any other
manner. If FNMA were unable to satisfy its obligations, distributions to holders
of FNMA Certificates would consist solely of payments and other recoveries on
the underlying mortgage loans and, accordingly, monthly distributions to holders
of FNMA Certificates would be affected by delinquent payments and defaults on
such mortgage loans.
FNMA Certificates evidencing interests in pools of mortgage loans formed
on or after May 1, 1985 (other than FNMA Certificates backed by pools containing
graduated payment mortgage loans or mortgage loans secured by multifamily
projects) are available in book-entry form only. Distributions of principal and
interest on each FNMA Certificate will be made by FNMA on the 25th day of each
month to the persons in whose name the FNMA Certificate is entered in the books
of the Federal Reserve Banks (or registered on the FNMA Certificate register in
the case of fully registered FNMA Certificates) as of the close of business on
the last day of the preceding month. With respect to FNMA Certificates issued in
book-entry form, distributions thereon will be made by wire and, with respect to
fully registered FNMA Certificates, distributions thereon will be made by check.
Stripped Mortgage-Backed Securities. Agency Securities may consist of one
or more stripped mortgage-backed securities, each as described herein and in the
related Prospectus Supplement. Each such Agency Security will represent an
undivided interest in all or part of the principal distributions (but not the
interest distributions) or the interest distributions (but not the principal
distributions), or in some specified portion of the principal and interest
distributions (but not all of such distributions) on certain FHLMC, FNMA or GNMA
Certificates. The underlying securities will be held under a trust agreement by
FHLMC, FNMA or GNMA, each as trustee, or by another trustee named in the related
Prospectus Supplement. FHLMC, FNMA or GNMA will guaranty each stripped Agency
Security to the same extent as such entity guarantees the underlying securities
backing such stripped Agency Security, unless otherwise specified in the related
Prospectus Supplement.
Other Agency Securities. If specified in the related Prospectus
Supplement, a Trust Fund may include other mortgage pass-through certificates
issued or guaranteed by FHLMC, FNMA or GNMA. The characteristics of any such
mortgage pass-through certificates will be described in such Prospectus
Supplement. If so specified, a combination of different types of Agency
Securities may be held in a Trust Fund.
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Private Mortgage-Backed Securities
General. Private Mortgage-Backed Securities may consist of (a) mortgage
pass-through certificates or participation certificates evidencing an undivided
interest in a pool of Mortgage Loans or (b) collateralized mortgage obligations
secured by Mortgage Loans. Private Mortgage-Backed Securities may include
stripped mortgage-backed securities representing an undivided interest in all or
a part of the principal distributions (but not the interest distributions) or
the interest distributions (but not the principal distributions) or in some
specified portion of the principal and interest distributions (but not all of
such distributions) on certain Mortgage Loans. Private Mortgage-Backed
Securities will have been issued pursuant to a pooling and servicing agreement,
an indenture or similar agreement (a "PMBS Agreement"). Unless otherwise
specified in the related Prospectus Supplement, the seller/servicer of the
underlying Mortgage Loans will have entered into the PMBS Agreement with the
trustee under such PMBS Agreement (the "PMBS Trustee"). The PMBS Trustee or its
agent, or a custodian, will possess the Mortgage Loans underlying such Private
Mortgage-Backed Security. Mortgage Loans underlying a Private Mortgage-Backed
Security will be serviced by a servicer (the "PMBS Servicer") directly or by one
or more subservicers which may be subject to the supervision of the PMBS
Servicer. Unless otherwise specified in the related Prospectus Supplement, the
PMBS Servicer will be a FNMA- or FHLMC-approved servicer and, if FHA Loans
underlie the Private Mortgage-Backed Securities, approved by HUD as an FHA
mortgagee.
The issuer of the Private Mortgage-Backed Securities (the "PMBS Issuer")
will be a financial institution or other entity engaged generally in the
business of mortgage lending, a public agency or instrumentality of a state,
local or federal government, or a limited purpose corporation organized for the
purpose of, among other things, establishing trusts and acquiring and selling
housing loans to such trusts and selling beneficial interests in such trusts. If
so specified in the related Prospectus Supplement, the PMBS Issuer may be an
affiliate of the Depositor. The obligations of the PMBS Issuer will generally be
limited to certain representations and warranties with respect to the assets
conveyed by it to the related trust. Unless otherwise specified in the related
Prospectus Supplement, the PMBS Issuer will not have guaranteed any of the
assets conveyed to the related trust or any of the Private Mortgage-Backed
Securities issued under the PMBS Agreement. Additionally, although the Mortgage
Loans underlying the Private Mortgage-Backed Securities may be guaranteed by an
agency or instrumentality of the United States, the Private Mortgage-Backed
Securities themselves will not be so guaranteed.
Distributions of principal and interest will be made on the Private
Mortgage-Backed Securities on the dates specified in the related Prospectus
Supplement. The Private Mortgage-Backed Securities may be entitled to receive
nominal or no principal distributions or nominal or no interest distributions.
Principal and interest distributions will be made on the Private Mortgage-Backed
Securities by the PMBS Trustee or the PMBS Servicer. The PMBS Issuer or the PMBS
Servicer may have the right to repurchase assets underlying the Private
Mortgage-Backed Securities after a certain date or under other circumstances
specified in the related Prospectus Supplement.
Underlying Loans. The Mortgage Loans underlying the Private
Mortgage-Backed Securities may consist of fixed rate, level payment, fully
amortizing loans or graduated payment mortgage loans, buydown loans, adjustable
rate mortgage loans, or loans having balloon or other special payment features.
Such Mortgage Loans may be secured by single family property, multifamily
property, Manufactured Homes or by an assignment of the proprietary lease or
occupancy agreement relating to a specific dwelling within a Cooperative and the
related shares issued by such Cooperative. Except as otherwise specified in the
related Prospectus Supplement, (i) no Mortgage Loan will have had a
Loan-to-Value Ratio at origination in excess of 95%, (ii) each Single Family
Loan secured by a Mortgaged Property having a Loan-to-Value Ratio in excess of
80% at origination will be covered by a primary mortgage insurance policy, (iii)
each Mortgage Loan will have had an original term to stated maturity of not less
than 5 years and not more than 40 years, (iv) no Mortgage Loan that was more
than 30 days delinquent as to the payment of principal or interest will have
been eligible for inclusion in the assets under the related PMBS Agreement, (v)
each Mortgage Loan (other than a Cooperative Loan) will be required to be
covered by a standard hazard insurance policy (which may be a blanket policy),
and (vi) each Mortgage Loan (other than a Cooperative Loan or a Contract secured
by a Manufactured Home) will be covered by a title insurance policy.
Credit Support Relating to Private Mortgage-Backed Securities. Credit
support in the form of reserve funds, subordination of other private mortgage
certificates issued under the PMBS Agreement, letters of credit, surety bonds,
insurance policies or other types of credit support may be provided with respect
to the Mortgage Loans
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underlying the Private Mortgage-Backed Securities or with respect to the Private
Mortgage-Backed Securities themselves.
Additional Information. The Prospectus Supplement for a Series for which
the Trust Fund includes Private Mortgage-Backed Securities will specify (i) the
aggregate approximate principal amount and type of the Private Mortgage-Backed
Securities to be included in the Trust Fund, (ii) certain characteristics of the
Mortgage Loans which comprise the underlying assets for the Private
Mortgage-Backed Securities including (A) the payment features of such Mortgage
Loans, (B) the approximate aggregate principal balance, if known, of underlying
Mortgage Loans insured or guaranteed by a governmental entity, (C) the servicing
fee or range of servicing fees with respect to the Mortgage Loans, and (D) the
minimum and maximum stated maturities of the underlying Mortgage Loans at
origination, (iii) the maximum original term-to-stated maturity of the Private
Mortgage-Backed Securities, (iv) the weighted average term-to-stated maturity of
the Private Mortgage-Backed Securities, (v) the pass-through or certificate rate
of the Private Mortgage-Backed Securities, (vi) the weighted average
pass-through or certificate rate of the Private Mortgage-Backed Securities,
(vii) the PMBS Issuer, the PMBS Servicer (if other than the PMBS Issuer) and the
PMBS Trustee for such Private Mortgage-Backed Securities, (viii) certain
characteristics of credit support, if any, such as reserve funds, insurance
policies, surety bonds, letters of credit or guaranties relating to the Mortgage
Loans underlying the Private Mortgage-Backed Securities or to such Private
Mortgage-Backed Securities themselves, (ix) the term on which the underlying
Mortgage Loans for such Private Mortgage-Backed Securities may, or are required
to, be purchased prior to their stated maturity or the stated maturity of the
Private Mortgage-Backed Securities and (x) the terms on which Mortgage Loans may
be substituted for those originally underlying the Private Mortgage-Backed
Securities.
Incorporation of Certain Information by Reference
There are incorporated herein by reference all documents and reports filed
or caused to be filed by Greenwich Capital Acceptance, Inc. ("GCA") with respect
to a Trust Fund pursuant to Section 13(a), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended, prior to the termination of the offering of
Certificates evidencing interests therein. Upon request by any person to whom
this Prospectus is delivered in connection with the offering of one or more
classes of Certificates, GCA will provide or cause to be provided without charge
a copy of any such documents and/or reports incorporated herein by reference, in
each case to the extent such documents or reports relate to such classes of
Certificates, other than the exhibits to such documents (unless such exhibits
are specifically incorporated by reference in such documents). Requests to GCA
should be directed in writing to: Paul D. Stevelman, Greenwich Capital
Acceptance, Inc., 600 Steamboat Road, Greenwich, Connecticut 06830, telephone
number (203) 625-2700. GCA has determined that its financial statements are not
material to the offering of any Certificates.
Investors may read and copy the documents and/or reports incorporated
herein by reference at the Public Reference Room of the Securities and Exchange
Commission (the "SEC") at 450 Fifth Street, N.W., Washington, DC 20549.
Investors may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a website
at http:\\www.sec.gov containing reports, proxy and information statements and
other information regarding issuers, including each Trust Fund, that file
electronically with the SEC.
USE OF PROCEEDS
The net proceeds to be received from the sale of the Certificates will be
applied by the Depositor to the purchase of Mortgage Assets or will be used by
the Depositor for general corporate purposes. The Depositor expects to sell
Certificates in Series from time to time, but the timing and amount of offerings
of Certificates will depend on a number of factors, including the volume of
Mortgage Assets acquired by the Depositor, prevailing interest rates,
availability of funds and general market conditions.
THE DEPOSITOR
Greenwich Capital Acceptance, Inc., the Depositor, is a Delaware
corporation organized on April 23, 1987 for the limited purpose of acquiring,
owning and transferring Mortgage Assets and selling interests therein or bonds
secured thereby. It is an indirect, limited purpose finance subsidiary of
National Westminster Bank Plc and an
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affiliate of Greenwich Capital Markets, Inc. Greenwich Capital Markets, Inc. is
a registered broker-dealer engaged in the U.S. government securities and related
capital markets business. The Depositor maintains its principal office at 600
Steamboat Road, Greenwich, Connecticut 06830. Its telephone number is (203)
625-2700.
Neither the Depositor nor any of the Depositor's affiliates will ensure or
guarantee distributions on the Certificates of any Series.
MORTGAGE LOAN PROGRAM
The Mortgage Loans will have been purchased by the Depositor, either
directly or through affiliates, from Sellers. Unless otherwise specified in the
related Prospectus Supplement, the Mortgage Loans so acquired by the Depositor
will have been originated in accordance with the underwriting criteria specified
below under "Underwriting Standards".
Underwriting Standards
Unless otherwise specified in the related Prospectus Supplement, each
Seller will represent and warrant that all Mortgage Loans originated and/or sold
by it to the Depositor or one of its affiliates will have been underwritten in
accordance with standards consistent with those utilized by mortgage lenders or
manufactured home lenders generally during the period of origination for similar
types of loans. As to any Mortgage Loan insured by the FHA or partially
guaranteed by the VA, the Seller will represent that it has complied with the
underwriting policies of the FHA or the VA, as the case may be.
Underwriting standards are applied by or on behalf of a lender to evaluate
a prospective borrower's credit standing and repayment ability, and the value
and adequacy of the Mortgaged Property as collateral. In general, a prospective
borrower applying for a Single Family Loan or for financing secured by a
Manufactured Home is required to fill out a detailed application designed to
provide to the underwriting officer pertinent credit information. As part of the
description of the borrower's financial condition, the borrower generally is
required to provide a current list of assets and liabilities and a statement of
income and expenses, as well as an authorization to apply for a credit report
which summarizes the borrower's credit history with local merchants and lenders
and any record of bankruptcy. In most cases, an employment verification is
obtained from an independent source (typically the borrower's employer) which
verification reports the borrower's length of employment with that organization,
his current salary, and whether it is expected that the borrower will continue
such employment in the future. If a prospective borrower is self-employed, the
borrower may be required to submit copies of signed tax returns. The borrower
may also be required to authorize verification of deposits at financial
institutions where the borrower has demand or savings accounts. Underwriting
standards which pertain to the creditworthiness of borrowers seeking Multifamily
Loans will be described in the related Prospectus Supplement.
In determining the adequacy of the Mortgaged Property as collateral, an
appraisal is made of each property considered for financing. The appraiser is
required to inspect the property and verify that it is in good repair and that
construction, if new, has been completed. In connection with a Single Family
Loan, the appraisal is based on the market value of comparable homes, the
estimated rental income (if considered applicable by the appraiser) and the cost
of replacing the subject home. In connection with a Contract, the appraisal is
based on recent sales of comparable Manufactured Homes and, when deemed
applicable, a replacement cost analysis based on the cost of a comparable
Manufactured Home. In connection with a Multifamily Loan, the appraisal must
specify whether an income analysis, a market analysis or a cost analysis was
used. An appraisal employing the income approach to value analyzes a multifamily
project's cashflow, expenses, capitalization and other operational information
in determining the property's value. The market approach to value focuses its
analysis on the prices paid for the purchase of similar properties in the
multifamily project's area, with adjustments made for variations between these
other properties and the multifamily project being appraised. The cost approach
calls for the appraiser to make an estimate of land value and then determine the
current cost of reproducing the building less any accrued depreciation. In any
case, the value of the property being financed, as indicated by the appraisal,
must be such that it currently supports, and is anticipated to support in the
future, the outstanding loan balance.
In the case of Single Family Loans and Contracts, once all applicable
employment, credit and property information is received, a determination
generally is made as to whether the prospective borrower has sufficient
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monthly income available (i) to meet the borrower's monthly obligations on the
proposed mortgage loan (generally determined on the basis of the monthly
payments due in the year of origination) and other expenses related to the
Mortgaged Property (such as property taxes and hazard insurance) and (ii) to
meet monthly housing expenses and other financial obligations and monthly living
expenses. The underwriting standards applied by Sellers, particularly with
respect to the level of loan documentation and the mortgagor's income and credit
history, may be varied in appropriate cases where factors such as low
Loan-to-Value Ratios or other favorable credit exist.
In the case of a Single Family or Multifamily Loan secured by a leasehold
interest in real property, the title to which is held by a third-party lessor,
the Seller will represent and warrant, among other things, that the remaining
term of the lease and any sublease is at least five years longer than the
remaining term of the Mortgage Note.
Certain of the types of Mortgage Loans which may be included in the
Mortgage Pools are recently developed and may involve additional uncertainties
not present in traditional types of loans. For example, certain of such Mortgage
Loans may provide for escalating or variable payments by the mortgagor or
obligor. These types of Mortgage Loans are generally underwritten on the basis
of a judgment that mortgagors or obligors will have the ability to make the
monthly payments required initially; in some instances, however, their incomes
may not be sufficient to permit continued loan payments as such payments
increase. These types of Mortgage Loans may also be underwritten primarily upon
the basis of Loan-to-Value Ratios or other favorable credit factors.
Qualifications of Sellers
Unless otherwise specified in the related Prospectus Supplement, each
Seller will be required to satisfy the qualifications set forth herein. Each
Seller must be an institution experienced in originating and servicing Mortgage
Loans of the type contained in the related Mortgage Pool in accordance with
accepted practices and prudent guidelines and must maintain satisfactory
facilities to originate and service those Mortgage Loans. Each Seller must be a
seller/servicer approved by either FNMA or FHLMC. Each Seller must be a
mortgagee approved by the FHA or an institution the deposit accounts in which
are insured by the Federal Deposit Insurance Corporation (the "FDIC").
Representations by Sellers; Repurchases
Each Seller will have made representations and warranties in respect of
the Mortgage Loans sold by such Seller and evidenced by a Series of
Certificates. Such representations and warranties, unless otherwise provided in
the related Prospectus Supplement, generally include, among other things: (i)
that title insurance (or in the case of Mortgaged Properties located in areas
where such policies are generally not available, an attorney's certificate of
title) in the case of Single Family Loans and Multifamily Loans (other than a
Cooperative Loan or a contract secured by a Manufactured Home) and any required
hazard insurance policy and Primary Mortgage Insurance Policy were effective at
the origination of each Mortgage Loan (other than Cooperative Loans), and that
each policy (or certificate of title as applicable) remained in effect on the
date of purchase of the Mortgage Loan from the Seller by or on behalf of the
Depositor; (ii) that the Seller had good title to each such Mortgage Loan and
such Mortgage Loan was subject to no offsets, defenses, counterclaims or rights
of rescission except to the extent that any buydown agreement described herein
may forgive certain indebtedness of a Mortgagor; (iii) that each Mortgage Loan
constituted a valid first lien on, or a first perfected security interest with
respect to, the related Mortgaged Property (subject only to permissible title
insurance exceptions, if applicable, and certain other exceptions described in
the Agreement) and that the Mortgaged Property was free from damage and was in
good repair; (iv) that there were no delinquent tax or assessment liens against
the Mortgaged Property; (v) that no required payment on a Mortgage Loan was
delinquent more than 30 days; and (vi) that each Mortgage Loan was made in
compliance with, and is enforceable under, all applicable local, state and
federal laws and regulations in all material respects.
If so specified in the related Prospectus Supplement, the representations
and warranties of a Seller in respect of a Mortgage Loan will be made not as of
the Cut-off Date but as of the date on which such Seller sold the Mortgage Loan
to the Depositor or one of its affiliates. Under such circumstances, a
substantial period of time may have elapsed between such date and the date of
initial issuance of the Series of Certificates evidencing an interest in such
Mortgage Loan. Since the representations and warranties of a Seller do not
address events that may occur following the sale of a Mortgage Loan by such
Seller, its repurchase obligation described below will not arise if the relevant
event that would otherwise have given rise to such an obligation with respect to
a Mortgage Loan occurs
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after the date of sale of such Mortgage Loan by such Seller to the Depositor or
its affiliates. However, the Depositor will not include any Mortgage Loan in the
Trust Fund for any Series of Certificates if anything has come to the
Depositor's attention that would cause it to believe that the representations
and warranties of the related Seller will not be accurate and complete in all
material respects in respect of such Mortgage Loan as of the date of initial
issuance of the related Series of Certificates. If the Master Servicer is also a
Seller of Mortgage Loans with respect to a particular Series, such
representations will be in addition to the representations and warranties made
by the Master Servicer in its capacity as a Master Servicer.
The Master Servicer, or the Trustee if the Master Servicer is the Seller,
will promptly notify the relevant Seller of any breach of any representation or
warranty made by such Seller in respect of a Mortgage Loan which materially and
adversely affects the interests of the Certificateholders in such Mortgage Loan.
Unless otherwise specified in the related Prospectus Supplement, if such Seller
cannot cure such breach within 90 days after notice from the Master Servicer or
the Trustee, as the case may be, then such Seller will be obligated to
repurchase such Mortgage Loan from the Trust Fund at a price (the "Purchase
Price") equal to 100% of the unpaid principal balance thereof as of the date of
the repurchase plus accrued interest thereon to the first day of the month
following the month of repurchase at the Mortgage Rate (less any Advances or
amount payable as related servicing compensation if the Seller is the Master
Servicer). If a REMIC election is to be made with respect to a Trust Fund,
unless otherwise provided in the related Prospectus Supplement, the Master
Servicer or a holder of the related residual certificate will be obligated to
pay any prohibited transaction tax which may arise in connection with any such
repurchase. The Master Servicer, unless otherwise specified in the related
Prospectus Supplement, will be entitled to reimbursement for any such payment
from the assets of the related Trust Fund or from any holder of the related
residual certificate. See "Description of the Certificates--General". Except in
those cases in which the Master Servicer is the Seller, the Master Servicer will
be required under the applicable Agreement to enforce this obligation for the
benefit of the Trustee and the holders of the Certificates, following the
practices it would employ in its good faith business judgment were it the owner
of such Mortgage Loan. This repurchase obligation will constitute the sole
remedy available to holders of Certificates or the Trustee for a breach of
representation by a Seller.
Neither the Depositor nor the Master Servicer (unless the Master Servicer
is the Seller) will be obligated to purchase a Mortgage Loan if a Seller
defaults on its obligation to do so, and no assurance can be given that Sellers
will carry out their respective repurchase obligations with respect to Mortgage
Loans. However, to the extent that a breach of a representation and warranty of
a Seller may also constitute a breach of a representation made by the Master
Servicer, the Master Servicer may have a repurchase obligation as described
under "The Pooling and Servicing Agreement--Assignment of Mortgage Assets".
DESCRIPTION OF THE CERTIFICATES
Each Series of Certificates will be issued pursuant to an Agreement, dated
as of the related Cut-off Date, among the Depositor, the Master Servicer and the
Trustee for the benefit of the holders of the Certificates of such Series. The
provisions of each Agreement will vary depending upon the nature of the
Certificates to be issued thereunder and the nature of the related Trust Fund. A
form of such Agreement is an exhibit to the Registration Statement of which this
Prospectus is a part. The following summaries describe certain provisions which
may appear in each Agreement. The Prospectus Supplement for a Series of
Certificates will describe any provision of the Agreement relating to such
Series that materially differs from the description thereof contained in this
Prospectus. The summaries do not purport to be complete and are subject to, and
are qualified in their entirety by reference to, all of the provisions of the
Agreement for each Series of Certificates and the applicable Prospectus
Supplement. The Depositor will provide a copy of the Agreement (without
exhibits) relating to any Series without charge upon written request of a holder
of record of a Certificate of such Series addressed to Greenwich Capital
Acceptance, Inc., 600 Steamboat Road, Greenwich, Connecticut 06830, Attention:
Asset Backed Finance Group.
General
Unless otherwise specified in the Prospectus Supplement, the Certificates
of each Series will be issued in fully registered form only, in the authorized
denominations specified in the related Prospectus Supplement, will evidence
specified beneficial ownership interests in the related Trust Fund created
pursuant to each Agreement and will not be entitled to payments in respect of
the assets included in any other Trust Fund established by the Depositor. The
Certificates will not represent obligations of the Depositor or any affiliate of
the Depositor. The
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Mortgage Loans will not be insured or guaranteed by any governmental entity or
other person, unless otherwise specified in the related Prospectus Supplement.
To the extent provided in the Agreement, each Trust Fund will consist of (i) the
Mortgage Assets, as from time to time are subject to the related Agreement
(exclusive of any amounts specified in the related Prospectus Supplement (the
"Retained Interest")); (ii) such assets as from time to time are required to be
deposited in the related Certificate Account as defined under "The Pooling and
Servicing Agreement--Payments on Mortgage Loans; Deposits to the Certificate
Account"; (iii) property which secured a Mortgage Loan and which is acquired on
behalf of the Certificateholders by foreclosure or deed in lieu of foreclosure
and (iv) Primary Mortgage Insurance Policies, FHA Insurance and VA Guarantees,
if any, and any other insurance policies or other forms of credit enhancement
required to be maintained pursuant to the Agreement. If so specified in the
related Prospectus Supplement, a Trust Fund may also include one or more of the
following: reinvestment income on payments received on the Mortgage Assets, a
reserve fund, a mortgage pool insurance policy, a special hazard insurance
policy, a bankruptcy bond, one or more letters of credit, a surety bond,
guaranties or similar instruments or other agreements.
Each Series of Certificates will be issued in one or more classes. Each
class of Certificates of a Series will evidence beneficial ownership of a
specified portion or percentage (which may be 0%) of future interest payments
and a specified portion or percentage (which may be 0%) of future principal
payments on the Mortgage Assets in the related Trust Fund. A Series of
Certificates may include one or more classes that are senior in right to payment
to one or more other classes of Certificates of such Series. Certain Series or
classes of Certificates may be covered by insurance policies, surety bonds or
other forms of credit enhancement, in each case as described herein and in the
related Prospectus Supplement. One or more classes of Certificates of a Series
may be entitled to receive distributions of principal, interest or any
combination thereof. Distributions on one or more classes of a Series of
Certificates may be made prior to being made on one or more other classes, after
the occurrence of specified events, in accordance with a schedule or formula, on
the basis of collections from designated portions of the Mortgage Assets in the
related Trust Fund or on a different basis, in each case as specified in the
related Prospectus Supplement. The timing and amounts of such distributions may
vary among classes or over time as specified in the related Prospectus
Supplement.
Unless otherwise specified in the related Prospectus Supplement,
distributions of principal and interest (or, where applicable, of principal only
or interest only) on the related Certificates will be made by the Trustee on
each Distribution Date (i.e., monthly, quarterly, semi-annually or at such other
intervals and on the dates as are specified in the Prospectus Supplement) in
proportion to the percentages specified in the related Prospectus Supplement.
Distributions will be made to the persons in whose names the Certificates are
registered at the close of business on the dates specified in the related
Prospectus Supplement (each, a "Record Date"). Distributions will be made by
check or money order mailed to the persons entitled thereto at the address
appearing in the register maintained for holders of Certificates (the
"Certificate Register") or, if specified in the related Prospectus Supplement,
in the case of Certificates that are of a certain minimum denomination, upon
written request by the Certificateholder, by wire transfer or by such other
means as are described therein; provided, however, that the final distribution
in retirement of the Certificates will be made only upon presentation and
surrender of the Certificates at the office or agency of the Trustee or other
person specified in the notice to Certificateholders of such final distribution.
The Certificates will be freely transferable and exchangeable at the
Corporate Trust Office of the Trustee as set forth in the related Prospectus
Supplement. No service charge will be made for any registration of exchange or
transfer of Certificates of any Series but the Trustee may require payment of a
sum sufficient to cover any related tax or other governmental charge.
Under current law, in the case of a class of Certificates entitled only to
a specified percentage of payments of interest or principal or a notional amount
of either interest or principal on the related Mortgage Loans or a class of
Certificates entitled to receive payments of interest and principal on the
Mortgage Loans only after payments to other classes or after the occurrence of
certain specified events, the purchase and holding of such a class of
Certificates by or on behalf of any employee benefit plan or other retirement
arrangement (including individual retirement accounts and annuities, Keogh plans
and collective investment funds in which such plans, accounts or arrangements
are invested) subject to provisions of ERISA or the Code may result in
"prohibited transactions" within the meaning of ERISA and the Code. See "ERlSA
Considerations". Unless otherwise specified in the related Prospectus
Supplement, transfer of Certificates of such a class will not be registered
unless the transferee (i) represents that it is not, and is not purchasing on
behalf of, any such plan, account or arrangement or (ii) provides an
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opinion of counsel satisfactory to the Trustee and the Depositor that the
purchase of Certificates of such a class by or on behalf of such plan, account
or arrangement is permissible under applicable law and will not subject the
Trustee, the Master Servicer or the Depositor to any obligation or liability in
addition to those undertaken in the Agreement.
As to each Series, an election may be made to treat the related Trust Fund
or designated portions thereof as a "real estate mortgage investment conduit" (
each, a "REMIC") as defined in the Code. The related Prospectus Supplement will
specify whether a REMIC election is to be made. Alternatively, the Agreement for
a Series may provide that a REMIC election may be made at the discretion of the
Depositor or the Master Servicer and may only be made if certain conditions are
satisfied. As to any such Series, the terms and provisions applicable to the
making of a REMIC election, as well as any material federal income tax
consequences to Certificateholders not otherwise described herein, will be set
forth in the related Prospectus Supplement. If such an election is made with
respect to a Series, one of the classes will be designated as evidencing the
sole class of "residual interests" in the related REMIC, as defined in the Code.
All other classes of Certificates in such a Series will constitute "regular
interests" in the related REMIC, as defined in the Code. As to each Series with
respect to which a REMIC election is to be made, the Master Servicer or a holder
of the related residual certificate will be obligated to take all actions
required in order to comply with applicable laws and regulations and will be
obligated to pay any prohibited transaction taxes. The Master Servicer, unless
otherwise specified in the related Prospectus Supplement, will be entitled to
reimbursement for any such payment from the assets of the Trust Fund or from any
holder of the related residual certificate.
Distributions on Certificates
General. In general, the method of determining the amount of distributions
on a particular Series of Certificates will depend on the type of credit
support, if any, that is used with respect to such Series. See "Credit
Enhancement". Set forth below are descriptions of various methods that may be
used to determine the amount of distributions on the Certificates of a
particular Series. The Prospectus Supplement for each Series of Certificates
will describe the method to be used in determining the amount of distributions
on the Certificates of such Series.
Distributions allocable to principal and interest on the Certificates will
be made by the Trustee out of, and only to the extent of, funds in the related
Certificate Account, including any funds transferred from any reserve account (a
"Reserve Account"). As between Certificates of different classes and as between
distributions of principal (and, if applicable, between distributions of
Principal Prepayments, as defined below, and scheduled payments of principal)
and interest, distributions made on any Distribution Date will be applied as
specified in the related Prospectus Supplement. Unless otherwise specified in
the related Prospectus Supplement, distributions to any class of Certificates
will be made pro rata to all Certificateholders of that class.
Available Funds. All distributions on the Certificates of each Series on
each Distribution Date will be made from the Available Funds described below in
accordance with the terms described in the related Prospectus Supplement and
specified in the Agreement. Unless otherwise provided in the related Prospectus
Supplement, the "Available Funds" for each Distribution Date will equal the sum
of the following amounts:
(i) the aggregate of all previously undistributed payments on account of
principal (including Principal Prepayments, if any, and prepayment penalties, if
so provided in the related Prospectus Supplement) and interest on the Mortgage
Loans in the related Trust Fund (including Liquidation Proceeds and Insurance
Proceeds and amounts drawn under letters of credit or other credit enhancement
instruments as permitted thereunder and as specified in the related Agreement)
received by the Master Servicer after the Cut-off Date and on or prior to the
day of the month of the related Distribution Date specified in the related
Prospectus Supplement (the "Determination Date") except:
(a) all payments which were due on or before the Cut-off Date;
(b) all Liquidation Proceeds and all Insurance Proceeds, all
Principal Prepayments and all other proceeds of any Mortgage Loan purchased by
the Depositor, the Master Servicer, any Sub-Servicer or any Seller pursuant to
the Agreement that were received after the prepayment period specified in the
related Prospectus Supplement and all related payments of interest representing
interest for any period after such prepayment period;
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(c) all scheduled payments of principal and interest due on a date
or dates subsequent to the first day of the month of distribution;
(d) amounts received on particular Mortgage Loans as late payments
of principal or interest or other amounts required to be paid by Mortgagors, but
only to the extent of any unreimbursed advance in respect thereof made by the
Master Servicer (including the related Sub-Servicers, Support Servicers or the
Trustee);
(e) amounts representing reimbursement, to the extent permitted by
the Agreement and as described under "--Advances" below, for advances made by
the Master Servicer, Sub-Servicers, Support Servicers or the Trustee that were
deposited into the Certificate Account, and amounts representing reimbursement
for certain other losses and expenses incurred by the Master Servicer or the
Depositor and described below;
(f) that portion of each collection of interest on a particular
Mortgage Loan in such Trust Fund which represents servicing compensation payable
to the Master Servicer or Retained Interest which is to be retained from such
collection or is permitted to be retained from related Insurance Proceeds,
Liquidation Proceeds or proceeds of Mortgage Loans purchased pursuant to the
Agreement;
(ii) the amount of any advance made by the Master Servicer, any
Sub-Servicer, Support Servicer or the Trustee as described under "--Advances"
below and deposited by it in the Certificate Account;
(iii) if applicable, amounts withdrawn from a Reserve Account; and
(iv) if applicable, the amount of prepayment interest shortfall.
Distributions of Interest. Unless otherwise specified in the related
Prospectus Supplement, interest will accrue on the aggregate principal balance
of each class of Certificates (with respect to each class, the "Certificate
Principal Balance") (or, in the case of Certificates entitled only to
distributions allocable to interest, the aggregate notional principal balance)
entitled to interest from the date, at the Pass-Through Rate (which may be a
fixed rate or an adjustable rate adjustable as specified in such Prospectus
Supplement) and for the periods specified in such Prospectus Supplement. To the
extent funds are available therefor, interest accrued during each such specified
period on each class of Certificates entitled to interest (other than a class of
Certificates that provides for interest that accrues, but is not currently
payable, referred to hereafter as "Accrual Certificates") will be distributable
on the Distribution Dates specified in the related Prospectus Supplement until
the aggregate Certificate principal balance of the Certificates of such class
has been distributed in full or, in the case of Certificates entitled only to
distributions allocable to interest, until the aggregate notional principal
balance of such Certificates is reduced to zero or for the period of time
designated in the related Prospectus Supplement. The original Certificate
Principal Balance of each Certificate will equal the aggregate distributions
allocable to principal to which such Certificate is entitled. Unless otherwise
specified in the related Prospectus Supplement, distributions allocable to
interest on each Certificate that is not entitled to distributions allocable to
principal will be calculated based on the notional principal balance of such
Certificate. The notional principal balance of a Certificate will not evidence
an interest in or entitlement to distributions allocable to principal but will
be used solely for convenience in expressing the calculation of interest and for
certain other purposes.
With respect to any class of Accrual Certificates, if specified in the
related Prospectus Supplement, any interest that has accrued but is not paid on
any Distribution Date will be added to the aggregate Certificate Principal
Balance of such class of Certificates on such Distribution Date. Unless
otherwise specified in the related Prospectus Supplement, distributions of
interest on each class of Accrual Certificates will commence only after the
occurrence of the events specified in such Prospectus Supplement. Unless
otherwise specified in the related Prospectus Supplement, prior to such time the
beneficial ownership interest of such class of Accrual Certificates in the Trust
Fund, as reflected in the aggregate Certificate Principal Balance of such class
of Accrual Certificates, will increase on each Distribution Date by the amount
of interest that accrued on such class of Accrual Certificates during the
preceding interest accrual period but that was not required to be distributed to
such class on such Distribution Date. Any such class of Accrual Certificates
will thereafter accrue interest on its outstanding Certificate Principal Balance
as so adjusted.
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Distributions of Principal. Unless otherwise specified in the related
Prospectus Supplement, the aggregate Certificate Principal Balance of any class
of Certificates entitled to distributions of principal will be the aggregate
original Certificate Principal Balance of such class of Certificates specified
in such Prospectus Supplement, reduced by all distributions reported to the
holders of such Certificates as allocable to principal and, (i) in the case of
Accrual Certificates, unless otherwise specified in the related Prospectus
Supplement, increased by all interest accrued but not then distributable on such
Accrual Certificates and (ii) in the case of adjustable rate Certificates,
unless otherwise specified in the related Prospectus Supplement, subject to the
effect of negative amortization. The related Prospectus Supplement will specify
the method by which the amount of principal to be distributed on the
Certificates on each Distribution Date will be calculated and the manner in
which such amount will be allocated among the classes of Certificates entitled
to distributions of principal.
If so provided in the related Prospectus Supplement, one or more classes
of Senior Certificates will be entitled to receive all or a disproportionate
percentage of the payments of principal which are received from borrowers in
advance of their scheduled due dates and are not accompanied by amounts
representing scheduled interest due after the month of such payments ("Principal
Prepayments") in the percentages and under the circumstances or for the periods
specified in such Prospectus Supplement. Any such allocation of Principal
Prepayments to such class or classes of Certificates will have the effect of
accelerating the amortization of such Senior Certificates while increasing the
interests evidenced by the Subordinated Certificates in the Trust Fund.
Increasing the interests of the Subordinated Certificates relative to that of
the Senior Certificates is intended to preserve the availability of the
subordination provided by the Subordinated Certificates. See "Credit
Enhancement--Subordination" herein.
Unscheduled Distributions. If specified in the related Prospectus
Supplement, the Certificates will be subject to receipt of distributions before
the next scheduled Distribution Date under the circumstances and in the manner
described below and in such Prospectus Supplement. If applicable, the Trustee
will be required to make such unscheduled distributions on the day and in the
amount specified in the related Prospectus Supplement if, due to substantial
payments of principal (including Principal Prepayments) on the Mortgage Assets,
the Trustee or the Master Servicer determines that the funds available or
anticipated to be available from the Certificate Account and, if applicable,
from any Reserve Account may be insufficient to make required distributions on
the Certificates on such Distribution Date. Unless otherwise specified in the
related Prospectus Supplement, the amount of any such unscheduled distribution
that is allocable to principal will not exceed the amount that would otherwise
have been required to be distributed as principal on the Certificates on the
next Distribution Date. Unless otherwise specified in the related Prospectus
Supplement, all unscheduled distributions will include interest at the
applicable Pass-Through Rate (if any) on the amount of the unscheduled
distribution allocable to principal for the period and to the date specified in
such Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, all
distributions allocable to principal in any unscheduled distribution will be
made in the same priority and manner as distributions of principal on the
Certificates would have been made on the next Distribution Date, and with
respect to Certificates of the same class, unscheduled distributions of
principal will be made on a pro rata basis. Notice of any unscheduled
distribution will be given by the Trustee prior to the date of such
distribution.
Advances
Unless otherwise provided in the related Prospectus Supplement, the Master
Servicer will be required to advance on or before each Distribution Date (from
its own funds, funds advanced by Sub-Servicers or Support Servicers or funds
held in the Certificate Account for future distributions to the holders of such
Certificates) an amount equal to the aggregate of payments of principal and
interest that were delinquent on the related Determination Date and were not
advanced by any Sub-Servicer, subject to the Master Servicer's determination
that such Advances will be recoverable out of late payments by Mortgagors,
Liquidation Proceeds, Insurance Proceeds or otherwise. In the case of
Cooperative Loans, the Master Servicer also will be required to advance any
unpaid maintenance fees and other charges under the related proprietary leases
as specified in the related Prospectus Supplement.
In making Advances, the Master Servicer will endeavor to maintain a
regular flow of scheduled interest and principal payments to holders of the
Certificates rather than to guarantee or insure against losses. If Advances are
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made by the Master Servicer from cash being held for future distribution to
Certificateholders, the Master Servicer will replace such funds on or before any
future Distribution Date to the extent that funds in the applicable Certificate
Account on such Distribution Date would be less than the amount required to be
available for distributions to Certificateholders on such date. Any Master
Servicer funds advanced will be reimbursable to the Master Servicer out of
recoveries on the specific Mortgage Loans with respect to which such Advances
were made (e.g., late payments made by the related Mortgagor, any related
Insurance Proceeds, Liquidation Proceeds or proceeds of any Mortgage Loan
purchased by a Sub-Servicer or a Seller under the circumstances described
hereinabove). Advances by the Master Servicer (and any advances by a
Sub-Servicer or a Support Servicer) also will be reimbursable to the Master
Servicer (or Sub-Servicer or Support Servicer, as applicable) from cash
otherwise distributable to Certificateholders (including the holders of Senior
Certificates) to the extent that the Master Servicer determines that any such
Advances previously made are not ultimately recoverable as described above. The
Master Servicer also will be obligated to make Advances, to the extent
recoverable out of Insurance Proceeds, Liquidation Proceeds or otherwise, in
respect of certain taxes and insurance premiums not paid by Mortgagors on a
timely basis. Funds so advanced are reimbursable to the Master Servicer to the
extent permitted by the Agreement. If specified in the related Prospectus
Supplement, the obligations of the Master Servicer to make advances may be
supported by a cash advance reserve fund, a surety bond or other arrangement, in
each case as described in such Prospectus Supplement.
The Master Servicer or Sub-Servicer may enter into an agreement (a
"Support Agreement") with a support servicer (each, a "Support Servicer")
pursuant to which the Support Servicer agrees to provide funds on behalf of the
Master Servicer or Sub-Servicer in connection with the obligation of the Master
Servicer or Sub-Servicer, as the case may be, to make Advances. The Support
Agreement will be delivered to the Trustee and the Trustee will be authorized to
accept a substitute Support Agreement in exchange for an original Support
Agreement, provided that such substitution of the Support Agreement will not
adversely affect the rating or ratings assigned to the Certificates by such
Rating Agency or Agencies.
Unless otherwise provided in the Prospectus Supplement, in the event the
Master Servicer, a Sub-Servicer or a Support Servicer fails to make an Advance,
the Trustee will be obligated to make such Advance in its capacity as successor
servicer. If the Trustee makes such an Advance, it will be entitled to be
reimbursed for such Advance to the same extent and degree as the Master
Servicer, a Sub-Servicer or a Support Servicer is entitled to be reimbursed for
Advances. See "--Distribution on Certificates" above.
Reports to Certificateholders
Prior to or concurrently with each distribution on a Distribution Date and
except as otherwise set forth in an applicable Prospectus Supplement, the Master
Servicer or the Trustee will furnish to each Certificateholder of record of the
related Series a statement setting forth, to the extent applicable to such
Series of Certificates, among other things:
(i) the amount of such distribution allocable to principal, separately
identifying the aggregate amount of any Principal Prepayments and, if so
specified in the related Prospectus Supplement, prepayment penalties included
therein;
(ii) the amount of such distribution allocable to interest;
(iii) the amount of any Advance;
(iv) the aggregate amount (a) otherwise allocable to the Subordinated
Certificateholders on such Distribution Date and (b) withdrawn from the Reserve
Fund, if any, that is included in the amounts distributed to the Senior
Certificateholders;
(v) the outstanding Certificate Principal Balance or notional principal
balance of such class after giving effect to the distribution of principal on
such Distribution Date;
(vi) the percentage of principal payments on the Mortgage Loans (excluding
prepayments), if any, which such class will be entitled to receive on the
following Distribution Date;
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(vii) the percentage of Principal Prepayments on the Mortgage Loans, if
any, which such class will be entitled to receive on the following Distribution
Date;
(viii) the related amount of the servicing compensation retained or
withdrawn from the Certificate Account by the Master Servicer and the amount of
additional servicing compensation received by the Master Servicer attributable
to penalties, fees, excess Liquidation Proceeds and other similar charges and
items;
(ix) the number and aggregate principal balances of Mortgage Loans (A)
delinquent (exclusive of Mortgage Loans in foreclosure) (1) from one to 30 days,
(2) from 31 to 60 days, (3) from 61 to 90 days and (4) 91 days or more and (B)
in foreclosure, as of the close of business on the last day of the calendar
month preceding such Distribution Date;
(x) the book value of any real estate acquired through foreclosure or
grant of a deed in lieu of foreclosure and, if such real estate secured a
Multifamily Loan, such additional information as may be specified in the related
Prospectus Supplement;
(xi) if a class is entitled only to a specified portion of payments of
interest on the Mortgage Loans in the related Mortgage Pool, the Pass-Through
Rate, if adjusted from the date of the last statement, of the Mortgage Loans
expected to be applicable to the next distribution to such class;
(xii) if applicable, the amount remaining in any Reserve Account at the
close of business on the Distribution Date;
(xiii) the Pass-Through Rate as of the day prior to the immediately
preceding Distribution Date; and
(xiv) any amounts remaining under letters of credit, pool policies or
other forms of credit enhancement.
Where applicable, any amount set forth above may be expressed as a dollar
amount per single Certificate of the relevant class having the percentage
interest specified in the related Prospectus Supplement. The report to
Certificateholders for any Series of Certificates may include additional or
other information of a similar nature to that specified above.
In addition, within a reasonable period of time after the end of each
calendar year, the Master Servicer or the Trustee will mail to each
Certificateholder of record at any time during such calendar year a report (a)
as to the aggregate of amounts reported pursuant to (i) and (ii) above for such
calendar year or, in the event such person was a Certificateholder of record
during a portion of such calendar year, for the applicable portion of such year
and (b) such other customary information as may be deemed necessary or desirable
for Certificateholders to prepare their tax returns.
CREDIT ENHANCEMENT
General
Credit enhancement may be provided with respect to one or more classes of
a Series of Certificates or with respect to the Mortgage Assets in the related
Trust Fund. Credit enhancement may be in the form of a limited financial
guaranty policy issued by an entity named in the related Prospectus Supplement,
the subordination of one or more classes of the Certificates of such Series, the
establishment of one or more reserve accounts, the use of a cross-support
feature, use of a mortgage pool insurance policy, bankruptcy bond, special
hazard insurance policy, surety bond, letter of credit, guaranteed investment
contract or another method of credit enhancement described in the related
Prospectus Supplement or any combination of the foregoing. Unless otherwise
specified in the related Prospectus Supplement, any credit enhancement will not
provide protection against all risks of loss and will not guarantee repayment of
the entire principal balance of the Certificates and interest thereon. If losses
occur which exceed the amount covered by credit enhancement or which are not
covered by the credit enhancement, Certificateholders will bear their allocable
share of deficiencies.
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Subordination
If so specified in the related Prospectus Supplement, protection afforded
to holders of one or more classes of Certificates of a Series by means of the
subordination feature will be accomplished by the preferential right of holders
of one or more other classes of such Series (the "Senior Certificates") to
distributions in respect of scheduled principal, Principal Prepayments, interest
or any combination thereof that otherwise would have been payable to holders of
one or more other classes of Certificates (the "Subordinated Certificates")
under the circumstances and to the extent specified in the related Prospectus
Supplement. If so specified in the related Prospectus Supplement, protection may
also be afforded to the holders of the Senior Certificates of a Series by: (i)
reducing the ownership interest of the holders of the related Subordinated
Certificates; (ii) a combination of the immediately preceding sentence and
clause (i) above; or (iii) as otherwise described in the related Prospectus
Supplement. If specified in the related Prospectus Supplement, delays in receipt
of scheduled payments on the Mortgage Loans and losses on defaulted Mortgage
Loans will be borne first by the various classes of Subordinated Certificates
and thereafter by the various classes of Senior Certificates, in each case under
the circumstances and subject to the limitations specified in such related
Prospectus Supplement. The aggregate distributions in respect of delinquent
payments on the Mortgage Loans over the lives of the Certificates or at any
time, the aggregate losses in respect of defaulted Mortgage Loans which must be
borne by the Subordinated Certificates by virtue of subordination and the amount
of the distributions otherwise distributable to the Subordinated
Certificateholders that will be distributable to Senior Certificateholders on
any Distribution Date may be limited as specified in the related Prospectus
Supplement. If aggregate distributions in respect of delinquent payments on the
Mortgage Loans or aggregate losses in respect of such Mortgage Loans were to
exceed an amount specified in the related Prospectus Supplement, holders of the
Senior Certificates would experience losses on such Certificates.
In addition to or in lieu of the foregoing, if so specified in the related
Prospectus Supplement, all or any portion of distributions otherwise payable to
holders of the Subordinated Certificates on any Distribution Date may instead be
deposited into one or more Reserve Accounts established with the Trustee. If so
specified in the related Prospectus Supplement, such deposits may be made on
each Distribution Date, for specified periods or until the balance in the
Reserve Account has reached a specified amount and, following payments from the
Reserve Account to holders of the Senior Certificates or otherwise, thereafter
to the extent necessary to restore the balance in the Reserve Account to
required levels, in each case as specified in the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, amounts on deposit in the
Reserve Account may be released to the holders of the class or classes of
Certificates specified in such Prospectus Supplement at the times and under the
circumstances specified in such Prospectus Supplement.
If specified in the related Prospectus Supplement, various classes of
Senior Certificates and Subordinated Certificates may themselves be subordinate
in their right to receive certain distributions to other classes of Senior and
Subordinated Certificates, respectively, through a cross support mechanism or
otherwise.
As among classes of Senior Certificates and as among classes of
Subordinated Certificates, distributions may be allocated among such classes (i)
in the order of their scheduled final distribution dates, (ii) in accordance
with a schedule or formula, (iii) in relation to the occurrence of events or
(iv) otherwise, in each case as specified in the related Prospectus Supplement.
As among classes of Subordinated Certificates, payments to holders of the
related Senior Certificates on account of delinquencies or losses and payments
to any Reserve Account will be allocated as specified in the related Prospectus
Supplement.
Mortgage Pool Insurance Policies
If specified in the related Prospectus Supplement related to a Mortgage
Pool of Single Family Loans, a separate mortgage pool insurance policy (a
"Mortgage Pool Insurance Policy") will be obtained for the Mortgage Pool and
issued by the insurer (the "Pool Insurer") named in such Prospectus Supplement.
Each Mortgage Pool Insurance Policy will, subject to the limitations described
below, cover loss by reason of default in payment on Single Family Loans in the
related Mortgage Pool in an amount equal to a percentage (specified in such
Prospectus Supplement) of the aggregate principal balances of such Mortgage
Loans on the Cut-off Date which are not covered as to their entire outstanding
principal balances by Primary Mortgage Insurance Policies. As more fully
described below, the Master Servicer will present claims thereunder to the Pool
Insurer on behalf of itself, the Trustee and the holders of the Certificates.
The Mortgage Pool Insurance Policies, however, are not blanket policies against
loss,
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since claims thereunder may only be made respecting particular defaulted
Mortgage Loans and only upon satisfaction of certain conditions precedent
described below. Unless otherwise specified in the related Prospectus
Supplement, no Mortgage Pool Insurance Policy will cover losses due to a failure
to pay or denial of a claim under a Primary Mortgage Insurance Policy.
Unless otherwise specified in the related Prospectus Supplement, the
Mortgage Pool Insurance Policy will provide that no claims may be validly
presented unless (i) any required Primary Mortgage Insurance Policy is in effect
for the defaulted Mortgage Loan and a claim thereunder has been submitted and
settled; (ii) hazard insurance on the related Mortgaged Property has been kept
in force and real estate taxes and other protection and preservation expenses
have been paid; (iii) if there has been physical loss or damage to the Mortgaged
Property, it has been restored to its physical condition (reasonable wear and
tear excepted) at the time of issuance of the policy; and (iv) the insured has
acquired good and merchantable title to the Mortgaged Property free and clear of
liens except certain permitted encumbrances. Upon satisfaction of these
conditions, the Pool Insurer will have the option either (a) to purchase the
property securing the defaulted Mortgage Loan at a price equal to the principal
balance thereof plus accrued and unpaid interest at the Mortgage Rate to the
date of purchase and certain expenses incurred by the Master Servicer on behalf
of the Trustee and Certificateholders or (b) to pay the amount by which the sum
of the principal balance of the defaulted Mortgage Loan plus accrued and unpaid
interest at the Mortgage Rate to the date of payment of the claim and the
aforementioned expenses exceeds the proceeds received from an approved sale of
the Mortgaged Property, in either case net of certain amounts paid or assumed to
have been paid under the related Primary Mortgage Insurance Policy. If any
property securing a defaulted Mortgage Loan is damaged and proceeds, if any,
from the related hazard insurance policy or any applicable Special Hazard
Insurance Policy are insufficient to restore the damaged property to a condition
sufficient to permit recovery under the Mortgage Pool Insurance Policy, the
Master Servicer will not be required to expend its own funds to restore the
damaged property unless it determines that (i) such restoration will increase
the proceeds to Certificateholders on liquidation of the Mortgage Loan after
reimbursement of the Master Servicer for its expenses and (ii) such expenses
will be recoverable by it through proceeds of the sale of the property or
proceeds of such related Mortgage Pool Insurance Policy or any related Primary
Mortgage Insurance Policy.
Unless otherwise specified in the related Prospectus Supplement, no
Mortgage Pool Insurance Policy will insure (and many Primary Mortgage Insurance
Policies do not insure) against loss sustained by reason of a default arising
from, among other things, (i) fraud or negligence in the origination or
servicing of a Mortgage Loan, including misrepresentation by the mortgagor, the
originator or persons involved in the origination thereof or (ii) failure to
construct a Mortgaged Property in accordance with plans and specifications. A
failure of coverage attributable to one of the foregoing events might result in
a breach of the related Seller's representations described above and, in such
event, might give rise to an obligation on the part of such Seller to purchase
the defaulted Mortgage Loan if the breach cannot be cured by such Seller. No
Mortgage Pool Insurance Policy will cover (and many Primary Mortgage Insurance
Policies do not cover) a claim in respect of a defaulted Mortgage Loan occurring
when the servicer of such Mortgage Loan, at the time of default or thereafter,
was not approved by the applicable insurer.
Unless otherwise specified in the related Prospectus Supplement, the
original amount of coverage under the Mortgage Pool Insurance Policy will be
reduced over the life of the related Certificates by the aggregate dollar amount
of claims paid less the aggregate of the net amounts realized by the Pool
Insurer upon disposition of all foreclosed properties. The amount of claims paid
will include certain expenses incurred by the Master Servicer as well as accrued
interest on delinquent Mortgage Loans to the date of payment of the claim,
unless otherwise specified in the related Prospectus Supplement. Accordingly, if
aggregate net claims paid under any Mortgage Pool Insurance Policy reach the
original policy limit, coverage under that Mortgage Pool Insurance Policy will
be exhausted and any further losses will be borne by the Certificateholders.
The terms of any pool insurance policy relating to a pool of Contracts
will be described in the related Prospectus Supplement.
FHA Insurance; VA Guarantees
Single Family Loans designated in the related Prospectus Supplement as
insured by the FHA will be insured by the FHA as authorized under the United
States Housing Act of 1937, as amended. Such Mortgage Loans
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will be insured under various FHA programs including the standard FHA 203(b)
program to finance the acquisition of one- to four-family housing units and the
FHA 245 graduated payment mortgage program. These programs generally limit the
principal amount and interest rates of the mortgage loans insured. Single Family
Loans insured by the FHA generally require a minimum down payment of
approximately 5% of the original principal amount of the loan. No FHA-insured
Single Family Loan relating to a Series may have an interest rate or original
principal amount exceeding the applicable FHA limits at the time of origination
of such loan.
The insurance premiums for Single Family Loans insured by the FHA are
collected by lenders approved by the Department of Housing and Urban Development
("HUD") or by the Master Servicer or any Sub-Servicers and are paid to the FHA.
The regulations governing FHA single-family mortgage insurance programs provide
that insurance benefits are payable either upon foreclosure (or other
acquisition of possession) and conveyance of the mortgaged premises to HUD or
upon assignment of the defaulted Mortgage Loan to HUD. With respect to a
defaulted FHA-insured Single Family Loan, the Master Servicer or any
Sub-Servicer is limited in its ability to initiate foreclosure proceedings. When
it is determined by the Master Servicer or any applicable Sub-Servicer or HUD
that the default was caused by circumstances beyond the mortgagor's control, the
Master Servicer or such Sub-Servicer is expected to make an effort to avoid
foreclosure by entering, if feasible, into one of a number of available forms of
forbearance plans with the mortgagor. Such plans may involve the reduction or
suspension of regular mortgage payments for a specified period, with such
payments to be made up on or before the maturity date of the mortgage, or the
recasting of payments due under the mortgage up to or beyond the maturity date.
In addition, when a default caused by such circumstances is accompanied by
certain other criteria, HUD may provide relief by making payments to the Master
Servicer or such Sub-Servicer in partial or full satisfaction of amounts due
under the Mortgage Loan (which payments are to be repaid by the mortgagor to
HUD) or by accepting assignment of the loan from the Master Servicer or such
Sub-Servicer. With certain exceptions, at least three full monthly installments
must be due and unpaid under the Mortgage Loan, and HUD must have rejected any
request for relief from the mortgagor, before the Master Servicer or such
Sub-Servicer may initiate foreclosure proceedings.
HUD has the option, in most cases, to pay insurance claims in cash or in
debentures issued by HUD. Currently, claims are being paid in cash and claims
have not been paid in debentures since 1965. HUD debentures issued in
satisfaction of FHA insurance claims bear interest at the applicable HUD
debentures' interest rate. The Master Servicer or any Sub-Servicer of each
FHA-insured Single Family Loan will be obligated to purchase any such debenture
issued in satisfaction of such Mortgage Loan upon default for an amount equal to
the principal amount of any such debenture.
The amount of insurance benefits generally paid by the FHA is equal to the
entire unpaid principal amount of the defaulted Mortgage Loan adjusted to
reimburse the Master Servicer or Sub-Servicer for certain costs and expenses and
to deduct certain amounts received or retained by the Master Servicer or
Sub-Servicer after default. When entitlement to insurance benefits results from
foreclosure (or other acquisition of possession) and conveyance to HUD, the
Master Servicer or Sub-Servicer is compensated for no more than two-thirds of
its foreclosure costs, and is compensated for interest accrued and unpaid prior
to such date generally only to the extent allowed pursuant to the related
forbearance plan approved by HUD. When entitlement to insurance benefits results
from assignment of the Mortgage Loan to HUD, the insurance payment includes full
compensation for interest accrued and unpaid to the assignment date. The
insurance payment itself, upon foreclosure of an FHA-insured Single Family Loan,
bears interest from the date which is 30 days after the mortgagor's first
uncorrected failure to perform any obligation to make any payment due under the
Mortgage and, upon assignment, from the date of assignment to the date of
payment of the claim, in each case at the same interest rate as the applicable
HUD debenture interest rate described above.
Single Family Loans designated in the related Prospectus Supplement as
guaranteed by the VA will be partially guaranteed by the VA under the
Serviceman's Readjustment Act of 1944, as amended (a "VA Guaranty Policy"),
which permits a veteran (or in certain instances the spouse of a veteran) to
obtain a mortgage loan guaranteed by the VA covering mortgage financing of the
purchase of a one- to four-family dwelling unit at interest rates permitted by
the VA. The program has no mortgage loan limits, requires no down payment from
the purchaser and permits the guarantee of mortgage loans of up to 30 years'
duration. However, no Single Family Loan guaranteed by the VA will have an
original principal amount greater than five times the partial VA guarantee for
such Mortgage Loan.
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The maximum guarantee that may be issued by the VA under a VA guaranteed
mortgage loan depends upon the original principal amount of the mortgage loan,
as further described in 38 United States Code Section 1803(a), as amended. As of
November 1, 1998 the maximum guarantee that may be issued by the VA under a VA
guaranteed mortgage loan of more than $144,000 is the lesser of 25% of the
original principal amount of the mortgage loan and $50,570. The liability on the
guarantee is reduced or increased pro rata with any reduction or increase in the
amount of indebtedness, but in no event will the amount payable on the guarantee
exceed the amount of the original guarantee. The VA may, at its option and
without regard to the guarantee, make full payment to a mortgage holder of
unsatisfied indebtedness on a mortgage upon its assignment to the VA.
With respect to a defaulted VA guaranteed Single Family Loan, the Master
Servicer or Sub-Servicer is, absent exceptional circumstances, authorized to
announce its intention to foreclose only when the default has continued for
three months. Generally, a claim for the guarantee is submitted after
liquidation of the Mortgaged Property.
The amount payable under the guarantee will be the percentage of the
VA-insured Single Family Loan originally guaranteed applied to indebtedness
outstanding as of the applicable date of computation specified in the VA
regulations. Payments under the guarantee will be equal to the unpaid principal
amount of the loan, interest accrued on the unpaid balance of the loan to the
appropriate date of computation and limited expenses of the mortgagee, but in
each case only to the extent that such amounts have not been recovered through
liquidation of the Mortgaged Property. The amount payable under the guarantee
may in no event exceed the amount of the original guarantee.
Special Hazard Insurance Policies
If specified in the related Prospectus Supplement, a separate special
hazard insurance policy (a "Special Hazard Insurance Policy") will be obtained
for the Mortgage Pool and will be issued by the insurer (a "Special Hazard
Insurer") named in such Prospectus Supplement. Each Special Hazard Insurance
Policy will, subject to limitations described below, protect holders of the
related Certificates from (i) loss by reason of damage to Mortgaged Properties
caused by certain hazards (including earthquakes and, to a limited extent, tidal
waves and related water damage or as otherwise specified in the related
Prospectus Supplement) not insured against under the standard form of hazard
insurance policy for the respective states in which the Mortgaged Properties are
located or under a flood insurance policy if the Mortgaged Property is located
in a federally designated flood area, and (ii) loss caused by reason of the
application of the coinsurance clause contained in hazard insurance policies.
See "The Pooling and Servicing Agreement--Hazard Insurance". No Special Hazard
Insurance Policy will cover losses occasioned by fraud or conversion by the
Trustee or Master Servicer, war, insurrection, civil war, certain governmental
action, errors in design, faulty workmanship or materials (except under certain
circumstances), nuclear or chemical reaction, flood (if the Mortgaged Property
is located in a federally designated flood area), nuclear or chemical
contamination and certain other risks. The amount of coverage under any Special
Hazard Insurance Policy will be specified in the related Prospectus Supplement.
Each Special Hazard Insurance Policy will provide that no claim may be paid
unless hazard insurance and, if applicable, flood insurance on the related
Mortgaged Property have been kept in force and other protection and preservation
expenses have been paid.
Subject to the foregoing limitations, and unless otherwise specified in
the related Prospectus Supplement, each Special Hazard Insurance Policy will
provide that where there has been damage to property securing a foreclosed
Mortgage Loan (title to which has been acquired by the insured) and to the
extent such damage is not covered by the hazard insurance policy or flood
insurance policy, if any, maintained by the mortgagor or the Master Servicer,
the Special Hazard Insurer will pay the lesser of (i) the cost of repair or
replacement of such property or (ii) upon transfer of the property to the
Special Hazard Insurer, the unpaid principal balance of such Mortgage Loan at
the time of acquisition of such property by foreclosure or deed in lieu of
foreclosure plus accrued interest to the date of claim settlement and certain
expenses incurred by the Master Servicer with respect to such property. If the
unpaid principal balance of a Mortgage Loan plus accrued interest and certain
expenses is paid by the Special Hazard Insurer, the amount of further coverage
under the related Special Hazard Insurance Policy will be reduced by such amount
less any net proceeds from the sale of the property. Any amount paid as the cost
of repairing such property of the property will further reduce coverage by such
amount. So long as a Mortgage Pool Insurance Policy remains in effect, the
payment by the Special Hazard Insurer of the cost of repair or of the unpaid
principal balance of the related Mortgage Loan plus accrued interest and certain
expenses will not affect the total insurance proceeds
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paid to Certificateholders, but will affect the relative amounts of coverage
remaining under the related Special Hazard Insurance Policy and such Mortgage
Pool Insurance Policy.
Since each Special Hazard Insurance Policy will be designed to permit full
recovery under the Mortgage Pool Insurance Policy in circumstances in which such
recoveries would otherwise be unavailable because property has been damaged by a
cause not insured against by a standard hazard policy and thus would not be
restored, each Agreement will provide that, if the related Mortgage Pool
Insurance Policy shall have been terminated or been exhausted through payment of
claims, unless otherwise specified in the related Prospectus Supplement, the
Master Servicer will be under no further obligation to maintain such Special
Hazard Insurance Policy.
To the extent specified in an applicable Prospectus Supplement, the Master
Servicer may deposit cash, an irrevocable letter of credit or any other
instrument acceptable to each nationally recognized rating agency rating the
Certificates of the related Series in a special trust account to provide
protection in lieu of or in addition to that provided by a Special Hazard
Insurance Policy. The amount of any Special Hazard Insurance Policy or of the
deposit to the special trust account relating to such Certificates in lieu
thereof may be reduced so long as any such reduction will not result in a
downgrading of the rating of such Certificates by any such rating agency.
The terms of any Special Hazard Insurance Policy relating to a pool of
Contracts will be described in the related Prospectus Supplement.
Bankruptcy Bonds
If specified in the related Prospectus Supplement, a bankruptcy bond
("Bankruptcy Bond") for proceedings under the Bankruptcy Code will be issued by
an insurer named in such Prospectus Supplement. Each Bankruptcy Bond will cover
certain losses resulting from a reduction by a bankruptcy court of scheduled
payments of principal and interest on a Mortgage Loan or a reduction by such
court of the principal amount of a Mortgage Loan and will cover certain unpaid
interest on the amount of such a principal reduction from the date of the filing
of a bankruptcy petition. The required amount of coverage under a Bankruptcy
Bond will be set forth in the related Prospectus Supplement. Coverage under a
Bankruptcy Bond may be cancelled or reduced by the Master Servicer if such
cancellation or reduction would not adversely affect the then current rating or
ratings of the related Certificates. See "Certain Legal Aspects of the Mortgage
Loans--Anti-Deficiency Legislation and Other Limitations on Lenders" herein.
To the extent specified in the related Prospectus Supplement, the Master
Servicer may deposit cash, an irrevocable letter of credit or any other
instrument acceptable to each nationally recognized rating agency rating the
Certificates of the related Series in a special trust account to provide
protection in lieu of or in addition to that provided by a Bankruptcy Bond. The
amount of any Bankruptcy Bond or of the deposit to the special trust account
relating to such Certificates in lieu thereof may be reduced so long as any such
reduction would not result in a downgrading of the then current rating or
ratings of such Certificates by any such rating agency.
The terms of any Bankruptcy Bond relating to a pool of Contracts will be
described in the related Prospectus Supplement.
FHA Insurance on Multifamily Loans
There are two primary FHA insurance programs that are available for
Multifamily Loans. Sections 221(d)(3) and (d)(4) of the Housing Act allow HUD to
insure mortgage loans that are secured by newly constructed and substantially
rehabilitated multifamily rental projects. Section 244 of the Housing Act
provides for co-insurance of such mortgage loans made under Sections 221(d)(3)
and (d)(4) by HUD/FHA and a HUD-approved co-insurer. Generally the term of such
a mortgage loan may be up to 40 years and the ratio of loan amount to property
replacement cost can be up to 90%.
Section 223(f) of the Housing Act allows HUD to insure mortgage loans made
for the purchase or refinancing of existing apartment projects which are at
least three years old. Section 244 also provides for co-insurance of mortgage
loans made under Section 223(f). Under Section 223(f), the loan proceeds cannot
be used for
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substantial rehabilitation work but repairs may be made for up to, in general,
the greater of 15% of the value of the project or a dollar amount per apartment
unit established from time to time by HUD. In general the loan term may not
exceed 35 years and a loan-to-value ratio of no more than 85% is required for
the purchase of a project and 70% for the refinancing of a project.
FHA insurance is generally payable in cash or, at the option of the
mortgagee, in debentures. Such insurance does not cover 100% of the mortgage
loan but is instead subject to certain deductions and certain losses of interest
from the date of the default.
Reserve Accounts
If so specified in the related Prospectus Supplement, credit support with
respect to a Series of Certificates may be provided by the establishment and
maintenance of one or more Reserve Accounts for such Series, in trust, with the
Trustee for such Series of Certificates. The related Prospectus Supplement will
specify whether or not such Reserve Accounts will be included in the Trust Fund
for such Series.
The Reserve Account for a Series will be funded (i) by the deposit therein
of cash, U.S. Treasury securities, instruments evidencing ownership of principal
or interest payments thereon, letters of credit, demand notes, certificates of
deposit or a combination thereof in the aggregate amount specified in the
related Prospectus Supplement, (ii) by the deposit therein from time to time of
certain amounts, as specified in the related Prospectus Supplement to which the
Subordinate Certificateholders, if any, would otherwise be entitled or (iii) in
such other manner as may be specified in the related Prospectus Supplement.
Any amounts on deposit in the Reserve Account and the proceeds of any
other instrument upon maturity will be held in cash or will be invested in
Permitted Investments which, unless otherwise specified in the related
Prospectus Supplement, will include obligations of the United States and certain
agencies thereof, certificates of deposit, certain commercial paper, time
deposits and bankers acceptances sold by eligible commercial banks and certain
repurchase agreements of United States government securities with eligible
commercial banks. If a letter of credit is deposited with the Trustee, such
letter of credit will be irrevocable. Unless otherwise specified in the related
Prospectus Supplement, any instrument deposited therein will name the Trustee,
in its capacity as trustee for the holders of the Certificates, as beneficiary
and will be issued by an entity acceptable to each rating agency that rates the
Certificates. Additional information with respect to such instruments deposited
in the Reserve Account will be set forth in the related Prospectus Supplement.
Any amounts so deposited and payments on instruments so deposited will be
available for withdrawal from the Reserve Account for distribution to the
holders of Certificates for the purposes, in the manner and at the times
specified in the related Prospectus Supplement.
Cross Support
If specified in the related Prospectus Supplement, the beneficial
ownership of separate groups of assets included in a Trust Fund may be evidenced
by separate classes of the related Series of Certificates. In such case, credit
support may be provided by a cross support feature which requires that
distributions be made with respect to Certificates evidencing a beneficial
ownership interest in other asset groups within the same Trust Fund. The related
Prospectus Supplement for a Series which includes a cross support feature will
describe the manner and conditions for applying such cross support feature.
If specified in the related Prospectus Supplement, the coverage provided
by one or more forms of credit support may apply concurrently to two or more
related Trust Funds. If applicable, the related Prospectus Supplement will
identify the Trust Funds to which such credit support relates and the manner of
determining the amount of the coverage provided thereby and of the application
of such coverage to the identified Trust Funds.
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Other Insurance, Surety Bonds, Guaranties, Letters of Credit and Similar
Instruments or Agreements
If specified in the related Prospectus Supplement, a Trust Fund may also
include insurance, guaranties, surety bonds, letters of credit or similar
arrangements for the purpose of (i) maintaining timely payments or providing
additional protection against losses on the assets included in such Trust Fund,
(ii) paying administrative expenses or (iii) establishing a minimum reinvestment
rate on the payments made in respect of such assets or principal payment rate on
such assets. Such arrangements may include agreements under which
Certificateholders are entitled to receive amounts deposited in various accounts
held by the Trustee upon the terms specified in such Prospectus Supplement.
YIELD AND PREPAYMENT CONSIDERATIONS
The yields to maturity and weighted average lives of the Certificates will
be affected primarily by the amount and timing of principal payments received on
or in respect of the Mortgage Assets included in the related Trust Fund. The
original terms to maturity of the Mortgage Loans in a given Mortgage Pool will
vary depending upon the types of Mortgage Loans included therein. Each
Prospectus Supplement will contain information with respect to the types and
maturities of the Mortgage Loans in the related Mortgage Pool. Unless otherwise
specified in the related Prospectus Supplement, Single Family Loans and
Contracts may be prepaid without penalty in full or in part at any time.
Multifamily Loans may prohibit prepayment for a specified period after
origination, may prohibit partial prepayments entirely, and may require the
payment of a prepayment penalty upon prepayment in full or in part. The
prepayment experience on the Mortgage Loans in a Mortgage Pool will affect the
life of the related Series of Certificates.
A number of factors, including homeowner mobility, economic conditions,
the presence and enforceability of due-on-sale clauses, mortgage market interest
rates and the availability of mortgage funds may affect the prepayment
experience of Single Family Loans and Contracts. Some of these factors, as well
as other factors including limitations on prepayment and the relative tax
benefits associated with the ownership of income-producing real property, may
affect the prepayment of Multifamily Loans.
Unless otherwise provided in the related Prospectus Supplement, all
conventional Single Family Loans and Contracts will contain due-on-sale
provisions permitting the mortgagee or holder of the Contract to accelerate the
maturity of the loan or Contract upon sale or certain transfers by the mortgagor
or obligor of the underlying Mortgaged Property. As described in the related
Prospectus Supplement, conventional Multifamily Loans may contain due-on-sale
provisions, due-on-encumbrance provisions or both. Mortgage Loans insured by the
FHA, and Single Family Loans and Contracts partially guaranteed by the VA, are
assumable with the consent of the FHA and the VA, respectively. Thus, the rate
of prepayments of such Mortgage Loans may be lower than that of conventional
Mortgage Loans bearing comparable interest rates. Unless otherwise provided in
the related Prospectus Supplement, the Master Servicer generally will enforce
any due-on-sale or due-on-encumbrance clause, to the extent it has knowledge of
the conveyance or further encumbrance or the proposed conveyance or proposed
further encumbrance of the Mortgaged Property and reasonably believes that it is
entitled to do so under applicable law; provided, however, that the Master
Servicer will not take any enforcement action that would impair or threaten to
impair any recovery under any related insurance policy. See "The Pooling and
Servicing Agreement--Collection Procedures" and "Certain Legal Aspects of the
Mortgage Loans" herein for a description of certain provisions of each Agreement
and certain legal developments that may affect the prepayment experience of the
Mortgage Loans.
The rate of prepayments of conventional mortgage loans has fluctuated
significantly in recent years. In general, if prevailing rates fall
significantly below the Mortgage Rates borne by the Mortgage Loans, such
Mortgage Loans are likely to be subject to higher prepayment rates than if
prevailing interest rates remain at or above such Mortgage Rates. Conversely, if
prevailing interest rates rise appreciably above the Mortgage Rates borne by the
Mortgage Loans, such Mortgage Loans are likely to experience a lower prepayment
rate than if prevailing rates remain at or below such Mortgage Rates. However,
there can be no assurance that such will be the case. The rate of prepayment of
Multifamily Loans may also be affected by other factors including Mortgage Loan
terms (e.g., the existence of lockout periods, due-on-sale and
due-on-encumbrance clauses and prepayment penalties), relative economic
conditions in the area where the Mortgaged Properties are located, the quality
of management of the Mortgaged Properties and possible changes in tax laws.
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When a prepayment in full is made with respect to a Single Family Loan,
the mortgagor is charged interest on the principal amount of the Loan so prepaid
only for the number of days in the month actually elapsed up to the date of the
prepayment rather than for a full month. Unless otherwise specified in the
related Prospectus Supplement, the effect of prepayments in full will be to
reduce the amount of interest passed through in the following month to holders
of Certificates because interest on the principal amount of any Mortgage Loan so
prepaid will be paid only to the date of prepayment. Partial prepayments in a
given month may be applied to the outstanding principal balances of the Mortgage
Loans so prepaid on the first day of the month of receipt or of the month
following receipt. In the latter case, partial prepayments will not reduce the
amount of interest passed through in such month. Unless otherwise specified in
the related Prospectus Supplement, neither prepayments in full nor partial
prepayments will be passed through until the month following receipt. Prepayment
penalties collected with respect to Multifamily Loans will be distributed to the
holders of Certificates, or to other persons entitled thereto, as described in
the related Prospectus Supplement.
If the rate at which interest is passed through to the holders of
Certificates of a Series is calculated on a Mortgage Loan by Mortgage Loan
basis, disproportionate principal prepayments with respect to Mortgage Loans
bearing different Mortgage Rates will affect the yield on such Certificates. In
all cases, the effective yield to Certificateholders will be slightly lower than
the yield otherwise produced by the applicable Pass-Through Rate and purchase
price because, while interest will accrue on each Mortgage Loan from the first
day of the month (unless otherwise provided in the related Prospectus
Supplement), the distribution of such interest will not be made earlier than the
month following the month of accrual.
Under certain circumstances, the Master Servicer or the holders of the
residual interests in a REMIC may have the option to purchase the assets of a
Trust Fund thereby effecting earlier retirement of the related Series of
Certificates. See "The Pooling and Servicing Agreement--Termination; Optional
Termination".
Factors other than those identified herein and in the related Prospectus
Supplement could significantly affect principal prepayments at any time and over
the lives of the Certificates. The relative contribution of the various factors
affecting prepayment may also vary from time to time. There can be no assurance
as to the rate of payment of principal of the Mortgage Assets at any time or
over the lives of the Certificates.
The Prospectus Supplement relating to a Series of Certificates will
discuss in greater detail the effect of the rate and timing of principal
payments (including prepayments), delinquencies and losses on the yield,
weighted average lives and maturities of such Certificates.
In the event that a receiver, bankruptcy trustee, debtor in possession or
similar entity (each, an "Insolvency Trustee") is appointed with respect to a
Seller due to its insolvency or a Seller becomes a debtor under Title 11 of the
United States Code (the "Bankruptcy Code") or any similar insolvency law, such
Insolvency Trustee may attempt to characterize the transfer of the related
Mortgage Loans from such Seller to the Depositor as a pledge to secure a
financing rather than as a sale. In the event that such attempt were successful,
such Insolvency Trustee might elect, among other remedies, to accelerate payment
of the related Certificates and liquidate such Mortgage Loans, with each related
Certificateholder being entitled to receive its allocable share of the principal
balance thereof, together with such Certificateholder's allocable share of
interest thereon at the applicable Pass-Through Rate or weighted average Strip
Rate (as defined in the related Prospectus Supplement), as the case may be, to
the date of payment. In any such event, the related Certificateholders might
incur reinvestment losses with respect to principal received and investment
losses attendant to the liquidation of the Mortgage Loans (and the resulting
early retirement of the related Certificates). In addition, certain delays in
distributions might be experienced by such Certificateholders in connection with
any such insolvency proceedings.
THE POOLING AND SERVICING AGREEMENT
Set forth below is a summary of certain provisions of each Agreement which
are not described elsewhere in this Prospectus. This summary does not purport to
be complete and is subject to, and qualified in its entirety by reference to,
the provisions of such Agreement. Where particular provisions or terms used in
the Agreements are referred to, such provisions or terms are as specified in the
Agreements.
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Assignment of Mortgage Assets
Assignment of the Mortgage Loans. At the time of issuance of the
Certificates of a Series, the Depositor will cause the Mortgage Loans comprising
the related Trust Fund to be assigned to the Trustee, together with all
principal and interest received by or on behalf of the Depositor with respect to
such Mortgage Loans after the Cut-off Date, other than principal and interest
due on or before the Cut-off Date and other than any Retained Interest specified
in the related Prospectus Supplement. The Trustee will, concurrently with such
assignment, deliver the Certificates to the Depositor in exchange for the
Mortgage Loans. Each Mortgage Loan will be identified in a schedule appearing as
an exhibit to the related Agreement. Such schedule will include information as
to the outstanding principal balance of each Mortgage Loan after application of
payments due on the Cut-off Date, as well as information regarding the Mortgage
Rate or APR, the current scheduled monthly payment of principal and interest,
the maturity of the loan, the Loan-to-Value Ratio at origination and certain
other information.
In addition, the Depositor will deliver or cause to be delivered to the
Trustee (or to the custodian hereinafter referred to) as to each Mortgage Loan,
among other things, (i) the mortgage note or Contract endorsed without recourse
in blank or to the order of the Trustee, (ii) in the case of Single Family Loans
or Multifamily Loans, the mortgage, deed of trust or similar instrument (each, a
"Mortgage") with evidence of recording indicated thereon (except for any
Mortgage not returned from the public recording office, in which case the
Depositor will deliver or cause to be delivered a copy of such Mortgage together
with a certificate stating that the original of such Mortgage was delivered to
such recording office), (iii) an assignment of the Mortgage or Contract to the
Trustee, which assignment will be in recordable form in the case of a Mortgage
assignment and (iv) such other security documents as may be specified in the
related Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement, (i) in the case of Single Family Loans or Multifamily
Loans, the Depositor will promptly cause the assignments of the related loans to
be recorded in the appropriate public office for real property records, except
in states in which, in the opinion of counsel acceptable to the Trustee, such
recording is not required to protect the Trustee's interest in such loans
against the claim of any subsequent transferee or any successor to or creditor
of the Depositor or the originator of such loans, and (ii) in the case of
Contracts, the Depositor will promptly make or cause to be made an appropriate
filing of a UCC-1 financing statement in the appropriate states to give notice
of the Trustee's ownership of the Contracts.
With respect to any Mortgage Loans which are Cooperative Loans, the
Depositor will cause to be delivered to the Trustee, the related original
cooperative note endorsed without recourse in blank or to the order of the
Trustee, the original security agreement, the proprietary lease or occupancy
agreement, the recognition agreement, an executed financing agreement and the
relevant stock certificate, related blank stock powers and any other document
specified in the related Prospectus Supplement. The Depositor will cause to be
filed in the appropriate office an assignment and a financing statement
evidencing the Trustee's security interest in each Cooperative Loan.
The Trustee (or the custodian hereinafter referred to) will review such
Mortgage Loan documents within the time period specified in the related
Prospectus Supplement after receipt thereof and the Trustee will hold such
documents in trust for the benefit of the Certificateholders. Unless otherwise
specified in the related Prospectus Supplement, if any such document is found to
be missing or defective in any material respect, the Trustee (or such custodian)
will notify the Master Servicer and the Depositor, and the Master Servicer will
notify the related Seller. If the Seller cannot cure the omission or defect
within 45 days after receipt of such notice, the Seller will be obligated to
purchase the related Mortgage Loan from the Trustee at the Purchase Price. There
can be no assurance that a Seller will fulfill this purchase obligation.
Although the Master Servicer may be obligated to enforce such obligation to the
extent described under "Mortgage Loan Program--Representations by Sellers;
Repurchases" herein, neither the Master Servicer nor the Depositor will be
obligated to purchase such Mortgage Loan if the Seller defaults on its purchase
obligation, unless such breach also constitutes a breach of the representations
or warranties of the Master Servicer or the Depositor, as the case may be.
Unless otherwise specified in the related Prospectus Supplement, this purchase
obligation constitutes the sole remedy available to the Certificateholders or
the Trustee for the omission of, or a material defect in, a constituent
document.
The Trustee will be authorized to appoint a custodian pursuant to a
custodial agreement to maintain possession of and, if applicable, to review the
documents relating to the Mortgage Loans as agent of the Trustee.
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The Master Servicer will make certain representations and warranties
regarding its authority to enter into, and its ability to perform its
obligations under, the Agreement. Upon a breach of any such representation of
the Master Servicer which materially and adversely affects the interests of the
Certificateholders in a Mortgage Loan, the Master Servicer will be obligated
either to cure the breach in all material respects or to purchase the Mortgage
Loan at the Purchase Price. Unless otherwise specified in the related Prospectus
Supplement, this obligation to cure or purchase constitutes the sole remedy
available to the Certificateholders or the Trustee for such a breach of
representation by the Master Servicer.
Notwithstanding the foregoing provisions, with respect to a Trust Fund for
which a REMIC election is to be made, unless the related Prospectus Supplement
otherwise provides, no purchase of a Mortgage Loan will be made if such purchase
would result in a prohibited transaction tax under the Code.
Assignment of Agency Securities. The Depositor will cause the Agency
Securities to be registered in the name of the Trustee or its nominee, and the
Trustee concurrently will execute, countersign and deliver the Certificates.
Each Agency Security will be identified in a schedule appearing as an exhibit to
the Agreement, which will specify as to each Agency Security the original
principal amount, the outstanding principal balance as of the Cut-off Date, the
annual pass-through rate (if any) and the maturity date.
Assignment of Private Mortgage-Backed Securities. The Depositor will cause
Private Mortgage-Backed Securities to be registered in the name of the Trustee.
The Trustee (or the custodian) will have possession of any certificated Private
Mortgage-Backed Securities. Unless otherwise specified in the related Prospectus
Supplement, the Trustee will not be in possession of or be assignee of record of
any underlying assets for a Private Mortgage-Backed Security. See "The Trust
Fund--Private Mortgage-Backed Securities". Each Private Mortgage-Backed Security
will be identified in a schedule appearing as an exhibit to the related
Agreement which will specify the original principal amount, the outstanding
principal balance as of the Cut-off Date, the annual pass-through rate or
interest rate, the maturity date and certain other pertinent information for
each Private Mortgage-Backed Security conveyed to the Trustee.
Payments on Mortgage Loans; Deposits to Certificate Account
Each Sub-Servicer servicing a Mortgage Loan pursuant to a Sub-Servicing
Agreement (as defined under "--Sub-Servicing by Sellers" below) will establish
and maintain an account (the "Sub-Servicing Account") which meets the following
requirements and is otherwise acceptable to the Master Servicer. A Sub-Servicing
Account must be established with a Federal Home Loan Bank or with a depository
institution (including the Sub-Servicer itself) whose accounts are insured by
either the Bank Insurance Fund (the "BIF") of the FDIC or the Savings
Association Insurance Fund ("SAIF") of the FDIC. If a Sub-Servicing Account is
maintained at an institution that is a Federal Home Loan Bank or an FDIC-insured
institution and, in either case, the amount on deposit in the Sub-Servicing
Account exceeds the FDIC insurance coverage amount, then such excess amount must
be remitted to the Master Servicer within one business day after receipt. In
addition, the Sub-Servicer must maintain a separate account for escrow and
impound funds relating to the Mortgage Loans. Each Sub-Servicer is required to
deposit into its Sub-Servicing Account on a daily basis all amounts described
below under "--Sub-Servicing by Sellers" that are received by it in respect of
the Mortgage Loans, less its servicing or other compensation. On or before the
date specified in the Sub-Servicing Agreement, the Sub-Servicer will remit or
cause to be remitted to the Master Servicer or the Trustee all funds held in the
Sub-Servicing Account with respect to the Mortgage Loans that are required to be
so remitted. The Sub-Servicer is also required to advance on the scheduled date
of remittance an amount corresponding to any monthly installment of principal
and interest, less its servicing or other compensation, on any Mortgage Loan for
which payment was not received from the mortgagor. Unless otherwise specified in
the related Prospectus Supplement, this obligation of the Sub-Servicer to
advance continues up to and including the first of the month following the date
on which the related Mortgaged Property is sold at a foreclosure sale or is
acquired on behalf of the Certificateholders by deed in lieu of foreclosure, or
until the related Mortgage Loan is liquidated.
The Master Servicer will establish and maintain or cause to be established
and maintained with respect to the related Trust Fund a separate account or
accounts for the collection of payments on the related Mortgage Assets in the
Trust Fund (collectively, with respect to such Trust Fund, the "Certificate
Account") which, unless otherwise specified in the related Prospectus
Supplement, must be (i) maintained with a depository institution the debt
obligations of which (or in the case of a depository institution that is the
principal subsidiary of a holding company,
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the obligations of which) are rated in one of the two highest rating categories
by the nationally recognized statistical rating organization(s) that rated one
or more classes of the related Series of Certificates (each, a "Rating Agency"),
(ii) an account or accounts the deposits in which are fully insured by either
BIF or SAIF, (iii) an account or accounts the deposits in which are insured by
BIF or SAIF (to the limits established by the FDIC) and the uninsured deposits
in which are otherwise secured such that, as evidenced by an opinion of counsel,
the Certificateholders have a claim with respect to the funds in the Certificate
Account or a perfected first priority security interest against any collateral
securing such funds that is superior to the claims of any other depositors or
general creditors of the depository institution with which the Certificate
Account is maintained, or (iv) an account or accounts otherwise acceptable to
each Rating Agency. The collateral eligible to secure amounts in the Certificate
Account is limited to United States government securities and other high-quality
investments ("Permitted Investments"). A Certificate Account may be maintained
as an interest bearing account or the funds held therein may be invested pending
each succeeding Distribution Date in Permitted Investments. Unless otherwise
specified in the related Prospectus Supplement, the Master Servicer or its
designee will be entitled to receive any such interest or other income earned on
funds in the Certificate Account as additional compensation and will be
obligated to deposit in the Certificate Account the amount of any loss
immediately as realized. The Certificate Account may be maintained with the
Master Servicer or with a depository institution that is an affiliate of the
Master Servicer, provided that the Master Servicer or such affiliate, as
applicable, meets the standards set forth above.
The Master Servicer will deposit or cause to be deposited in the
Certificate Account for each Trust Fund on a daily basis, to the extent
applicable and unless otherwise specified in the related Prospectus Supplement
and provided in the Agreement, the following payments and collections received
or Advances made by or on behalf of it subsequent to the Cut-off Date (other
than payments due on or before the Cut-off Date and exclusive of any amounts
representing Retained Interest):
(i) all payments on account of principal, including Principal Prepayments
and, if specified in the related Prospectus Supplement, prepayment penalties, on
the Mortgage Loans;
(ii) all payments on account of interest on the Mortgage Loans, net of
applicable servicing compensation;
(iii) all proceeds (net of unreimbursed payments of property taxes,
insurance premiums and similar items ("Insured Expenses") incurred, and
unreimbursed Advances made, by the related Sub-Servicer, if any) of the hazard
insurance policies and any Primary Mortgage Insurance Policies, to the extent
such proceeds are not applied to the restoration of property or released to
mortgagors in accordance with the Master Servicer's normal servicing procedures
(collectively, "Insurance Proceeds") and all other cash amounts (net of
unreimbursed expenses in connection with liquidation or foreclosure
("Liquidation Expenses") incurred, and unreimbursed advances made, by the
related Sub-Servicer, if any) received and retained in connection with the
liquidation of defaulted Mortgage Loans, by foreclosure or otherwise
("Liquidation Proceeds"), together with any net proceeds received on a monthly
basis with respect to any properties acquired on behalf of the
Certificateholders by foreclosure or deed in lieu of foreclosure;
(iv) all proceeds of any Mortgage Loan or property in respect thereof
purchased by the Master Servicer, the Depositor, any Sub-Servicer or any Seller
as described under "Mortgage Loan Program--Representations by Sellers;
Repurchases" or "--Assignment of Mortgage Assets" above and all proceeds of any
Mortgage Loan repurchased as described under "--Termination; Optional
Termination" below;
(v) all payments required to be deposited in the Certificate Account with
respect to any deductible clause in any blanket insurance policy described below
under "--Hazard Insurance";
(vi) any amount required to be deposited by the Master Servicer in
connection with losses realized on investments for the benefit of the Master
Servicer of funds held in the Certificate Account; and
(vii) all other amounts required to be deposited in the Certificate
Account pursuant to the Agreement.
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Sub-Servicing by Sellers
Each Seller of a Mortgage Loan or any other servicing entity may act as
the Sub-Servicer for such Mortgage Loan pursuant to an agreement (each, a
"Sub-Servicing Agreement"), which will not contain any terms inconsistent with
the related Agreement. While each Sub-Servicing Agreement will be a contract
solely between the Master Servicer and the related Sub-Servicer, the Agreement
pursuant to which a Series of Certificates is issued will provide that, if for
any reason the Master Servicer for such Series of Certificates is no longer the
Master Servicer of the related Mortgage Loans, the Trustee or any successor
Master Servicer must recognize the Sub-Servicer's rights and obligations under
such Sub-Servicing Agreement.
With the approval of the Master Servicer, a Sub-Servicer may delegate its
servicing obligations to third-party servicers, but such Sub-Servicer will
remain obligated under the related Sub-Servicing Agreement. Each Sub-Servicer
will be required to perform the customary functions of a servicer of mortgage
loans. Such functions generally include collecting payments from mortgagors or
obligors and remitting such collections to the Master Servicer; maintaining
hazard insurance policies as described herein and in any related Prospectus
Supplement, and filing and settling claims thereunder, subject in certain cases
to the right of the Master Servicer to approve in advance any such settlement;
maintaining escrow or impoundment accounts of mortgagors or obligors for payment
of taxes, insurance and other items required to be paid by the mortgagor or
obligor pursuant to the related Mortgage Loan; processing assumptions or
substitutions, although, unless otherwise specified in the related Prospectus
Supplement, the Master Servicer is generally required to exercise due-on-sale
clauses to the extent such exercise is permitted by law and would not adversely
affect insurance coverage; attempting to cure delinquencies; supervising
foreclosures; inspecting and managing Mortgaged Properties under certain
circumstances; maintaining accounting records relating to the Mortgage Loans;
and, to the extent specified in the related Prospectus Supplement, maintaining
additional insurance policies or credit support instruments and filing and
settling claims thereunder. A Sub-Servicer will also be obligated to make
advances in respect of delinquent installments of principal and interest on
Mortgage Loans, as described more fully above under "--Payments on Mortgage
Loans; Deposits to Certificate Account", and in respect of certain taxes and
insurance premiums not paid on a timely basis by mortgagors or obligors.
As compensation for its servicing duties, each Sub-Servicer will be
entitled to a monthly servicing fee (to the extent the scheduled payment on the
related Mortgage Loan has been collected) in the amount set forth in the related
Prospectus Supplement. Each Sub-Servicer is also entitled to collect and retain,
as part of its servicing compensation, any prepayment or late charges provided
in the mortgage note or related instruments. Each Sub-Servicer will be
reimbursed by the Master Servicer for certain expenditures which it makes,
generally to the same extent the Master Servicer would be reimbursed under the
Agreement. The Master Servicer may purchase the servicing of Mortgage Loans if
the Sub-Servicer elects to release the servicing of such Mortgage Loans to the
Master Servicer. See "--Servicing and Other Compensation and Payment of
Expenses" below.
Each Sub-Servicer may be required to agree to indemnify the Master
Servicer for any liability or obligation sustained by the Master Servicer in
connection with any act or failure to act by the Sub-Servicer in its servicing
capacity. Each Sub-Servicer will be required to maintain a fidelity bond and an
errors and omissions policy with respect to its officers, employees and other
persons acting on its behalf or on behalf of the Master Servicer.
Each Sub-Servicer will be required to service each Mortgage Loan pursuant
to the terms of the Sub-Servicing Agreement for the entire term of such Mortgage
Loan, unless the Sub-Servicing Agreement is earlier terminated by the Master
Servicer or unless servicing is released to the Master Servicer. The Master
Servicer may terminate a Sub-Servicing Agreement without cause, upon written
notice to the Sub-Servicer in the manner specified in such Sub-Servicing
Agreement.
The Master Servicer may agree with a Sub-Servicer to amend a Sub-Servicing
Agreement or, upon termination of the Sub-Servicing Agreement, the Master
Servicer may act as servicer of the related Mortgage Loans or enter into new
Sub-Servicing Agreements with other Sub-Servicers. If the Master Servicer acts
as servicer, it will not assume liability for the representations and warranties
of the Sub-Servicer which it replaces. Each Sub-Servicer must be a Seller or
meet the standards for becoming a Seller or have such servicing experience as to
be otherwise satisfactory to the Master Servicer and the Depositor. The Master
Servicer will make reasonable efforts to have the new Sub-Servicer assume
liability for the representations and warranties of the terminated Sub-Servicer,
but no
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assurance can be given that such an assumption will occur. In the event of such
an assumption, the Master Servicer may in the exercise of its business judgment
release the terminated Sub-Servicer from liability in respect of such
representations and warranties. Any amendments to a Sub-Servicing Agreement or
new Sub-Servicing Agreements may contain provisions different from those which
are in effect in the original Sub-Servicing Agreement. However, each Agreement
will provide that any such amendment or new agreement may not be inconsistent
with or violate such Agreement.
Collection Procedures
The Master Servicer, directly or through one or more Sub-Servicers, will
make reasonable efforts to collect all payments called for under the Mortgage
Loans and will, consistent with each Agreement and any Mortgage Pool Insurance
Policy, Primary Mortgage Insurance Policy, FHA Insurance, VA Guaranty Policy and
Bankruptcy Bond or alternative arrangements, follow such collection procedures
as are customary with respect to mortgage loans that are comparable to the
Mortgage Loans. Consistent with the above, the Master Servicer may, in its
discretion, (i) waive any assumption fee, late payment or other charge in
connection with a Mortgage Loan and (ii) to the extent not inconsistent with the
coverage of such Mortgage Loan by a Mortgage Pool Insurance Policy, Primary
Mortgage Insurance Policy, FHA Insurance, VA Guaranty or Bankruptcy Bond or
alternative arrangements, if applicable, arrange with a mortgagor a schedule for
the liquidation of delinquencies running for no more than 125 days after the
applicable due date for each payment. Both the Sub-Servicer and the Master
Servicer remain obligated to make Advances during any period of such an
arrangement.
Unless otherwise specified in the related Prospectus Supplement, in any
case in which property securing a conventional Mortgage Loan has been, or is
about to be, conveyed by the mortgagor or obligor, the Master Servicer will, to
the extent it has knowledge of such conveyance or proposed conveyance, exercise
or cause to be exercised its rights to accelerate the maturity of such Mortgage
Loan under any due-on-sale clause applicable thereto, but only if the exercise
of such rights is permitted by applicable law and will not impair or threaten to
impair any recovery under any related Primary Mortgage Insurance Policy. If
these conditions are not met or if the Master Servicer reasonably believes it is
unable under applicable law to enforce such due-on-sale clause, or if such
Mortgage Loan is insured by the FHA or partially guaranteed by the VA the Master
Servicer will enter into or cause to be entered into an assumption and
modification agreement with the person to whom such property has been or is
about to be conveyed, pursuant to which such person becomes liable for repayment
of the Mortgage Loan and, to the extent permitted by applicable law, the
mortgagor remains liable thereon. Any fee collected by or on behalf of the
Master Servicer for entering into an assumption agreement will be retained by or
on behalf of the Master Servicer as additional servicing compensation. In the
case of Multifamily Loans and unless otherwise specified in the related
Prospectus Supplement, the Master Servicer will agree to exercise any right it
may have to accelerate the maturity of a Multifamily Loan to the extent it has
knowledge of any further encumbrance of the related Mortgaged Property effected
in violation of any due-on-encumbrance clause applicable thereto. See "Certain
Legal Aspects of the Mortgage Loans--Due-on-Sale Clauses" herein. In connection
with any such assumption, the terms of the related Mortgage Loan may not be
changed.
With respect to Cooperative Loans, any prospective purchaser will
generally have to obtain the approval of the board of directors of the relevant
Cooperative before purchasing the shares and acquiring rights under the related
proprietary lease or occupancy agreement. See "Certain Legal Aspects of the
Mortgage Loans" herein. This approval is usually based on the purchaser's income
and net worth and numerous other factors. Although the Cooperative's approval is
unlikely to be unreasonably withheld or delayed, the necessity of acquiring such
approval could limit the number of potential purchasers for those shares and
otherwise limit the Trust Fund's ability to sell and realize the value of those
shares.
In general, a "tenant-stockholder" (as defined in section 216(b)(2) of the
Internal Revenue Code of 1986, as amended (the "Code")), of a corporation that
qualifies as a "cooperative housing corporation" within the meaning of section
216(b)(1) of the Code is allowed a deduction for amounts paid or accrued within
his taxable year to the corporation representing his proportionate share of
certain interest expenses and certain real estate taxes allowable as a deduction
under section 216(a) of the Code to the corporation under sections 163 and 164
of the Code. In order for a corporation to qualify under Section 216(b)(1) of
the Code for the taxable year in which such items are allowable as a deduction
to the corporation, such Section requires, among other things, that at least 80%
of the gross income of the corporation be derived from its tenant-stockholders
(as defined in section 216(b)(2) of the Code). By virtue of
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this requirement, the status of a corporation for purposes of section 216(b)(1)
of the Code must be determined on a year-to-year basis. Consequently, there can
be no assurance that Cooperatives relating to the Cooperative Loans will qualify
under such section for any particular year. In the event that such a Cooperative
fails to qualify for one or more years, the value of the collateral securing any
related Cooperative Loans could be significantly impaired because no deduction
would be allowable to tenant-stockholders under section 216(a) of the Code with
respect to those years. In view of the significance of the tax benefits accorded
tenant-stockholders of a corporation that qualifies under section 216(b)(1) of
the Code, the likelihood that such a failure would be permitted to continue over
a period of years appears remote.
Hazard Insurance
The Master Servicer will require the mortgagor or obligor on each Single
Family Loan, Multifamily Loan or Contract to maintain a hazard insurance policy
providing for no less than the coverage of the standard form of fire insurance
policy with extended coverage customary for the type of Mortgaged Property in
the state in which such Mortgaged Property is located. Such coverage will be in
an amount not less than the replacement value of the improvements or
Manufactured Home securing such Mortgage Loan or the principal balance owing on
such Mortgage Loan, whichever is less. All amounts collected by the Master
Servicer under any hazard policy (except for amounts to be applied to the
restoration or repair of the Mortgaged Property or released to the mortgagor or
obligor in accordance with the Master Servicer's normal servicing procedures)
will be deposited in the related Certificate Account. In the event that the
Master Servicer maintains a blanket policy insuring against hazard losses on all
the Mortgage Loans comprising part of a Trust Fund, it will conclusively be
deemed to have satisfied its obligation relating to the maintenance of hazard
insurance. Such blanket policy may contain a deductible clause, in which case
the Master Servicer will be required to deposit from its own funds into the
related Certificate Account the amounts which would have been deposited therein
but for such clause. Any additional insurance coverage for Mortgaged Properties
in a Mortgage Pool of Multifamily Loans will be specified in the related
Prospectus Supplement.
In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements or Manufactured Home
securing a Mortgage Loan by fire, lightning, explosion, smoke, windstorm and
hail, riot, strike and civil commotion, subject to the conditions and exclusions
particularized in each policy. Although the policies relating to the Mortgage
Loans may have been underwritten by different insurers under different state
laws in accordance with different applicable forms and therefore may not contain
identical terms and conditions, the basic terms thereof are dictated by
respective state laws, and most such policies typically do not cover any
physical damage resulting from the following: war, revolution, governmental
actions, floods and other water-related causes, earth movement (including
earthquakes, landslides and mud flows), nuclear reactions, wet or dry rot,
vermin, rodents, insects or domestic animals, theft and, in certain cases,
vandalism. The foregoing list is merely indicative of certain kinds of uninsured
risks and is not intended to be all inclusive. If the Mortgaged Property
securing a Mortgage Loan is located in a federally designated special flood area
at the time of origination, the Master Servicer will require the mortgagor or
obligor to obtain and maintain flood insurance.
The hazard insurance policies covering properties securing the Mortgage
Loans typically contain a clause which in effect requires the insured at all
times to carry insurance of a specified percentage (generally 80% to 90%) of the
full replacement value of the insured property in order to recover the full
amount of any partial loss. If the insured's coverage falls below this specified
percentage, then the insurer's liability in the event of partial loss will not
exceed the larger of (i) the actual cash value (generally defined as replacement
cost at the time and place of loss, less physical depreciation) of the
improvements damaged or destroyed or (ii) such proportion of the loss as the
amount of insurance carried bears to the specified percentage of the full
replacement cost of such improvements. Since the amount of hazard insurance the
Master Servicer may cause to be maintained on the improvements securing the
Mortgage Loans declines as the principal balances owing thereon decrease, and
since improved real estate generally has appreciated in value over time in the
past, the effect of this requirement in the event of partial loss may be that
hazard insurance proceeds will be insufficient to restore fully the damaged
property. If specified in the related Prospectus Supplement, a special hazard
insurance policy will be obtained to insure against certain of the uninsured
risks described above. See "Credit Enhancement--Special Hazard Insurance
Policies" herein.
The Master Servicer will not require that a standard hazard or flood
insurance policy be maintained on the cooperative dwelling relating to any
Cooperative Loan. Generally, the Cooperative itself is responsible for
maintenance of hazard insurance for the property owned by the Cooperative and
the tenant-stockholders of that
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Cooperative do not maintain individual hazard insurance policies. To the extent,
however, that a Cooperative and the related borrower on a Cooperative Loan do
not maintain such insurance or do not maintain adequate coverage or any
insurance proceeds are not applied to the restoration of damaged property, any
damage to such borrower's cooperative dwelling or such Cooperative's building
could significantly reduce the value of the collateral securing such Cooperative
Loan to the extent not covered by other credit support.
Realization upon Defaulted Mortgage Loans
Primary Mortgage Insurance Policies. The Master Servicer will maintain or
cause each Sub-Servicer to maintain, as the case may be, in full force and
effect, to the extent specified in the related Prospectus Supplement, a Primary
Mortgage Insurance Policy with regard to each Single Family Loan for which such
coverage is required. The Master Servicer will not cancel or refuse to renew any
such Primary Mortgage Insurance Policy in effect at the time of the initial
issuance of a Series of Certificates that is required to be kept in force under
the applicable Agreement unless the replacement Primary Mortgage Insurance
Policy for such cancelled or nonrenewed policy is maintained with an insurer
whose claims-paying ability is sufficient to maintain the current rating of the
classes of Certificates of such Series that have been rated.
Although the terms and conditions of primary mortgage insurance vary, the
amount of a claim for benefits under a Primary Mortgage Insurance Policy
covering a Mortgage Loan will consist of the insured percentage of the unpaid
principal amount of the covered Mortgage Loan and accrued and unpaid interest
thereon and reimbursement of certain expenses, less (i) all rents or other
payments collected or received by the insured (other than the proceeds of hazard
insurance) that are derived from or in any way related to the Mortgaged
Property, (ii) hazard insurance proceeds in excess of the amount required to
restore the Mortgaged Property and which have not been applied to the payment of
the Mortgage Loan, (iii) amounts expended but not approved by the issuer of the
related Primary Mortgage Insurance Policy (the "Primary Insurer"), (iv) claim
payments previously made by the Primary Insurer and (v) unpaid premiums.
Primary Mortgage Insurance Policies reimburse certain losses sustained by
reason of defaults in payments by borrowers. Primary Mortgage Insurance Policies
will not insure against, and exclude from coverage, a loss sustained by reason
of a default arising from or involving certain matters, including (i) fraud or
negligence in origination or servicing of the Mortgage Loan, including
misrepresentation by the originator, borrower or other persons involved in the
origination of the Mortgage Loan, (ii) failure to construct the Mortgaged
Property subject to the Mortgage Loan in accordance with specified plans, (iii)
physical damage to the Mortgaged Property and (iv) lack of approval by the
Primary Insurer of the related Servicer as a servicer.
Recoveries Under a Primary Mortgage Insurance Policy. As conditions
precedent to the filing of or payment of a claim under a Primary Mortgage
Insurance Policy covering a Mortgage Loan, the insured will be required to (i)
advance or discharge (a) all hazard insurance policy premiums and (b) as
necessary and approved in advance by the Primary Insurer, (1) real estate
property taxes, (2) all expenses required to maintain the related Mortgaged
Property in at least as good a condition as existed at the effective date of
such Primary Mortgage Insurance Policy, ordinary wear and tear excepted, (3)
Mortgaged Property sales expenses, (4) any outstanding liens (as defined in such
Primary Mortgage Insurance Policy) on the Mortgaged Property and (5) foreclosure
costs, including court costs and reasonable attorneys' fees; (ii) in the event
of any physical loss or damage to the Mortgaged Property, to have the Mortgaged
Property restored and repaired to at least as good a condition as existed at the
effective date of such Primary Mortgage Insurance Policy, ordinary wear and tear
excepted; and (iii) tender to the Primary Insurer good and merchantable title to
and possession of the Mortgaged Property.
In those cases in which a Single Family Loan is serviced by a
Sub-Servicer, the Sub-Servicer, on behalf of itself, the Trustee and
Certificateholders, will present claims to the Primary Insurer, and all
collections thereunder will be deposited in the Sub-Servicing Account. In all
other cases, the Master Servicer, on behalf of itself, the Trustee and the
Certificateholders, will present claims to the insurer under each Primary
Mortgage Insurance Policy and will take such reasonable steps as are necessary
to receive payment or to permit recovery thereunder with respect to defaulted
Mortgage Loans. As set forth above, all collections by or on behalf of the
Master Servicer under any Primary Mortgage Insurance Policy and, when the
Mortgaged Property has not been restored, the hazard insurance policy are to be
deposited in the Certificate Account, subject to withdrawal as heretofore
described.
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If the Mortgaged Property securing a defaulted Mortgage Loan is damaged
and proceeds, if any, from the related hazard insurance policy are insufficient
to restore the damaged Mortgaged Property to a condition sufficient to permit
recovery under the related Primary Mortgage Insurance Policy, if any, the Master
Servicer is not required to expend its own funds to restore the damaged
Mortgaged Property unless it determines (i) that such restoration will increase
the proceeds to Certificateholders on liquidation of the Mortgage Loan after
reimbursement of the Master Servicer for its expenses and (ii) that such
expenses will be recoverable by it from related Insurance Proceeds or
Liquidation Proceeds.
If recovery on a defaulted Mortgage Loan under any related Primary
Mortgage Insurance Policy is not available for the reasons set forth in the
preceding paragraph, or if the defaulted Mortgage Loan is not covered by a
Primary Mortgage Insurance Policy, the Master Servicer will be obligated to
follow or cause to be followed such normal practices and procedures as it deems
necessary or advisable to realize upon the defaulted Mortgage Loan. If the
proceeds of any liquidation of the Mortgaged Property securing the defaulted
Mortgage Loan are less than the principal balance of such Mortgage Loan plus
interest accrued thereon that is payable to Certificateholders, the Trust Fund
will realize a loss in the amount of such difference plus the aggregate of
expenses incurred by the Master Servicer in connection with such proceedings
which are reimbursable under the Agreement. In the unlikely event that any such
proceedings result in a total recovery which is, after reimbursement to the
Master Servicer of its expenses, in excess of the principal balance of such
Mortgage Loan plus interest accrued thereon that is payable to
Certificateholders, the Master Servicer will be entitled to withdraw or retain
from the Certificate Account amounts representing its normal servicing
compensation with respect to such Mortgage Loan and, unless otherwise specified
in the related Prospectus Supplement, amounts representing the balance of such
excess, exclusive of any amount required by law to be forwarded to the related
mortgagor, as additional servicing compensation.
If the Master Servicer or its designee recovers Insurance Proceeds which,
when added to any related Liquidation Proceeds and after deduction of certain
expenses reimbursable to the Master Servicer, exceed the principal balance of
such Mortgage Loan plus interest accrued thereon that is payable to
Certificateholders, the Master Servicer will be entitled to withdraw or retain
from the Certificate Account amounts representing its normal servicing
compensation with respect to such Mortgage Loan. In the event that the Master
Servicer has expended its own funds to restore the damaged Mortgaged Property
and such funds have not been reimbursed under the related hazard insurance
policy, it will be entitled to withdraw from the Certificate Account out of
related Liquidation Proceeds or Insurance Proceeds an amount equal to such
expenses incurred by it, in which event the Trust Fund may realize a loss up to
the amount so charged. Since Insurance Proceeds cannot exceed deficiency claims
and certain expenses incurred by the Master Servicer, no such payment or
recovery will result in a recovery to the Trust Fund which exceeds the principal
balance of the defaulted Mortgage Loan together with accrued interest thereon.
See "Credit Enhancement" herein.
Servicing and Other Compensation and Payment of Expenses
The Master Servicer's primary servicing compensation with respect to a
Series of Certificates will come from the monthly payment to it, out of each
interest payment on a Mortgage Loan, of an amount equal to the percentage per
annum specified in the related Prospectus Supplement of the outstanding
principal balance thereof. Since the Master Servicer's primary compensation is a
percentage of the outstanding principal balance of each Mortgage Loan, such
amounts will decrease as the Mortgage Loans amortize. In addition to primary
compensation, the Master Servicer or the Sub-Servicers will be entitled to
retain all assumption fees and late payment charges, to the extent collected
from Mortgagors, and, if so provided in the related Prospectus Supplement, any
prepayment penalties and any interest or other income which may be earned on
funds held in the Certificate Account or any Sub-Servicing Account. Unless
otherwise specified in the related Prospectus Supplement, any Sub-Servicer will
receive a portion of the Master Servicer's primary compensation as its
sub-servicing compensation.
In addition to amounts payable to any Sub-Servicer, the Master Servicer
will, unless otherwise specified in the related Prospectus Supplement, pay from
its servicing compensation certain expenses incurred in connection with its
servicing of the Mortgage Loans, including, without limitation, payment of any
premium for any insurance policy, guaranty, surety or other form of credit
enhancement as specified in the related Prospectus Supplement, payment of the
fees and disbursements of the Trustee and independent accountants, payment of
expenses incurred in connection with distributions and reports to
Certificateholders and payment of any other expenses described in the related
Prospectus Supplement.
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Evidence as to Compliance
Each Agreement will provide that, on or before a specified date in each
year, a firm of independent public accountants will furnish a statement to the
Trustee to the effect that, on the basis of the examination by such firm
conducted substantially in compliance with the Uniform Single Audit Program for
Mortgage Bankers or the Audit Program for Mortgages serviced for FHLMC, the
servicing by or on behalf of the Master Servicer of mortgage loans, private
mortgage-backed securities or agency securities, under pooling and servicing
agreements substantially similar to each other (including the related
Agreement), was conducted in compliance with such agreements except for any
significant exceptions or errors in records that, in the opinion of the firm,
the Audit Program for Mortgages serviced for FHLMC or the Uniform Single Audit
Program for Mortgage Bankers requires it to report. In rendering its statement
such firm may rely, as to matters relating to the direct servicing of mortgage
loans, private mortgage-backed securities or agency securities by Sub-Servicers,
upon comparable statements for examinations conducted substantially in
compliance with the Uniform Single Audit Program for Mortgage Bankers or the
Audit Program for Mortgages serviced for FHLMC (rendered within one year of such
statement) of firms of independent public accountants with respect to the
Sub-Servicers.
Each Agreement will also provide for delivery to the Trustee, on or before
a specified date in each year, of an annual statement signed by two officers of
the Master Servicer to the effect that the Master Servicer has fulfilled its
obligations under the Agreement throughout the preceding year.
Copies of the annual accountants' statement and the statement of officers
of the Master Servicer may be obtained by Certificateholders of the related
Series without charge upon written request to the Master Servicer at the address
set forth in the related Prospectus Supplement.
Certain Matters Regarding the Master Servicer and the Depositor
The Master Servicer under each Agreement will be named in the related
Prospectus Supplement. The entity serving as Master Servicer may have normal
business relationships with the Depositor or the Depositor's affiliates.
Each Agreement will provide that the Master Servicer may not resign from
its obligations and duties under the Agreement except upon a determination that
its duties thereunder are no longer permissible under applicable law. No such
resignation will become effective until the Trustee or a successor servicer has
assumed the Master Servicer's obligations and duties under the Agreement.
Each Agreement will further provide that none of the Master Servicer, the
Depositor or any director, officer, employee or agent of the Master Servicer or
of the Depositor will be under any liability to the related Trust Fund or the
Certificateholders for any action taken or for refraining from the taking of any
action in good faith pursuant to the Agreement, or for errors in judgment;
provided, however, that none of the Master Servicer, the Depositor any such
person will be protected against any liability which would otherwise be imposed
by reason of willful misfeasance, bad faith or negligence in the performance of
duties thereunder or by reason of reckless disregard of obligations and duties
thereunder. Each Agreement will further provide that the Master Servicer, the
Depositor and any director, officer, employee or agent of the Master Servicer or
of the Depositor will be entitled to indemnification by the related Trust Fund
and will be held harmless against any loss, liability or expense incurred in
connection with any legal action relating to the Agreement or the Certificates,
other than any loss, liability or expense related to any specific Mortgage Loan
or the Mortgage Loans (except any such loss, liability or expense otherwise
reimbursable pursuant to the Agreement) and any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or negligence in the
performance of duties thereunder or by reason of reckless disregard of
obligations and duties thereunder. In addition, each Agreement will provide that
neither the Master Servicer nor the Depositor will be under any obligation to
appear in, prosecute or defend any legal action which is not incidental to its
respective responsibilities under the Agreement and which in its opinion may
involve it in any expense or liability. The Master Servicer or the Depositor
may, however, in its discretion undertake any such action which it may deem
necessary or desirable with respect to the Agreement and the rights and duties
of the parties thereto and the interests of the Certificateholders thereunder.
In such event, the legal expenses and costs of such action and any liability
resulting therefrom will be expenses, costs and liabilities of the Trust Fund
and the Master Servicer or the Depositor, as the case may be, will be entitled
to be reimbursed therefor out of funds otherwise distributable to
Certificateholders.
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Any person into which the Master Servicer may be merged or consolidated,
or any person resulting from any merger or consolidation to which the Master
Servicer is a party, or any person succeeding to the business of the Master
Servicer, will be the successor of the Master Servicer under each Agreement,
provided that such person is qualified to sell mortgage loans to, and service
mortgage loans on behalf of, FNMA or FHLMC and further provided that such
merger, consolidation or succession does not adversely affect the then current
rating or ratings of the class or classes of Certificates of such Series that
have been rated.
Events of Default
Unless otherwise specified in the related Prospectus Supplement, Events of
Default (each, an "Event of Default") under each Agreement will consist of (i)
any failure by the Master Servicer to distribute or cause to be distributed to
Certificateholders of any class any required payment (other than an Advance)
which continues unremedied for five business days after the giving of written
notice of such failure to the Master Servicer by the Trustee or the Depositor,
or to the Master Servicer, the Depositor and the Trustee by the holders of
Certificates of such class evidencing not less than 25% of the aggregate
percentage interests evidenced by such class; (ii) any failure by the Master
Servicer to make an Advance as required under the Agreement, unless cured as
specified therein; (iii) any failure by the Master Servicer duly to observe or
perform in any material respect any of its other covenants or agreements in the
Agreement which continues unremedied for 30 days after the giving of written
notice of such failure to the Master Servicer by the Trustee or the Depositor,
or to the Master Servicer, the Depositor and the Trustee by the holders of
Certificates of any class evidencing not less than 25% of the aggregate
percentage interests constituting such class; and (iv) certain events of
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceeding and certain actions by or on behalf of the Master Servicer
indicating its insolvency, reorganization or inability to pay its obligations.
If specified in the related Prospectus Supplement, the Agreement will
permit the Trustee to sell the Mortgage Assets and the other assets of the Trust
Fund in the event that payments in respect thereto are insufficient to make
payments required in the Agreement. The assets of the Trust Fund will be sold
only under the circumstances and in the manner specified in the related
Prospectus Supplement.
Rights upon Event of Default
So long as an Event of Default under an Agreement remains unremedied, the
Depositor or the Trustee may, and, at the direction of holders of Certificates
of any class evidencing not less than 51% of the aggregate percentage interests
constituting such class and under such other circumstances as may be specified
in such Agreement, the Trustee shall, terminate all of the rights and
obligations of the Master Servicer under the Agreement relating to such Trust
Fund and in and to the Mortgage Loans, whereupon the Trustee will succeed to all
of the responsibilities, duties and liabilities of the Master Servicer under the
Agreement, including, if specified in the related Prospectus Supplement, the
obligation to make advances, and will be entitled to similar compensation
arrangements. In the event that the Trustee is unwilling or unable so to act, it
may appoint, or petition a court of competent jurisdiction for the appointment
of, a mortgage loan servicing institution with a net worth of at least
$10,000,000 to act as successor to the Master Servicer under the Agreement.
Pending such appointment, the Trustee is obligated to act in such capacity. The
Trustee and any such successor may agree upon the servicing compensation to be
paid, which in no event may be greater than the compensation payable to the
Master Servicer under the Agreement.
No Certificateholder, solely by virtue of such holder's status as a
Certificateholder, will have any right under any Agreement to institute any
proceeding with respect to such Agreement, unless (i) such holder previously has
given to the Trustee written notice of default, (ii) the holders of Certificates
of any class of such Series evidencing not less than 25% of the aggregate
percentage interests constituting such class have made written request upon the
Trustee to institute such proceeding in its own name as Trustee thereunder and
have offered to the Trustee reasonable indemnity, and (iii) the Trustee for 60
days has neglected or refused to institute any such proceeding.
Amendment
Unless otherwise specified in the related Prospectus Supplement, each
Agreement may be amended by the Depositor, the Master Servicer and the Trustee,
without the consent of any of the Certificateholders, (i) to cure any ambiguity,
(ii) to correct or supplement any provision therein which may be defective or
inconsistent with any other
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provision therein or (iii) to make any other revisions with respect to matters
or questions arising under the Agreement which are not inconsistent with the
provisions thereof; provided, however, that such action will not adversely
affect in any material respect the interests of any Certificateholder. In
addition, to the extent provided in the related Agreement, an Agreement may be
amended without the consent of any of the Certificateholders to change the
manner in which the Certificate Account is maintained, provided, however, that
any such change does not adversely affect the then current rating on the class
or classes of Certificates of such Series that have been rated. In addition, if
a REMIC election is made with respect to a Trust Fund, the related Agreement may
be amended to modify, eliminate or add to any of its provisions to such extent
as may be necessary to maintain the qualification of the related Trust Fund as a
REMIC, provided, however, that the Trustee has received an opinion of counsel to
the effect that such action is necessary or helpful to maintain such
qualification. Unless otherwise specified in the related Prospectus Supplement,
each Agreement may also be amended by the Depositor, the Master Servicer and the
Trustee with consent of holders of Certificates of such Series evidencing not
less than 66% of the aggregate percentage interests of each class affected
thereby for the purpose of adding any provisions to, or changing in any manner
or eliminating any of the provisions of the Agreement or of modifying in any
manner the rights of the holders of the related Certificates; provided, however,
that no such amendment may (i) reduce in any manner the amount of, or delay the
timing of, payments received on Mortgage Loans which are required to be
distributed on any Certificate without the consent of the holder of such
Certificate or (ii) reduce the aforesaid percentage of Certificates of any class
the holders of which are required to consent to any such amendment without the
consent of the holders of all Certificates of such class covered by such
Agreement then outstanding. If a REMIC election is made with respect to a Trust
Fund, the Trustee will not be entitled to consent to an amendment to the related
Agreement without having first received an opinion of counsel to the effect that
such amendment will not cause such Trust Fund to fail to qualify as a REMIC.
Termination; Optional Termination
Unless otherwise specified in the related Agreement, the obligations
created by each Agreement for each Series of Certificates will terminate upon
the payment to the related Certificateholders of all amounts held in the
Certificate Account or by the Master Servicer and required to be paid to them
pursuant to such Agreement following the later of (i) the final payment or other
liquidation of the last of the Mortgage Assets subject thereto or the
disposition of all property acquired upon foreclosure of any such Mortgage
Assets remaining in the Trust Fund and (ii) the purchase from the related Trust
Fund by the Master Servicer or, if REMIC treatment has been elected and if
specified in the related Prospectus Supplement, by the holder of the residual
interest in the REMIC (see "Certain Federal Income Tax Consequences"), of all of
the remaining Mortgage Assets and all property acquired in respect of such
Mortgage Assets.
Unless otherwise specified in the related Prospectus Supplement, any such
purchase of Mortgage Assets and property acquired in respect of Mortgage Assets
evidenced by a Series of Certificates will be made at the option of the Master
Servicer or, if applicable, such holder of the REMIC residual interest, at a
price, and in accordance with the procedures, specified in the related
Prospectus Supplement. The exercise of such right will effect early retirement
of the Certificates of that Series, but the right of the Master Servicer or, if
applicable, such holder of the REMIC residual interest, to so purchase is
subject to the aggregate principal balance of the related Mortgage Assets as of
such date being less than the percentage specified in the related Prospectus
Supplement of the aggregate principal balances of the Mortgage Assets as of the
Cut-off Date for the Series; provided, however, that, if a REMIC election is
made with respect to a Trust Fund, any repurchase pursuant to clause (ii) above
will be made only in connection with a "qualified liquidation" of the REMIC
within the meaning of Section 860F(g)(4) of the Code.
The Trustee
The Trustee under each Agreement will be named in the applicable
Prospectus Supplement. The commercial bank or trust company serving as Trustee
may have normal banking relationships with the Depositor, the Master Servicer
and any of their respective affiliates.
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS
The following discussion contains summaries, which are general in nature,
of certain legal matters relating to the Mortgage Loans. Because such legal
aspects are governed primarily by applicable state law (which laws may
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differ substantially), the summaries do not purport to be complete or to reflect
the laws of any particular state or to encompass the laws of all states in which
security for the Mortgage Loans may be situated. The summaries are qualified in
their entirety by reference to the appropriate laws of the states in which
Mortgage Loans may be originated.
General
Single Family Loans and Multifamily Loans. The Single Family Loans and
Multifamily Loans will be secured by deeds of trust, mortgages, security deeds
or deeds to secure debt, depending upon the prevailing practice in the state in
which the property subject to the loan is located. A mortgage creates a lien
upon the real property encumbered by the mortgage, which lien is generally not
prior to the lien for real estate taxes and assessments. Priority between
mortgages depends on their terms and generally on the order of recording with a
state or county office. There are two parties to a mortgage: the mortgagor, who
is the borrower and owner of the mortgaged property, and the mortgagee, who is
the lender. Under the mortgage instrument, the mortgagor delivers to the
mortgagee a note or bond and the mortgage. Although a deed of trust is similar
to a mortgage, a deed of trust formally has three parties: the borrower-property
owner called the trustor (similar to a mortgagor), a lender (similar to a
mortgagee) called the beneficiary, and a third-party grantee called the trustee.
Under a deed of trust, the borrower grants the property, irrevocably until the
debt is paid, in trust, generally with a power of sale, to the trustee to secure
payment of the obligation. A security deed and a deed to secure debt are special
types of deeds which indicate on their face that they are granted to secure an
underlying debt. By executing a security deed or deed to secure debt, the
grantor conveys to the grantee title to, as opposed to merely creating a lien
upon, the subject property until such time as the underlying debt is repaid. The
trustee's authority under a deed of trust, the mortgagee's authority under a
mortgage and the grantee's authority under a security deed or deed to secure
debt are governed by law and, with respect to some deeds of trust, the
directions of the beneficiary.
Cooperatives. Certain of the Mortgage Loans may be Cooperative Loans. The
Cooperative owns all the real property that comprises the related project,
including the land, separate dwelling units and all common areas. The
Cooperative is directly responsible for project management and, in most cases,
payment of real estate taxes and hazard and liability insurance. If, as is
generally the case, there is a blanket mortgage on the Cooperative and/or
underlying land, the Cooperative, as project mortgagor, is also responsible for
meeting these mortgage obligations. A blanket mortgage is ordinarily incurred by
the Cooperative in connection with the construction or purchase of the
Cooperative's apartment building. The interest of the occupant under proprietary
leases or occupancy agreements to which the Cooperative is a party are generally
subordinate to the interest of the holder of the blanket mortgage in that
building. If the Cooperative is unable to meet the payment obligations arising
under its blanket mortgage, the mortgagee holding the blanket mortgage could
foreclose on that mortgage and terminate all subordinate proprietary leases and
occupancy agreements. In addition, the blanket mortgage on a Cooperative may
provide financing in the form of a mortgage that does not fully amortize with a
significant portion of principal being due in one lump sum at final maturity.
The inability of the Cooperative to refinance this mortgage and its consequent
inability to make such final payment could lead to foreclosure by the mortgagee
providing the financing. A foreclosure in either event by the holder of the
blanket mortgage could eliminate or significantly diminish the value of any
collateral held by the lender who financed the purchase by an individual
tenant-stockholder of Cooperative shares or, in the case of a Trust Fund
including Cooperative Loans, the collateral securing the Cooperative Loans.
A Cooperative is owned by tenant-stockholders who, through ownership of
stock, shares or membership certificates in the corporation, receive proprietary
leases or occupancy agreements which confer exclusive rights to occupy specific
units. Generally, a tenant-stockholder of a Cooperative must make a monthly
payment to the Cooperative representing such tenant-stockholder's pro rata share
of the Cooperative's payments for its blanket mortgage, real property taxes,
maintenance expenses and other capital or ordinary expenses. An ownership
interest in a Cooperative and the accompanying rights are financed through a
Cooperative share loan evidenced by a promissory note and secured by a security
interest in the occupancy agreement or proprietary lease and in the related
Cooperative shares. The lender takes possession of the share certificate and a
counterpart of the proprietary lease or occupancy agreement and a financing
statement covering the proprietary lease or occupancy agreement and the
Cooperative shares is filed in the appropriate state and local offices to
perfect the lender's interest in its collateral. Subject to the limitations
discussed below, upon default of the tenant-stockholder, the lender may sue for
judgment on the promissory note, dispose of the collateral at a public or
private sale or otherwise proceed against the collateral
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or against the tenant-stockholder as an individual as provided in the security
agreement covering the assignment of the proprietary lease or occupancy
agreement and the pledge of Cooperative shares.
Contracts. Each Contract evidences both (a) the obligation of the obligor
to repay the loan evidenced thereby and (b) the grant of a security interest in
the Manufactured Home to secure repayment of such loan. The Contracts generally
are "chattel paper" as defined in the Uniform Commercial Code (the "UCC") in
effect in the states in which the Manufactured Homes initially were registered.
Pursuant to the UCC, the rules governing the sale of chattel paper are similar
to those governing the perfection of a security interest in chattel paper. Under
the Agreement, the Depositor will transfer or cause the transfer of physical
possession of the Contracts to the Trustee or its custodian. In addition the
Depositor will make or cause to be made an appropriate filing of UCC-1 financing
statements in the appropriate states to give notice of the Trustee's ownership
of the Contracts. Under the laws of most states, manufactured housing
constitutes personal property and is subject to the motor vehicle registration
laws of the state or other jurisdiction in which the unit is located. In a few
states, where certificates of title are not required for Manufactured Homes,
security interests are perfected by the filing of a financing statement under
Article 9 of the UCC which has been adopted by all states except Louisiana. Such
financing statements are effective for five years and must be renewed at the end
of each five years. The certificate of title laws adopted by the majority of
states provide that ownership of motor vehicles and manufactured housing shall
be evidenced by a certificate of title issued by the motor vehicles department
(or a similar entity) of such state. In the states which have enacted
certificate of title laws, a security interest in a unit of manufactured
housing, so long as it is not attached to land in so permanent a fashion as to
become a fixture, is generally perfected by the recording of such interest on
the certificate of title to the unit in the appropriate motor vehicle
registration office or by delivery of the required documents and payment of a
fee to such office, depending on state law.
Unless otherwise specified in the related Prospectus Supplement, the
Master Servicer will be required to effect such notation or delivery of the
required documents and fees and to obtain possession of the certificate of
title, as appropriate under the laws of the state in which any Manufactured Home
is registered. If the Master Servicer fails to effect such notation or delivery,
due to clerical errors or otherwise, or files the security interest under the
wrong law (for example, under a motor vehicle title statute rather than under
the UCC, in a few states), the Trustee may not have a first priority security
interest in the Manufactured Home securing the affected Contract. As
Manufactured Homes have become larger and have often been attached to their
sites without any apparent intention to move them, courts in many states have
held that Manufactured Homes may, under certain circumstances, become subject to
real estate title and recording laws. As a result, a security interest in a
Manufactured Home could be rendered subordinate to the interests of other
parties claiming an interest in the home under applicable state real estate law.
In order to perfect a security interest in a Manufactured Home under real estate
laws, the holder of the security interest must file either a "fixture filing"
under the provisions of the UCC or a real estate mortgage under the real estate
laws of the state where the Manufactured Home is located. These filings must be
made in the real estate records office of the county where the Manufactured Home
is located. Generally, Contracts will contain provisions prohibiting the obligor
from permanently attaching the Manufactured Home to its site. So long as the
obligor does not violate this agreement, a security interest in the Manufactured
Home will be governed by the certificate of title laws or the UCC, and the
notation of the security interest on the certificate of title or the filing of a
UCC financing statement will be effective to maintain the priority of the
security interest in the Manufactured Home. If, however, a Manufactured Home is
permanently attached to its site, other parties could obtain an interest in the
Manufactured Home which is prior to the security interest originally retained by
the Seller and transferred to the Depositor.
The Depositor will assign or cause to be assigned to the Trustee, on
behalf of the Certificateholders, a security interest in the Manufactured Homes.
Unless otherwise specified in the related Prospectus Supplement, none of the
Depositor, the Master Servicer or the Trustee will amend the certificates of
title to identify the Trustee, on behalf of the Certificateholders, as the new
secured party and, accordingly, the Depositor or the Seller will continue to be
named as the secured party on the certificates of title relating to the
Manufactured Homes. In most states, such assignment is an effective conveyance
of such security interest without amendment of any lien noted on the related
certificate of title and the new secured party succeeds to the Depositor's
rights as the secured party. However, in some states there exists a risk that,
in the absence of an amendment to the certificate of title, such assignment of
the security interest might not be held effective against creditors of the
Depositor or Seller.
In the absence of fraud, forgery or permanent affixation of the
Manufactured Home to its site by the Manufactured Home owner, or administrative
error by state recording officials, the notation of the lien of the
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Trustee on the certificate of title or delivery of the required documents and
fees will be sufficient to protect the Trustee against the rights of subsequent
purchasers of a Manufactured Home or subsequent lenders who take a security
interest in the Manufactured Home. In the case of any Manufactured Home as to
which the security interest assigned to the Depositor and the Trustee is not
perfected, such security interest would be subordinate to, among others,
subsequent purchasers for value of Manufactured Home and holders of perfected
security interests therein. There also exists a risk that, in not identifying
the Trustee, on behalf of the Certificateholders, as the new secured party on
the certificate of title, the security interest of the Trustee could be released
through fraud or negligence.
If the owner of a Manufactured Home moves it to a state other than the
state in which such Manufactured Home initially is registered, under the laws of
most states the perfected security interest in the Manufactured Home would
continue for four months after such relocation and thereafter until the owner
re-registers the Manufactured Home in such state. If the owner were to relocate
a Manufactured Home to another state and re-register the Manufactured Home in
such state, and if steps are not taken to re-perfect the Trustee's security
interest in such state, the security interest in the Manufactured Home would
cease to be perfected. A majority of states generally require surrender of a
certificate of title to re-register a Manufactured Home; accordingly, the
Trustee must surrender possession if it holds the certificate of title to such
Manufactured Home or, in the case of Manufactured Homes registered in states
which provide for notation of lien, the Master Servicer would receive notice of
surrender if the security interest in the Manufactured Home is noted on the
certificate of title. Accordingly, the Trustee would have the opportunity to
re-perfect its security interest in the Manufactured Home in the state of
relocation. In states which do not require a certificate of title for
registration of a Manufactured Home, re-registration could defeat perfection.
Similarly, when an obligor under Contract sells a Manufactured Home, the obligee
must surrender possession of the certificate of title or it will receive notice
as a result of its lien noted thereon and accordingly will have an opportunity
to require satisfaction of the related Contract before release of the lien. The
Master Servicer will be obligated to take such steps, at the Master Servicer's
expense, as are necessary to maintain perfection of security interests in the
Manufactured Homes.
Under the laws of most states, liens for repairs performed on a
Manufactured Home take priority even over a perfected security interest. The
Depositor will obtain the representation of the Seller that it has no knowledge
of any such liens with respect to any Manufactured Home securing a Contract.
However, such liens could arise at any time during the term of a Contract. No
notice will be given to the Trustee or Certificateholders in the event such a
lien arises.
Foreclosure/Repossession
Single Family Loans and Multifamily Loans. Foreclosure of a deed of trust
is generally accomplished by a non-judicial sale under a specific provision in
the deed of trust which authorizes the trustee to sell the property at public
auction upon any default by the borrower under the terms of the note or deed of
trust. In some states, such as California, the trustee must record a notice of
default and send a copy to the borrower-trustor, to any person who has recorded
a request for a copy of any notice of default and notice of sale, to any
successor in interest to the borrower-trustor, to the beneficiary of any junior
deed of trust and to certain other persons. Before such non-judicial sale takes
place, typically a notice of sale must be posted in a public place and published
during a specific period of time in one or more newspapers, posted on the
property and sent to parties having an interest of record in the property.
Foreclosure of a mortgage is generally accomplished by judicial action.
The action is initiated by the service of legal pleadings upon all parties
having an interest in the real property. Delays in completion of the foreclosure
may occasionally result from difficulties in locating necessary parties.
Judicial foreclosure proceedings are often not contested by any of the parties.
When the mortgagee's right to foreclosure is contested, the legal proceedings
necessary to resolve the issue can be time consuming. After the completion of a
judicial foreclosure proceeding, the court generally issues a judgment of
foreclosure and appoints a referee or other court officer to conduct the sale of
the property. In general, the borrower, or any other person having a junior
encumbrance on the real estate, may, during a statutorily prescribed
reinstatement period, cure a monetary default by paying the entire amount in
arrears plus other designated costs and expenses incurred in enforcing the
obligation. Generally, state law controls the amount of foreclosure expenses and
costs, including attorneys' fees, which may be recovered by a lender. After the
reinstatement period has expired without the default having been cured, the
borrower or junior lienholder no longer has the right to reinstate the loan and
must pay the loan in full to prevent the scheduled foreclosure sale. If the deed
of trust is not reinstated, a notice of sale must be posted in a public place
and, in most
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states, published for a specific period of time in one or more newspapers. In
addition, some state laws require that a copy of the notice of sale be posted on
the property and sent to all parties having an interest in the real property.
Although foreclosure sales are typically public sales, frequently no
third-party purchaser bids in excess of the lender's lien because of the
difficulty of determining the exact status of title to the property, the
possible deterioration of the property during the foreclosure proceedings and a
requirement that the purchaser pay for the property in cash or by cashier's
check. Thus the foreclosing lender often purchases the property from the trustee
or referee for an amount equal to the principal amount outstanding under the
loan plus accrued and unpaid interest and the expenses of foreclosure.
Thereafter, the lender will assume the burden of ownership, including obtaining
hazard insurance and making such repairs at its own expense as are necessary to
render the property suitable for sale. The lender will commonly obtain the
services of a real estate broker and pay the broker's commission in connection
with the sale of the property. Depending upon market conditions, the ultimate
proceeds of the sale of the property may not equal the lender's investment in
the property.
Courts have imposed general equitable principles upon foreclosure, which
are generally designed to mitigate the legal consequences to the borrower of the
borrower's defaults under the loan documents. Some courts have been faced with
the issue of whether federal or state constitutional provisions reflecting due
process concerns for fair notice require that borrowers under deeds of trust
receive notice longer than that prescribed by statute. For the most part, these
cases have upheld the notice provisions as being reasonable or have found that
the sale by a trustee under a deed of trust does not involve sufficient state
action to afford constitutional protection to the borrower.
Cooperative Loans. The Cooperative shares owned by the tenant-stockholder
and pledged to the lender are, in almost all cases, subject to restrictions on
transfer as set forth in the Cooperative's articles of incorporation and
by-laws, as well as in the proprietary lease or occupancy agreement, and may be
cancelled by the Cooperative if the tenant-stockholder fails to pay rent or
other obligations or charges owed, including mechanics' liens against the
cooperative apartment building incurred by such tenant-stockholder. The
proprietary lease or occupancy agreement generally permits the Cooperative to
terminate such lease or agreement in the event an obligor fails to make payments
or defaults in the performance of covenants required thereunder. Typically, the
lender and the Cooperative enter into a recognition agreement which establishes
the rights and obligations of both parties in the event of a default by the
tenant-stockholder on its obligations under the proprietary lease or occupancy
agreement. A default by the tenant-stockholder under the proprietary lease or
occupancy agreement will usually constitute a default under the security
agreement between the lender and the tenant-stockholder.
The recognition agreement generally provides that, in the event that the
tenant-stockholder has defaulted under the proprietary lease or occupancy
agreement, the Cooperative will take no action to terminate such lease or
agreement until the lender has been provided with an opportunity to cure the
default. The recognition agreement typically provides, that if the proprietary
lease or occupancy agreement is terminated, the Cooperative will recognize the
lender's lien against proceeds from the sale of the Cooperative apartment,
subject, however, to the Cooperative's right to sums due under such proprietary
lease or occupancy agreement. The total amount owed to the Cooperative by the
tenant-stockholder, which the lender generally cannot restrict and does not
monitor, could reduce the value of the collateral below the outstanding
principal balance of the Cooperative Loan and accrued and unpaid interest
thereon.
Recognition agreements also provide that, in the event of a foreclosure on
a Cooperative Loan, the lender must obtain the approval or consent of the
Cooperative as required by the proprietary lease before transferring the
Cooperative shares or assigning the proprietary lease. Generally, lenders are
not limited in any rights they may have to dispossess tenant-stockholders.
In some states, foreclosure on the Cooperative shares is accomplished by a
sale in accordance with the provisions of Article 9 of the UCC and the security
agreement relating to those shares. Article 9 of the UCC requires that a sale be
conducted in a "commercially reasonable" manner. Whether a foreclosure sale has
been conducted in a "commercially reasonable" manner will depend on the facts in
each case. In determining commercial reasonableness, a court will look to the
notice given the debtor and the method, manner, time, place and terms of the
foreclosure. Generally, a sale conducted according to the usual practice of
banks selling similar collateral will be considered reasonably conducted.
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Article 9 of the UCC provides that the proceeds of the sale will be
applied first to pay the costs and expenses of the sale and then to satisfy the
indebtedness secured by the lender's security interest. The recognition
agreement, however, generally provides that the lender's right to reimbursement
is subject to the right of the Cooperative to receive sums due under the
proprietary lease or occupancy agreement. If there are proceeds remaining, the
lender must account to the tenant-stockholder for the surplus. Conversely, if a
portion of the indebtedness remains unpaid, the tenant-stockholder is generally
responsible for the deficiency. See "--Anti-Deficiency Legislation and Other
Limitations on Lenders" below.
In the case of foreclosure on a building which was converted from a rental
building to a building owned by a Cooperative under a non-eviction plan, some
states require that a purchaser at a foreclosure sale take the property subject
to rent control and rent stabilization laws which apply to certain tenants who
elected to remain in the building but who did not purchase shares in the
Cooperative when the building was so converted.
Contracts. The Master Servicer, on behalf of the Trustee, to the extent
required by the related agreement, may take action to enforce the Trustee's
security interest with respect to Contracts in default by repossession and
resale of the Manufactured Homes securing such Contracts in default. So long as
a Manufactured Home has not become subject to the real estate law, a creditor
can repossess the Manufactured Home securing a Contract by voluntary surrender,
by "self-help" repossession that is "peaceful" (i.e., without breach of the
peace) or, in the absence of voluntary surrender and the ability to repossess
without breach of the peace, by judicial process. The holder of a Contract must
give the debtor a number of days' notice, which varies from ten to 30 days
depending on the state, prior to commencement of any repossession. The UCC and
consumer protection laws in most states place restrictions on repossession
sales, including requiring prior notice to the debtor and commercial
reasonableness in effecting such a sale. The law in most states also requires
that the debtor be given notice of any sale prior to resale of the unit so that
the debtor may redeem at or before such resale. In the event of such
repossession and resale of a Manufactured Home, the Trustee would be entitled to
be paid out of the sale proceeds before such proceeds could be applied to the
payment of the claims of unsecured creditors or the holders of subsequently
perfected security interests or, thereafter, to the debtor.
Under the laws applicable in most states, a creditor is entitled to obtain
a deficiency judgment from a debtor for any deficiency on repossession and
resale of the Manufactured Home securing such a debtor's loan. However, some
states impose prohibitions or limitations on deficiency judgments.
Certain other statutory provisions, including federal and state bankruptcy
and insolvency laws and general equitable principles, may limit or delay the
ability of a lender to repossess and resell collateral or enforce a deficiency
judgment.
Environmental Risks
Real property pledged as security to a lender may be subject to unforeseen
environmental risks. Under the laws of certain states, contamination of a
property may give rise to a lien on the property to assure the payment of the
costs of clean-up. In several states such a lien has priority over the lien of
an existing mortgage against such property. In addition, under the federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), the United States Environmental Protection Agency ("EPA") may impose
a lien on property where EPA has incurred clean-up costs. However, a CERCLA lien
is subordinate to pre-existing, perfected security interests.
Under the laws of some states, and under CERCLA, there is a possibility
that a lender may be held liable as an "owner" or "operator" for costs of
addressing releases or threatened releases of hazardous substances at a
property, regardless of whether or not the environmental damage or threat was
caused by a current or prior owner or operator. CERCLA imposes liability for
such costs on any and all "responsible parties," including owners or operators.
However, CERCLA excludes from the definition of "owner or operator" a secured
creditor who holds indicia of ownership primarily to protect its security
interest but does not "participate in the management" of the property (the
"secured creditor exclusion"). Thus, if a lender's activities begin to encroach
on the actual management of a contaminated facility or property, the lender may
incur liability as an "owner or operator" under CERCLA. Similarly, if a lender
forecloses and takes title to a contaminated facility or property, the lender
may incur CERCLA liability in various circumstances, including, but not limited
to, when it holds the facility or property
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as an investment (including leasing the facility or property to a third party),
or fails to market the property in a timely fashion.
Whether actions taken by a lender would constitute such participation in
the management of a property, so that the lender would lose the protection of
the secured creditor exclusion, has been a matter of judicial interpretation of
the statutory language, and court decisions have historically been inconsistent.
In 1990, the United States Court of Appeals for the Eleventh Circuit suggested,
in United States v. Fleet Factors Corp., that the mere capacity of the lender to
influence a borrower's decisions regarding disposal of hazardous substances was
sufficient participation in the management of the borrower's business to deny
the protection of the secured creditor exclusion to the lender, regardless of
whether the lender actually exercised such influence. Other judicial decisions
did not interpret the secured creditor exclusion as narrowly as did the Eleventh
Circuit.
This ambiguity appears to have been resolved by the enactment of the Asset
Conservation, Lender Liabiltiy and Deposit Insurance Protection Act of 1996 (the
"Asset Conservation Act"), which took effect on September 30, 1996. The Asset
Conservation Act provides that in order to be deemed to have participated in the
management of a secured property, a lender must actually participate in the
operational affairs of the property or of the borrower. The Asset Conservation
Act also provides that participation in the management of the property does not
include "merely having the capacity to influence, or unexercised right to
control" operations. Rather, a lender will lose the protection of the secured
creditor exclusion only if it exercises decision-making control over the
borrower's environmental compliance and hazardous substance handling and
disposal practices, or assumes day-to-day management of all operational
functions of the secured property.
If a lender is or becomes liable, it can bring an action for contribution
against any other "responsible parties," including a previous owner or operator,
who crated the environmental hazard, but those persons or entities may be
bankrupt or otherwise judgment proof. The costs associated with environmental
cleanup may be substantial. It is conceivable that such costs arising from the
circumstances set forth above would result in a loss to Certificateholders.
CERCLA does not apply to petroleum products, and the secured creditor
exclusion does not govern liability for cleanup costs under federal laws other
than CERCLA, in particular Subtitle I of the federal Resource Conservation and
Recovery Act ("RCRA"), which regulates underground petroleum storage tanks
(except heating oil tanks). The EPA has adopted a lender liability rule for
underground storage tanks under Subtitle I of RCRA. Under such rule, a holder of
a security interest in an underground storage tank or real property containing
an underground storage tank is not considered an operator of the underground
storage tank as long as petroleum is not added to, stored in or dispensed from
the tank. Moreover, under the Asset Conservation Act, the protections accorded
to lenders under CERCLA are also accorded to holders of security interests in
underground petroleum storage tanks. It should be noted, however, that liability
for cleanup of petroleum contamination may be governed by state law, which may
not provide for any specific protection for secured creditors.
Except as otherwise specified in the applicable Prospectus Supplement, at
the time the Mortgage Loans were originated, no environmental assessment or a
very limited environment assessment of the Mortgage Properties was conducted.
The Agreement will provide that the Master Servicer, acting on behalf of
the Trust Fund, may not acquire title to a multifamily residential property or
mixed residential/commercial property underlying a Mortgage Loan or take over
its operation unless the Master Servicer has previously determined, based upon a
report prepared by a person who regularly conducts environmental audits, that
the Mortgaged Property is in compliance with applicable environmental laws and
regulations or that such acquisition would not be more detrimental than
beneficial to the value of the Mortgaged Properties and the interests therein of
the Certificateholders.
Rights of Redemption
Single Family Loans and Multifamily Loans. In some states, after sale
pursuant to a deed of trust or foreclosure of a mortgage, the borrower and
foreclosed junior lienors are given a statutory period in which to redeem the
property from the foreclosure sale. In some states, redemption may occur only
upon payment of the entire principal balance of the loan plus accrued interest
and expenses of foreclosure. In other states, redemption may be
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authorized if the former borrower pays only a portion of the sums due. The
effect of a statutory right of redemption would defeat the title of any
purchaser from the lender subsequent to foreclosure or sale under a deed of
trust. Consequently, the practical effect of the redemption right is to force
the lender to retain the property and pay the expenses of ownership until the
redemption period has run.
Contracts. While state laws do not usually require notice to be given
debtors prior to repossession, many states do require delivery of a notice of
default and of the debtor's right to cure defaults before repossession. The law
in most states also requires that the debtor be given notice of sale prior to
the resale of a Manufacture Home so that the owner may redeem at or before
resale. In addition, the sale must comply with the requirements of the UCC.
Manufactured Homes are most often resold through private sale.
Anti-Deficiency Legislation and Other Limitations on Lenders
Certain states, including California, have adopted statutory prohibitions
restricting the right of the beneficiary or mortgagee to obtain a deficiency
judgment against borrowers financing the purchase of their residence or
following sale under a deed of trust or certain other foreclosure proceedings. A
deficiency judgment is a personal judgment against the borrower equal in most
cases to the difference between the amount due to the lender and the fair market
value of the real property sold at the foreclosure sale. As a result of these
prohibitions, it is anticipated that in many instances the Master Servicer will
not seek deficiency judgments against defaulting mortgagors. Under the laws
applicable in most states, a creditor is entitled to obtain a deficiency
judgment for any deficiency following possession and resale of a Manufactured
Home. However, some states impose prohibitions or limitations on deficiency
judgments in such cases.
In addition to anti-deficiency and related legislation, numerous other
federal and state statutory provisions, including the Bankruptcy Code, the
federal Soldiers' and Sailors' Civil Relief Act of 1940 and state laws affording
relief to debtors, may interfere with or affect the ability of the secured
mortgage lender to realize upon its security. For example, in a proceeding under
the Bankruptcy Code, a lender may not foreclose on the Mortgaged Property
without the permission of the bankruptcy court. If the Mortgaged Property is not
the debtor's principal residence and the bankruptcy court determines that the
value of the Mortgaged Property is less than the principal balance of the
mortgage loan, the rehabilitation plan proposed by the debtor may reduce the
secured indebtedness to the value of the Mortgaged Property as of the date of
the commencement of the bankruptcy (rendering the lender a general unsecured
creditor for the difference), reduce the monthly payments due under such
mortgage loan, change the rate of interest and alter the mortgage loan repayment
schedule. The effect of any such proceedings under the Bankruptcy Code,
including but not limited to any automatic stay, could result in delays in
receiving payments on the Mortgage Loans underlying a Series of Certificates and
possible reductions in the aggregate amount of such payments.
The federal tax laws provide priority to certain tax liens over the lien
of a mortgage or secured party. Numerous federal and state consumer protection
laws impose substantive requirements upon mortgage lenders and manufactured
housing lenders in connection with the origination, servicing and enforcement of
Single Family Loans and Contracts. These laws include the federal Truth in
Lending Act, Real Estate Settlement Procedures Act, Equal Credit Opportunity
Act, Fair Credit Billing Act, Fair Credit Reporting Act and related statutes and
regulations. These federal and state laws impose specific statutory liabilities
upon lenders who fail to comply with the provisions of the law. In some cases,
this liability may affect assignees of the loans or contracts.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade Commission
(the "FTC Rule") has the effect of subjecting a seller (and certain related
creditors and their assignees) in a consumer credit transaction and any assignee
of the creditor to all claims and defenses which the debtor in the transaction
could assert against the seller of the goods. Liability under the FTC Rule is
limited to the amounts paid by a debtor on the Contract, and the holder of the
Contract may also be unable to collect amounts still due thereunder.
Most of the Contracts in a Mortgage Pool will be subject to the
requirements of the FTC Rule. Accordingly, the Trustee, as holder of the
Contracts, will be subject to any claims or defenses that the purchaser of the
related Manufactured Home may assert against the seller of the Manufactured
Home, subject to a maximum liability equal to the amounts paid by the obligor on
the Contract. If an obligor is successful in asserting any such claim or
defense, and if the Seller had or should have had knowledge of such claim or
defense, the Master Servicer
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will have the right to require the Seller to repurchase the Contract because of
a breach of its representation and warranty that no claims or defenses exist
which would affect the obligor's obligation to make the required payments under
the Contract.
Generally, Article 9 of the UCC governs foreclosure on Cooperative shares
and the related proprietary lease or occupancy agreement. Some courts have
interpreted Section 9-504 of the UCC to prohibit a deficiency award unless the
creditor establishes that the sale of the collateral (which, in the case of a
Cooperative Loan, would be the shares of the Cooperative and the related
proprietary lease or occupancy agreement) was conducted in a commercially
reasonable manner.
Due-on-Sale Clauses
Unless otherwise provided in the related Prospectus Supplement, each
conventional Mortgage Loan will contain a due-on-sale clause which will
generally provide that, if the mortgagor or obligor sells, transfers or conveys
the Mortgaged Property, the loan or contract may be accelerated by the mortgagee
or secured party. The Garn-St Germain Depository Institutions Act of 1982 (the
"Garn-St Germain Act"), subject to certain exceptions, pre-empts state
constitutional, statutory and case law prohibiting the enforcement of
due-on-sale clauses. With respect to loans secured by an owner-occupied
residence (which would include a Manufactured Home), the Garn-St Germain Act
sets forth nine specific instances in which a mortgagee covered by the Act may
not exercise its rights under a due-on-sale clause, notwithstanding the fact
that a transfer of the property may have occurred. The inability to enforce a
due-on-sale clause may result in transfer of the related Mortgaged Property to
an uncreditworthy person, which could increase the likelihood of default or may
result in a mortgage bearing an interest rate below the current market rate
being assumed by a new home buyer, which may affect the average life of the
Mortgage Loans and the number of Mortgage Loans which may extend to maturity.
Prepayment Charges
Under certain state laws, prepayment charges with respect to prepayments
on loans secured by liens encumbering owner-occupied residential properties may
not be imposed after a certain period of time following the origination of
Single Family Loans or Contracts. Since many of the Mortgaged Properties will be
owner-occupied, it is anticipated that prepayment charges may not be imposed
with respect to many of the Single Family Loans and Contracts. The absence of
such a restraint on prepayment, particularly with respect to fixed rate Single
Family Loans or Contracts having higher Mortgage Rates or APRs, may increase the
likelihood of refinancing or other early retirement of such Loans or Contracts.
Legal restrictions, if any, on prepayment of Multifamily Loans will be described
in the related Prospectus Supplement.
Applicability of Usury Laws
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980 ("Title V") provides that state usury limitations shall not apply to
certain types of residential first mortgage loans originated by certain lenders
after March 31, 1980. The Office of Thrift Supervision, as successor to the
Federal Home Loan Bank Board, is authorized to issue rules and regulations and
to publish interpretations governing implementation of Title V. The statute
authorized any state to reimpose limitations on interest rates and finance
charges by adopting before April 1, 1983 a law or constitutional provision which
expressly rejects application of the federal law. Fifteen states adopted such a
law prior to the April 1, 1983 deadline. In addition, even where Title V was not
so rejected, any state is authorized to adopt a provision limiting discount
points or other charges on loans covered by Title V. No Contract secured by a
Manufactured Home located in any state in which application of Title V was
expressly rejected or a provision limiting discount points or other charges has
been adopted will be included in any Trust File if such Contract imposes finance
charges or provides for discount points or charges in excess of permitted
levels.
Title V also provides that, subject to the following conditions, state
usury limitations will not apply to any loan which is secured by a first lien on
certain kinds of manufactured housing. The Contracts would be covered if they
satisfy certain conditions governing, among other things, the terms of any
prepayment, balloon payment, late charges and deferral fees and requiring a
30-day notice period prior to instituting any action leading to repossession of
or foreclosure with respect to the related unit.
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Soldiers' and Sailors' Civil Relief Act
Generally, under the terms of the Soldiers' and Sailors' Civil Relief Act
of 1940, as amended (the "Relief Act"), a borrower who enters military service
after the origination of such borrower's Mortgage Loan (including a borrower who
is a member of the National Guard or is in reserve status at the time of the
origination of the Mortgage Loan and is later called to active duty) may not be
charged interest above an annual rate of 6% during the period of such borrower's
active duty status, unless a court orders otherwise upon application of the
lender. It is possible that such interest rate limitation could have an effect,
for an indeterminate period of time, on the ability of the Master Servicer to
collect full amounts of interest on affected Mortgage Loans. Unless otherwise
provided in the related Prospectus Supplement, any shortfall in interest
collections resulting from the application of the Relief Act could result in
losses to the holders of the Certificates. In addition, the Relief Act imposes
limitations which would impair the ability of the Master Servicer to foreclose
on an affected Mortgage Loan during the borrower's period of active duty status.
Thus, in the event that such a Mortgage Loan goes into default, there may be
delays and losses occasioned by the lender's inability to realize upon the
mortgaged property in a timely fashion.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary of the anticipated material federal income tax
consequences of the purchase, ownership and disposition of Certificates is based
on the advice of Brown & Wood LLP, counsel to the Depositor. This summary is
based on laws, regulations, including the REMIC regulations promulgated by the
Treasury Department on December 23, 1992 and generally effective for REMICs with
start-up dates on or after November 12, 1991 (the "REMIC Regulations"), rulings
and decisions now in effect or (with respect to regulations) proposed, all of
which are subject to change either prospectively or retroactively. This summary
does not address the federal income tax consequences of an investment in
Certificates applicable to all categories of investors, some of which (for
example, banks and insurance companies) may be subject to special rules.
Prospective investors should consult their tax advisors regarding the federal,
state, local and any other tax consequences to them of the purchase, ownership
and disposition of Certificates.
General
The federal income tax consequences to Certificateholders will vary
depending on whether an election is made to treat the Trust Fund relating to a
particular Series of Certificates as a REMIC under the Code. The Prospectus
Supplement for each Series of Certificates will specify whether a REMIC election
will be made. In the discussion that follows, all references to a "Section" or
"Sections" shall be understood to refer, unless otherwise specifically
indicated, to a Section or Sections of the Code.
NON-REMIC CERTIFICATES
If a REMIC election is not made, Brown & Wood LLP will deliver its opinion
that the Trust Fund will not be classified as an association taxable as a
corporation and that each such Trust Fund will be classified as a grantor trust
under subpart E, part I of subchapter J of the Code. In this case, owners of
Certificates will be treated for federal income tax purposes as owners of a
portion of the Trust Fund's assets as described below.
Single Class of Senior Certificates
Characterization. The Trust Fund may be created with one class of Senior
Certificates and one class of Subordinated Certificates. In this case, each
Senior Certificateholder will be treated as the owner of a pro rata undivided
interest in the interest and principal portions of the Trust Fund represented by
that Senior Certificate and will be considered the equitable owner of a pro rata
undivided interest in each of the Mortgage Loans in the Pool. Any amounts
received by a Senior Certificateholder in lieu of amounts due with respect to
any Mortgage Loan because of a default or delinquency in payment will be treated
for federal income tax purposes as having the same character as the payments
they replace.
Each holder of a Senior Certificate will be required to report on its
federal income tax return its pro rata share of the entire income from the
Mortgage Loans in the Trust Fund represented by that Senior Certificate,
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including interest, original issue discount, if any, prepayment fees, assumption
fees, any gain recognized upon an assumption and late payment charges received
by the Master Servicer in accordance with such Senior Certificateholder's method
of accounting. Under section 162 or 212 of the Code, each Senior
Certificateholder will be entitled to deduct its pro rata share of servicing
fees, prepayment fees, assumption fees, any loss recognized upon an assumption
and late payment charges retained by the Master Servicer, provided that such
amounts are reasonable compensation for services rendered to the Trust Fund. A
Senior Certificateholder that is an individual, estate or trust will be entitled
to deduct its share of expenses only to the extent such expenses, plus all other
section 212 expenses, exceed 2% of such Senior Certificateholder's adjusted
gross income. A Senior Certificateholder using the cash method of accounting
must take into account its pro rata share of income and deductions as and when
collected by or paid to the Master Servicer. A Senior Certificateholder using an
accrual method of accounting must take into account its pro rata share of income
and deductions as they become due or are paid to the Master Servicer, whichever
is earlier. If the servicing fees paid to the Master Servicer were deemed to
exceed reasonable servicing compensation, the amount of such excess could be
considered as a retained ownership interest by the Master Servicer (or any
person to whom the Master Servicer assigned for value all or a portion of the
servicing fees) in a portion of the interest payments on the Mortgage Loans. The
Mortgage Loans might then be subject to the "coupon stripping" rules of the Code
discussed below.
Unless otherwise specified in the related Prospectus Supplement, Brown &
Wood LLP will have advised the Depositor with respect to each Series of
Certificates that:
(i) a Senior Certificate owned by a "domestic building and loan
association" within the meaning of section 7701(a)(19) of the Code representing
principal and interest payments on Mortgage Loans will be considered to
represent "loans . . . secured by an interest in real property which is . . .
residential property" within the meaning of section 7701(a)(19)(C)(v) of the
Code to the extent that the Mortgage Loans represented by that Senior
Certificate are of a type described in such section;
(ii) a Senior Certificate owned by a real estate investment trust
representing an interest in Mortgage Loans will be considered to represent "real
estate assets" within the meaning of section 856(c)(4)(A) of the Code and
interest income on the Mortgage Loans will be considered "interest on
obligations secured by mortgages on real property" within the meaning of section
856(c)(3)(B) of the Code to the extent that the Mortgage Loans represented by
that Senior Certificate are of a type described in such section; and
(iii) a Senior Certificate owned by a REMIC will be an "obligation . . .
which is principally secured by an interest in real property" within the meaning
of section 860G(a)(3)(A) of the Code.
The Small Business Job Protection Act of 1996, as part of the repeal of
the bad debt reserve method for thrift institutions, repealed the application of
section 593(d) of the Code to any taxable year beginning after December 31,
1995.
The assets constituting certain Trust Funds may include "buydown" Mortgage
Loans. The characterization of any investment in "buydown" Mortgage Loans will
depend upon the precise terms of the related buydown agreement, but to the
extent that such "buydown" Mortgage Loans are secured in part by a bank account
or other personal property, they may not be treated in their entirety as assets
described in the foregoing sections of the Code. There are no directly
applicable precedents with respect to the federal income tax treatment or the
characterization of investments in "buydown" Mortgage Loans. Accordingly,
holders of Senior Certificates should consult their own tax advisors with
respect to characterization of investments in Senior Certificates representing
an interest in a Trust Fund that includes "buydown" Mortgage Loans.
Premium. The price paid for a Senior Certificate by a holder will be
allocated to such holder's undivided interest in each Mortgage Loan based on
each Mortgage Loan's relative fair market value, so that such holder's undivided
interest in each Mortgage Loan will have its own tax basis. A Senior
Certificateholder that acquires an interest in Mortgage Loans at a premium may
elect to amortize such premium under a constant interest method, provided that
such Mortgage Loan was originated after September 27, 1985. Premium allocable to
a Mortgage Loan originated on or before September 27, 1985 should be allocated
among the principal payments on the Mortgage Loan and allowed as an ordinary
deduction as principal payments are made. Amortizable bond premium will be
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treated as an offset to interest income on such Senior Certificate. The basis
for such Senior Certificate will be reduced to the extent that amortizable
premium is applied to offset interest payments.
It is not clear whether a reasonable prepayment assumption should be used
in computing amortization of premium allowable under section 171 of the Code. A
Certificateholder that makes this election for a Certificate that is acquired at
a premium will be deemed to have made an election to amortize bond premium with
respect to all debt instruments having amortizable bond premium that such
Certificateholder acquires during the year of the election or thereafter.
If a premium is not subject to amortization using a reasonable prepayment
assumption, the holder of a Senior Certificate acquired at a premium should
recognize a loss, if a Mortgage Loan prepays in full, equal to the difference
between the portion of the prepaid principal amount of the Mortgage Loan that is
allocable to the Senior Certificate and the portion of the adjusted basis of the
Senior Certificate that is allocable to the Mortgage Loan. If a reasonable
prepayment assumption is used to amortize such premium, it appears that such a
loss would be available, if at all, only if prepayments have occurred at a rate
faster than the reasonable assumed prepayment rate. It is not clear whether any
other adjustments would be required to reflect differences between an assumed
prepayment rate and the actual rate of prepayments.
On December 30, 1997, the Internal Revenue Service (the "IRS") issued
final regulations (the "Amortizable Bond Premium Regulations") dealing with
amortizable bond premium. These regulations, which generally are effective for
bonds issued or acquired on or after March 2, 1998 (or, for holders making an
election for the taxable year that included March 2, 1998 or any subsequent
taxable year, shall apply to bonds held on or after the first day of the taxable
year of the election). The Amortizable Bond Premium Regulations specifically do
not apply to prepayable debt instruments or any pool of debt instruments, such
as the Trust Fund, the yield on which may be affected by prepayments which are
subject to section 1272(a)(6) of the Code. Absent further guidance from the IRS
and unless otherwise specified in the related Prospectus Supplement, the Trustee
will account for amortizable bond premium in the manner described above.
Prospective purchasers should consult their tax advisors regarding amortizable
bond premium and the Amortizable Bond Premium Regulations.
Original Issue Discount. The IRS has stated in published rulings that, in
circumstances similar to those described herein, the special rules of the Code
relating to "original issue discount" (currently sections 1271 through 1273 and
section 1275) will be applicable to a Senior Certificateholder's interest in
those Mortgage Loans meeting the conditions necessary for these sections to
apply. Accordingly, the following discussion is based in part on Treasury
regulations issued on February 2, 1994 under sections 1271 through 1273 and
section 1275 of the Code (the "OID Regulations"). Certificateholders should be
aware, however, that the OID Regulations do not adequately address certain
issues relevant to prepayable securities, such as the Certificates. Rules
regarding periodic inclusion of original issue discount income are applicable to
mortgages of corporations originated after May 27, 1969, mortgages of
noncorporate mortgagors (other than individuals) originated after July 1, 1982,
and mortgages of individuals originated after March 2, 1984. Such original issue
discount could arise by the financing of points or other charges by the
originator of the mortgages in an amount greater than a statutory de minimis
exception to the extent that the points are not currently deductible under
applicable provisions of the Code or are not for services provided by the
lender. Original issue discount generally must be reported as ordinary gross
income as it accrues under a constant interest method. See "--Multiple Classes
of Senior Certificates--B. Senior Certificates Representing Interests in Loans
Other than ARM Loans--Accrual of Original Issue Discount" below.
Market Discount. A Senior Certificateholder that acquires an undivided
interest in Mortgage Loans may be subject to the market discount rules of
sections 1276 through 1278 to the extent an undivided interest in a Mortgage
Loan is considered to have been purchased at a "market discount". Generally, the
excess of the portion of the principal amount of such Mortgage Loan allocable to
such holder's undivided interest over such holder's tax basis in such interest.
Market discount with respect to a Senior Certificate will be considered to be
zero if the amount allocable to the Senior Certificate is less than 0.25% of the
Senior Certificate's stated redemption price at maturity multiplied by the
weighted average maturity remaining after the date of purchase. Treasury
regulations implementing the market discount rules have not yet been issued;
therefore, investors should consult their own tax advisors regarding the
application of these rules and the advisability of making any of the elections
allowed under sections 1276 through 1278 of the Code.
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The Code provides that any principal payment (whether a scheduled payment
or a prepayment) or any gain on disposition of a market discount bond acquired
by the taxpayer after October 22, 1986 shall be treated as ordinary income to
the extent that it does not exceed the accrued market discount at the time of
such payment. The amount of accrued market discount for purposes of determining
the tax treatment of subsequent principal payments or dispositions of the market
discount bond is to be reduced by the amount so treated as ordinary income.
The Code also grants to the Department of the Treasury (the "Treasury")
authority to issue regulations providing for the computation of accrued market
discount on debt instruments, the principal of which is payable in more than one
installment. Although the Treasury has not yet issued regulations, rules
described in the relevant legislative history will apply. Under those rules, the
holder of a market discount bond may elect to accrue market discount either on
the basis of a constant interest rate or according to one of the following
methods. If a Senior Certificate is issued with original issue discount, the
amount of market discount that accrues during any accrual period is equal to the
product of (i) the total remaining market discount and (ii) a fraction, the
numerator of which is the original issue discount accruing during the period and
the denominator of which is the total remaining original issue discount at the
beginning of the accrual period. For Senior Certificates issued without original
issue discount, the amount of market discount that accrues during a period is
equal to the product of (i) the total remaining market discount and (ii) a
fraction, the numerator of which is the amount of stated interest paid during
the accrual period and the denominator of which is the total amount of stated
interest remaining to be paid at the beginning of the accrual period. For
purposes of calculating market discount under any of the above methods in the
case of instruments (such as the Senior Certificates) which provide for payments
which may be accelerated by reason of prepayments of other obligations securing
such instruments, the same prepayment assumption applicable to calculating the
accrual of original issue discount will apply. Because the regulations described
above have not been issued, it is impossible to predict what effect those
regulations might have on the tax treatment of a Senior Certificate purchased at
a discount or premium in the secondary market.
A holder who acquires a Senior Certificate at a market discount also may
be required to defer, until the maturity date of such Senior Certificate or its
earlier disposition in a taxable transaction, the deduction of a portion of the
amount of interest that the holder paid or accrued during the taxable year on
indebtedness incurred or maintained to purchase or carry the Senior Certificate
in excess of the aggregate amount of interest (including original issue
discount) includible in such holder's gross income for the taxable year with
respect to such Senior Certificate. The amount of such net interest expense
deferred in a taxable year may not exceed the amount of market discount accrued
on the Senior Certificate for the days during the taxable year on which the
holder held the Senior Certificate and, in general, would be deductible when
such market discount is includible in income. The amount of any remaining
deferred deduction is to be taken into account in the taxable year in which the
Senior Certificate matures or is disposed of in a taxable transaction. In the
case of a disposition in which gain or loss is not recognized in whole or in
part, any remaining deferred deduction will be allowed to the extent of gain
recognized on the disposition. This deferral rule does not apply if the Senior
Certificateholder elects to include such market discount in income currently as
it accrues on all market discount obligations acquired by such Senior
Certificateholder in that taxable year or thereafter.
Election to Treat All Interest as Original Issue Discount. The OID
Regulations permit a Certificateholder to elect to accrue all interest, discount
(including de minimis market or original issue discount) and premium in income
as interest, based on a constant yield method for Certificates acquired on or
after April 4, 1994. If such an election is made with respect to a Mortgage Loan
with market discount, the Certificateholder will be deemed to have made an
election to include in income currently market discount with respect to all
other debt instruments having market discount that such Certificateholder
acquires during the year of the election or thereafter. Similarly, a
Certificateholder that makes this election for a Certificate that is acquired at
a premium will be deemed to have made an election to amortize bond premium with
respect to all debt instruments having amortizable bond premium that such
Certificateholder owns or acquires. See "--Regular Certificates--Original Issue
Discount and Premium" below. The election to accrue interest, discount and
premium on a constant yield method with respect to a Certificate is irrevocable.
Anti-abuse Rule. The IRS is permitted apply or depart from the rules
contained in the OID Regulations as necessary or appropriate to achieve a
reasonable result where a principal purpose in structuring a Mortgage Asset,
Mortgage Loan or Senior Certificate, or the effect of applying the otherwise
applicable rules, is to achieve a result
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that is unreasonable in light of the purposes of the applicable statutes (which
generally are intended to achieve the clear reflection of income for both
issuers and holders of debt instruments).
Multiple Classes of Senior Certificates
A. Stripped Bonds and Stripped Coupons
Pursuant to section 1286 of the Code, the separation of ownership of the
right to receive some or all of the interest payments on an obligation from
ownership of the right to receive some or all of the principal payments results
in the creation of "stripped bonds" with respect to principal payments and
"stripped coupons" with respect to interest payments. For purposes of sections
1271 through 1288 of the Code, section 1286 treats a stripped bond or a stripped
coupon as an obligation issued on the date that such stripped interest is
created. If a Trust Fund is created with two classes of Senior Certificates, one
class of Senior Certificates will represent the right to principal and interest,
or principal only, on all or a portion of the Mortgage Loans (the "Stripped Bond
Certificates"), while the second class of Senior Certificates will represent the
right to some or all of the interest on such portion (the "Stripped Coupon
Certificates").
Servicing fees in excess of reasonable servicing fees ("excess servicing")
will be treated under the stripped bond rules. If the excess servicing fee is
less than 100 basis points (i.e., 1% interest on the Mortgage Loan principal
balance) or the Certificates are initially sold with a de minimis discount
(assuming no prepayment assumption is required), any non-de minimis discount
arising from a subsequent transfer of the Certificates should be treated as
market discount. The IRS appears to require that reasonable servicing fees be
calculated on a Mortgage Loan by Mortgage Loan basis, which could result in some
Mortgage Loans being treated as having more than 100 basis points of interest
stripped off.
Although not entirely clear, a Stripped Bond Certificate generally should
be treated as a single debt instrument issued on the day it is purchased for
purposes of calculating any original issue discount. Generally, if the discount
on a Stripped Bond Certificate is larger than a de minimis amount (as calculated
for purposes of the original issue discount rules), a purchaser of such a
certificate will be required to accrue the discount under the original issue
discount rules of the Code. See "--Single Class of Senior Certificates--Original
Issue Discount" above. However, a purchaser of a Stripped Bond Certificate will
be required to account for any discount on the certificate as market discount
rather than original issue discount if either (i) the amount of original issue
discount with respect to the certificate was treated as zero under the original
issue discount de minimis rule when the certificate was stripped or (ii) no more
than 100 basis points (including any amount of servicing in excess of reasonable
servicing) are stripped off the Trust Fund's Mortgage Loans. Pursuant to Revenue
Procedure 91-49 issued on August 8, 1991, purchasers of Stripped Bond
Certificates using an inconsistent method of accounting must change their method
of accounting and request the consent of the IRS to the change in their
accounting method on a statement attached to their first timely tax return filed
after August 8, 1991.
The precise tax treatment of Stripped Coupon Certificates is substantially
uncertain. The Code could be read literally to require that original issue
discount computations be made on a Mortgage Loan by Mortgagee Loan basis.
However, based on recent IRS guidance, it appears that a Stripped Coupon
Certificate should be treated as a single installment obligation subject to the
original issue discount rules of the Code. As a result, all payments on a
Stripped Coupon Certificate would be included in the certificate's stated
redemption price at maturity for purposes of calculating income on such
certificate under the original issue discount rules of the Code.
It is unclear under what circumstances, if any, the prepayment of Mortgage
Loans will give rise to a loss to the holder of a Stripped Bond Certificate
purchased at a premium or a Stripped Coupon Certificate. If such Certificate is
treated as a single instrument (rather than an interest in discrete mortgage
loans) and the effect of prepayments is taken into account in computing yield
with respect to such Senior Certificate, it appears that no loss may be
available as a result of any particular prepayment unless prepayments occur at a
rate faster than the assumed prepayment rate. However, if such Certificate is
treated as an interest in discrete Mortgage Loans or if no prepayment assumption
is used, then, when a Mortgage Loan is prepaid, the holder of such Certificate
should be able to recognize a loss equal to the portion of the adjusted issue
price of such Certificate that is allocable to such Mortgage Loan.
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Holders of Stripped Bond Certificates and Stripped Coupon Certificates are
urged to consult with their own tax advisors regarding the proper treatment of
these Certificates for federal income tax purposes.
Treatment of Certain Owners. Several sections of the Code provide
beneficial treatment to certain taxpayers that invest in mortgage loans of the
type that make up the Trust Fund. With respect to these sections, no specific
legal authority exists regarding whether the character of the Senior
Certificates, for federal income tax purposes, will be the same as that of the
underlying Mortgage Loans. While section 1286 treats a stripped obligation as a
separate obligation for purposes of the provisions of the Code addressing
original issue discount, it is not clear whether such characterization would
apply with regard to these other sections. Although the issue is not free from
doubt, based on policy considerations, each class of Senior Certificates should
be considered to represent "real estate assets" within the meaning of section
856(c)(4)(A) of the Code and "loans . . . secured by, an interest in real
property which is . . . residential real property" within the meaning of section
7701(a)(19)(C)(v) of the Code, and interest income attributable to Senior
Certificates should be considered to represent "interest on obligations secured
by mortgages on real property" within the meaning of section 856(c)(3)(B) of the
Code, provided that in each case the underlying Mortgage Loans and interest on
such Mortgage Loans qualify for such treatment. Prospective purchasers to which
such characterization of an investment in Senior Certificates is material should
consult their own tax advisors regarding the characterization of the Senior
Certificates and the income therefrom. Senior Certificates will be "obligations
(including any participation or certificate of beneficial ownership therein)
which are principally secured by an interest in real property" within the
meaning of section 860G(a)(3)(A) of the Code.
B. Senior Certificates Representing Interests in Loans Other than ARM Loans
The original issue discount rules of sections 1271 through 1275 of the
Code will be applicable to a Senior Certificateholder's interest in those
Mortgage Loans as to which the conditions for the application of those sections
are met. Rules regarding periodic inclusion of original issue discount in income
are applicable to mortgages of corporations originated after May 27, 1969,
mortgages of noncorporate mortgagors (other than individuals) originated after
July 1, 1982, and mortgages of individuals originated after March 2, 1984. Under
the OID Regulations, such original issue discount could arise by the charging of
points by the originator of the mortgage in an amount greater than the statutory
de minimis exception, including a payment of points that is currently deductible
by the borrower under applicable provisions of the Code, or, under certain
circumstances, by the presence of "teaser" rates on the Mortgage Loans. Original
issue discount on each Senior Certificate must be included in the owner's
ordinary income for federal income tax purposes as it accrues, in accordance
with a constant interest method that takes into account the compounding of
interest, in advance of receipt of the cash attributable to such income. The
amount of original issue discount required to be included in an owner's income
in any taxable year with respect to a Senior Certificate representing an
interest in Mortgage Loans other than Mortgage Loans with interest rates that
adjust periodically ("ARM Loans") likely will be computed as described under
"--Accrual of Original Issue Discount" below. The following discussion is based
in part on the OID Regulations and in part on the provisions of the Tax Reform
Act of 1986, as amended (the "1986 Act"). The OID Regulations generally are
effective for debt instruments issued on or after April 4, 1994, but may be
relied upon as authority with respect to debt instruments such as the Senior
Certificates issued after December 21, 1992. Alternatively, proposed Treasury
regulations issued December 21, 1992 may be treated as authority for debt
instruments issued after December 21, 1992 and prior to April 4, 1994, and
proposed Treasury regulations issued in 1986 and 1991 may be treated as
authority for instruments issued before December 21, 1992. In applying these
dates, the issue date of the Mortgage Loans should be used or, in the case of
Stripped Bond Certificates or Stripped Coupon Certificates, the date such
Certificates are acquired. The holder of a Senior Certificate should be aware,
however, that neither the proposed OID Regulations nor the OID Regulations
adequately address certain issues relevant to prepayable securities.
Under the Code, the Mortgage Loans underlying each Senior Certificate will
be treated as having been issued on the date they were originated with an amount
of original issue discount equal to the excess of such Mortgage Loan's stated
redemption price at maturity over its issue price. The issue price of a Mortgage
Loan is generally the amount lent to the mortgagee, which may be adjusted to
take into account certain loan origination fees. The stated redemption price at
maturity of a Mortgage Loan is the sum of all payments to be made on such
Mortgage Loan other than payments that are treated as qualified stated interest
payments. The accrual of this original issue discount, as described under
"--Accrual of Original Issue Discount" below, will, unless otherwise specified
in the related Prospectus Supplement, utilize the original yield to maturity of
the Senior Certificate calculated based on a reasonable assumed prepayment rate
for the Mortgage Loans underlying the Senior
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Certificates (the "Prepayment Assumption") and will take into account events
that occur during the calculation period. The Prepayment Assumption will be
determined in the manner prescribed by regulations that have not yet been
issued. The legislative history of the 1986 Act (the "Legislative History")
provides, however, that the regulations will require that the Prepayment
Assumption be the prepayment assumption that is used in determining the offering
price of such Certificate. No representation is made that any Certificate will
prepay at the Prepayment Assumption or at any other rate. The prepayment
assumption contained in the Code literally only applies to debt instruments
collateralized by other debt instruments that are subject to prepayment rather
than direct ownership interests in such debt instruments, such as the
Certificates represent. However, no other legal authority provides guidance with
regard to the proper method for accruing original issue discount on obligations
that are subject to prepayment, and, until further guidance is issued, the
Master Servicer intends to calculate and report original issue discount under
the method described below.
Accrual of Original Issue Discount. Generally, the owner of a Senior
Certificate must include in gross income the sum of the "daily portions", as
defined below, of the original issue discount on such Senior Certificate for
each day on which it owns a Senior Certificate, including the date of purchase
but excluding the date of disposition. In the case of an original owner, the
daily portions of original issue discount with respect to each component
generally will be determined as follows under the Amendments. A calculation will
be made by the Master Servicer or such other entity specified in the related
Prospectus Supplement of the portion of original issue discount that accrues
during each successive monthly accrual period (or shorter period from the date
of original issue) that ends on the day in the calendar year corresponding to
each of the Distribution Dates on the Senior Certificate (or the day prior to
each such date). This will be done, in the case of each full month accrual
period, by adding (i) the present value at the end of the accrual period
(determined by using as a discount factor the original yield to maturity of the
respective component, under the Prepayment Assumption) of all remaining payments
to be received under the Prepayment Assumption on the respective component, and
(ii) any payments received during such accrual period (other than a payment of
qualified stated interest), and subtracting from that total the "adjusted issue
price" of the respective component at the beginning of such accrual period. The
"adjusted issue price" of a Senior Certificate at the beginning of the first
accrual period is its issue price; the "adjusted issue price" of a Senior
Certificate at the beginning of a subsequent accrual period is the "adjusted
issue price" at the beginning of the immediately preceding accrual period plus
the amount of original issue discount allocable to that accrual period reduced
by the amount of any payment (other than a payment of qualified stated interest)
made at the end of or during that accrual period. The original issue discount
accruing during such accrual period will then be divided by the number of days
in the period to determine the daily portion of original issue discount for each
day in the period. With respect to an initial accrual period shorter than a full
monthly accrual period, the daily portions of original issue discount must be
determined according to an appropriate allocation under any reasonable method.
Original issue discount generally must be reported as ordinary gross
income as it accrues under a constant interest method that takes into account
the compounding of interest as it accrues rather than when received. However,
the amount of original issue discount includible in the income of a holder of an
obligation is reduced when the obligation is acquired after its initial issuance
at a price greater than the sum of the original issue price and the previously
accrued original issue discount, less prior payments of principal. Accordingly,
if such Mortgage Loans acquired by a Certificateholder are purchased at a price
equal to the then unpaid principal amount of such Mortgage Loan, no original
issue discount attributable to the difference between the issue price and the
original principal amount of such Mortgage Loan (i.e., points) will be
includible by such holder. Other original issue discount on the Mortgage Loans
(e.g., that arising from a "teaser" rate) would still need to be accrued.
C. Senior Certificates Representing Interests in ARM Loans
The OID Regulations do not address the treatment of instruments, such as
the Senior Certificates (if the related Trust Fund includes ARM Loans), which
represent interests in ARM Loans. Additionally, the IRS has not issued guidance
under the coupon stripping rules of the Code with respect to such instruments.
In the absence of any authority, the Master Servicer will report original issue
discount on Senior Certificates attributable to ARM Loans ("Stripped ARM
Obligations") to holders in a manner it believes to be consistent with the rules
described under the heading "--B. Senior Certificates Representing Interests in
Loans Other than ARM Loans" above and with the OID Regulations. In general,
application of these rules may require inclusion of income on a Stripped ARM
Obligation in advance of the receipt of cash attributable to such income.
Further, the addition of interest deferred by reason of negative amortization
("Deferred Interest") to the principal balance of an ARM Loan may require the
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inclusion of such amount in the income of the Senior Certificateholder when such
amount accrues. Furthermore, the addition of Deferred Interest to the Senior
Certificate's principal balance will result in additional income (including
possibly original issue discount income) to the Senior Certificateholder over
the remaining life of such Senior Certificates.
Because the treatment of Stripped ARM Obligations is uncertain, investors
are urged to consult their tax advisors regarding how income will be includible
with respect to such Certificates.
Possible Application of Contingent Payment Regulations to Certain Non-REMIC
Certificates
Final regulations issued on June 11, 1996 with respect to original issue
discount under section 1275 include rules for obligations that provide for one
or more contingent payments (the "Contingent Payment Regulations"). Rights to
interest payments on a mortgage loan might be considered to be contingent within
the meaning of the Contingent Payment Regulations if such interest would not be
paid if the borrower exercised its right to prepay the mortgage loan. However,
in the case of an investor having a right to shares of the interest and
principal payments on such a mortgage loan when the share of interest is not
substantially greater than the share of principal, the possibility of prepayment
should not be considered to characterize otherwise noncontingent interest
payments as contingent payments. The absence of interest payments following a
prepayment would be the normal consequence of the return of such investor's
capital in the form of a principal payment. On the other hand, a right to
interest on such a mortgage loan is more likely to be regarded as contingent if
held by an investor that does not also hold a right to the related principal.
Such an investor would not recover its capital through receipt of a principal
payment at the time of the prepayment of the mortgage loan.
Applying these principles to the Senior Certificates, because the Mortgage
Loans are subject to prepayment at any time, payments on a class of Senior
Certificates representing a right to interest on the Mortgage Loans could be
considered to be contingent within the meaning of the Contingent Payment
Regulations, at least if such Senior Certificate was issued at a premium. The
likelihood that such payments will be considered contingent increases the
greater the amount of such premium.
In the event that payments on a Senior Certificate in respect of interest
on the Mortgage Loans are considered contingent, then the holder would generally
report income or loss as described above under the heading "--A.Stripped Bonds
and Stripped Coupons"; provided, however, that the yield that would be used in
calculating interest income would not be the actual yield but would instead
equal the "applicable Federal rate" (the "AFR", generally, an average of current
yields of Treasury securities computed and published monthly by the IRS), in
effect at the time of purchase of such Senior Certificate by such holder. In
addition, once such Holder's adjusted basis in such Senior Certificate has been
reduced (by prior distributions or losses) to an amount equal to the aggregate
amount of the remaining noncontingent payments of the Mortgage Loans that are
allocable to such Senior Certificate (or to zero if such Senior Certificate does
not share in principal payments), then such holder would recognize income in
each subsequent month equal to the full amount of interest on the Mortgage Loans
that accrues in that month and is allocable to such Senior Certificate. It is
uncertain whether, under the Contingent Payment regulations, any other
adjustments would be made to take account of prepayments of the Mortgage Loans.
Sale or Exchange of a Senior Certificate
Sale or exchange of a Senior Certificate prior to its maturity will result
in gain or loss equal to the difference, if any, between the amount received and
the seller's adjusted basis in the Senior Certificate. Such adjusted basis
generally will equal the seller's purchase price for the Senior Certificate,
increased by the original issue discount included in the seller's gross income
with respect to the Senior Certificate, and reduced by principal payments on the
Senior Certificate previously received by the seller. Such gain or loss will be
capital gain or loss to a seller for which a Senior Certificate is a "capital
asset" within the meaning of section 1221 of the Code, and will be long-term or
short-term depending on whether the Senior Certificate has been owned for the
long-term capital gain holding period (currently more than one year).
Non-corporate taxpayers are subject to reduced maximum rates on long-term
capital gains and are generally subject to tax at ordinary income rates on
short-term capital gains. The deductibility of capital losses is
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subject to certain limitations. Prospective investors should consult their own
tax advisors concerning these tax law provisions.
It is possible that capital gain realized by holders of the Senior
Certificates could be considered gain realized upon the disposition of property
that was part of a "conversion transaction". A sale of a Senior Certificate will
be part of a conversion transaction if substantially all of the holder's
expected return is attributable to the time value of the holder's net
investment, and (i) the holder entered the contract to sell the Senior
Certificate substantially contemporaneously with acquiring the Senior
Certificate, (ii) the Senior Certificate is part of a straddle, (iii) the Senior
Certificate is marketed or sold as producing capital gain or (iv) other
transactions to be specified in Treasury regulations that have not yet been
issued. If the sale or other disposition of a Senior Certificate is part of a
conversion transaction, all or any portion of the gain realized upon the sale or
other disposition would be treated as ordinary income instead of capital gain.
Senior Certificates will be "evidences of indebtedness" within the meaning
of section 582(c)(1) of the Code, so that gain or loss recognized from the sale
of a Senior Certificate by a bank or a thrift institution to which such section
applies will be ordinary income or loss.
Non-U.S. Persons
Generally, to the extent that a Senior Certificate evidences ownership in
Mortgage Loans that are issued on or before July 18, 1984, interest or original
issue discount paid by the person required to withhold tax under section 1441 or
1442 to (i) an owner that is not a U.S. Person (as defined below) or (ii) a
Senior Certificateholder holding on behalf of an owner that is not a U.S.
Person, will be subject to federal income tax, collected by withholding, at a
rate of 30% or such lower rate as may be provided for interest by an applicable
tax treaty. Accrued original issue discount recognized by the owner on the sale
or exchange of such a Senior Certificate also will be subject to federal income
tax at the same rate. Generally, such payments would not be subject to
withholding to the extent that a Senior Certificate evidences ownership in
Mortgage Loans issued after July 18, 1984, if (i) such Senior Certificateholder
does not actually or constructively own 10% or more of the combined voting power
of all classes of equity in the issuer (which for purposes of this discussion
may be defined as the Trust Fund (the "issuer")); (ii) such Senior
Certificateholder is not a controlled foreign corporation (within the meaning of
section 957 of the Code) related to the issuer; and (iii) such Senior
Certificateholder complies with certain identification requirements (including
delivery of a statement, signed by the Senior Certificateholder under penalties
of perjury, certifying that such Senior Certificateholder is not a U.S. Person
and providing the name and address of such Senior Certificateholder).
For purposes of this discussion, a "U.S. Person" means a citizen or
resident of the United States, a corporation or a partnership (including an
entity treated as a corporation or partnership for U.S. federal income tax
purposes) organized in or under the laws of the United States, or any State
thereof or the District of Columbia (unless in the case of a partnership
Treasury regulations are adopted that provide otherwise) or an estate whose
income from sources outside the United States is includible in gross income for
federal income tax purposes regardless of its connection with the conduct of a
trade or business within the United States, or a trust if a court within the
United States is able to exercise primary supervision of the administration of
the trust and one or more U.S. Persons have the authority to control all
substantial decisions of the trust. In addition, certain trusts that would not
qualify as U.S. Persons under the foregoing definition but that are eligible to
and make an election to be treated as U.S. Persons will also be treated as U.S.
Persons.
Information Reporting and Backup Withholding
The Master Servicer will furnish or make available, within a reasonable
time after the end of each calendar year, to each Certificateholder at any time
during such year, such information as may be deemed necessary or desirable to
assist Certificateholders in preparing their federal income tax returns, or to
enable holders to make such information available to owners or other financial
intermediaries of holders that hold such Certificates as nominees. If a holder,
owner or other recipient of a payment on behalf of an owner fails to supply a
certified taxpayer identification number or if the Secretary of the Treasury
determines that such person has not reported all interest and dividend income
required to be shown on its federal income tax return, 31% backup withholding
may be required
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with respect to any payments. Any amounts deducted and withheld from a
distribution to a recipient would be allowed as a credit against such
recipient's federal income tax liability.
New Withholding Regulations
On October 6, 1997, the Treasury Department issued new regulations (the
"New Regulations") which make certain modifications to the backup withholding
and information reporting rules described above. The New Regulations attempt to
unify certification requirements and modify reliance standards. The New
Regulations will generally be effective for payments made after December 31,
1999, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
REMIC CERTIFICATES
The Trust Fund relating to a Series of Certificates may elect to be
treated as a REMIC. Qualification as a REMIC requires ongoing compliance with
certain conditions. Although a REMIC is not generally subject to federal income
tax (see, however, "--Prohibited Transactions and Other Taxes") below, if a
Trust Fund with respect to which a REMIC election is made fails to comply with
one or more of the ongoing requirements of the Code for REMIC status during any
taxable year (including the implementation of restrictions on the purchase and
transfer of the residual interest in a REMIC as described under "--Residual
Certificates" below), the Code provides that a Trust Fund will not be treated as
a REMIC for such year and thereafter. In that event, such entity may be taxable
as a separate corporation, and the related REMIC Certificates may not be
accorded the status or given the tax treatment described below. While the Code
authorizes the Treasury to issue regulations providing relief in the event of an
inadvertent termination of status as a REMIC, no such regulations have been
issued. Moreover, any such relief may be accompanied by sanctions such as the
imposition of a corporate tax on all or a portion of the REMIC's income for the
period in which the requirements for such status are not satisfied. With respect
to each such Trust Fund that elects REMIC status, Brown & Wood LLP will deliver
its opinion generally to the effect that, under then existing law and assuming
compliance with all provisions of the related Agreement, such Trust Fund will
qualify as a REMIC and the related Certificates will be considered to be regular
interests ("Regular Certificates") or residual interests ("Residual
Certificates") in the REMIC. The related Prospectus Supplement for each Series
of Certificates will indicate whether the Trust Fund will make a REMIC election
and whether a class of Certificates will be treated as a regular or residual
interest in the REMIC.
In general, with respect to each Series of Certificates for which a REMIC
election is made, (i) Certificates held by a thrift institution taxed as a
"domestic building and loan association" will constitute assets described in
section 7701(a)(19)(C) of the Code; (ii) Certificates held by a real estate
investment trust will constitute "real estate assets" within the meaning of
section 856(c)(4)(A) of the Code; and (iii) interest on Certificates held by a
real estate investment trust will be considered "interest on obligations secured
by mortgages on real property" within the meaning of section 856(c)(3)(B) of the
Code. If less than 95% of the REMIC's assets are assets qualifying under any of
the foregoing sections, the Certificates will be qualifying assets only to the
extent that the REMIC's assets are qualifying assets. In addition, payments on
Mortgage Loans held pending distribution on the REMIC Certificates will be
considered to be qualifying assets under the foregoing sections.
In some instances, the Mortgage Loans may not be treated entirely as
assets described in the foregoing sections. See, in this regard, the discussion
of "buydown" Mortgage Loans contained in "--NON-REMIC CERTIFICATES--Single Class
of Senior Certificates" above. REMIC Certificates held by a real estate
investment trust will not constitute "Government Securities" within the meaning
of section 856(c)(5)(A) of the Code and REMIC Certificates held by a regulated
investment company will not constitute "Government Securities" within the
meaning of section 851(b)(4)(A)(ii) of the Code. REMIC Certificates held by
certain financial institutions will constitute "evidences of indebtedness"
within the meaning of section 582(c)(1) of the Code.
A "qualified mortgage" for REMIC purposes is any obligation (including
certificates of participation in such an obligation) that is principally secured
by an interest in real property and that is transferred to the REMIC within a
prescribed time period in exchange for regular or residual interests in the
REMIC. The REMIC Regulations provide that manufactured housing or mobile homes
(not including recreational vehicles, campers or similar vehicles) which are
"single family residences" under section 25(e)(10) of the Code will qualify as
real property without regard to state law classifications. Under section
25(e)(10), a single family residence includes any
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manufactured home which has a minimum of 400 square feet of living space and a
minimum width in excess of 102 inches and which is of a kind customarily used at
a fixed location.
Tiered REMIC Structures
For certain Series of Certificates, two separate elections may be made to
treat designated portions of the related Trust Fund as REMICs (respectively, the
"Subsidiary REMIC" and the "Master REMIC") for federal income tax purposes. Upon
the issuance of any such Series of Certificates, Brown & Wood LLP, counsel to
the Depositor, will deliver its opinion generally to the effect that, assuming
compliance with all provisions of the related Agreement, the Master REMIC as
well as any Subsidiary REMIC will each qualify as a REMIC and the REMIC
Certificates issued by the Master REMIC and the Subsidiary REMIC, respectively,
will be considered to evidence ownership of Regular Certificates or Residual
Certificates in the related REMIC within the meaning of the REMIC provisions.
Only REMIC Certificates issued by the Master REMIC will be offered
hereunder. The Subsidiary REMIC and the Master REMIC will be treated as one
REMIC solely for purposes of determining (a) whether the REMIC Certificates will
be (i) "real estate assets" within the meaning of section 856(c)(4)(A) of the
Code or (ii) "loans secured by an interest in real property" under section
7701(a)(19)(C) of the Code; and (b) whether the income on such Certificates is
interest described in section 856(c)(3)(B) of the Code.
Regular Certificates
General. Except as otherwise stated in this discussion, Regular
Certificates will be treated for federal income tax purposes as debt instruments
issued by the REMIC and not as ownership interests in the REMIC or its assets.
Moreover, holders of Regular Certificates that otherwise report income under a
cash method of accounting will be required to report income with respect to
Regular Certificates under an accrual method.
Original Issue Discount and Premium. The Regular Certificates may be
issued with "original issue discount" within the meaning of section 1273(a) of
the Code. Generally, such original issue discount, if any, will equal the
difference between the "stated redemption price at maturity" of a Regular
Certificate and its "issue price". Holders of any class of Certificates issued
with original issue discount will be required to include such original issue
discount in gross income for federal income tax purposes as it accrues, in
accordance with a constant interest method based on the compounding of interest,
in advance of receipt of the cash attributable to such income. The following
discussion is based in part on the OID Regulations and in part on the provisions
of the 1986 Act. Holders of Regular Certificates (the "Regular
Certificateholders") should be aware, however, that the OID Regulations do not
adequately address certain issues relevant to prepayable securities such as the
Regular Certificates.
Rules governing original issue discount are set forth in sections 1271
through 1273 and section 1275 of the Code. These rules require that the amount
and rate of accrual of original issue discount be calculated based on a
Prepayment Assumption and prescribe a method for adjusting the amount and rate
of accrual of such discount where the actual prepayment rate differs from the
Prepayment Assumption. Under the Code, the Prepayment Assumption must be
determined in the manner prescribed by regulations which have not yet been
issued. The Legislative History provides, however, that Congress intended the
regulations to require that the Prepayment Assumption be the prepayment
assumption that is used in determining the initial offering price of such
Regular Certificates. The Prospectus Supplement for each Series of Regular
Certificates will specify the Prepayment Assumption to be used for the purpose
of determining the amount and rate of accrual of original issue discount. No
representation is made that the Regular Certificates will prepay at the
Prepayment Assumption or at any other rate.
In general, each Regular Certificate will be treated as a single
installment obligation issued with an amount of original issue discount equal to
the excess of its "stated redemption price at maturity" over its "issue price".
The issue price of a Regular Certificate is the first price at which a
substantial amount of Regular Certificates of that class are sold to the public
(excluding bond houses, brokers, underwriters or wholesalers). If less than a
substantial amount of a particular class of Regular Certificates is sold for
cash on or prior to the date of their initial issuance (the "Closing Date"), the
issue price for such class will be treated as the fair market value of such
class on the Closing Date. The issue price of a Regular Certificate also
includes the amount paid by an initial Regular Certificateholder for accrued
interest that relates to a period prior to the issue date of the Regular
Certificate. The
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stated redemption price at maturity of a Regular Certificate includes the
original principal amount of the Regular Certificate, but generally will not
include distributions of interest if such distributions constitute "qualified
stated interest". Qualified stated interest generally means interest payable at
a single fixed rate or qualified variable rate (as described below) provided
that such interest payments are unconditionally payable at intervals of one year
or less during the entire term of the Regular Certificate. Interest is payable
at a single fixed rate only if the rate appropriately takes into account the
length of the interval between payments. Distributions of interest on Regular
Certificates with respect to which deferred interest will accrue will not
constitute qualified stated interest payments, in which case the stated
redemption price at maturity of such Regular Certificates includes all
distributions of interest as well as principal thereon.
Where the interval between the issue date and the first Distribution Date
on a Regular Certificate is longer than the interval between subsequent
Distribution Dates, the greater of any original issue discount (disregarding the
rate in the first period) and any interest foregone during the first period is
treated as the amount by which the stated redemption price at maturity of the
Certificate exceeds its issue price for purposes of the de minimis rule
described below. The OID Regulations suggest that all interest on a long first
period Regular Certificate that is issued with non-de minimis original issue
discount, as determined under the foregoing rule, will be treated as original
issue discount. Where the interval between the issue date and the first
Distribution Date on a Regular Certificate is shorter than the interval between
subsequent Distribution Dates, interest due on the first Distribution Date in
excess of the amount that accrued during the first period would be added to the
Certificates stated redemption price at maturity. Regular Certificateholders
should consult their own tax advisors to determine the issue price and stated
redemption price at maturity of a Regular Certificate.
Under the de minimis rule, original issue discount on a Regular
Certificate will be considered to be zero if such original issue discount is
less than 0.25% of the stated redemption price at maturity of the Regular
Certificate multiplied by the weighted average maturity of the Regular
Certificate. For this purpose, the weighted average maturity of the Regular
Certificate is computed as the sum of the amounts determined by multiplying the
number of full years (i.e., rounding down partial years) from the issue date
until each distribution in reduction of stated redemption price at maturity is
scheduled to be made by a fraction, the numerator of which is the amount of each
distribution included in the stated redemption price at maturity of the Regular
Certificate and the denominator of which is the stated redemption price at
maturity of the Regular Certificate. Although currently unclear, it appears that
the schedule of such distributions should be determined in accordance with the
Prepayment Assumption relating to the Regular Certificates. The Prepayment
Assumption with respect to a Series of Regular Certificates will be set forth in
the related Prospectus Supplement. Holders generally must report de minimis
original issue discount pro rata as principal payments are received and such
income will be capital gain if the Regular Certificate is held as a capital
asset. However, accrual method holders may elect to accrue all de minimis
original issue discount as well as market discount under a constant interest
method.
The Prospectus Supplement with respect to a Trust Fund may provide for
certain Regular Certificates to be issued at prices significantly exceeding
their principal amounts or based on notional principal balances (the
"Super-Premium Certificates"). The income tax treatment of such Regular
Certificates is not entirely certain. For information reporting purposes, the
Trust Fund intends to take the position that the stated redemption price at
maturity of such Regular Certificates is the sum of all payments to be made on
such Regular Certificates determined under the Prepayment Assumption, with the
result that such Regular Certificates would be issued with original issue
discount. The calculation of income in this manner could result in negative
original issue discount (which delays future accruals of original issue discount
rather than being immediately deductible) when prepayments on the Mortgage Loans
exceed those estimated under the Prepayment Assumption. The IRS might contend,
however, that the Contingent Payment Regulations should apply to such
Certificates.
Although the Contingent Payment Regulations are not applicable to
instruments governed by section 1272(a)(6) of the Code, they represent the only
guidance regarding the current view of the IRS with respect to contingent
payment instruments. In the alternative, the IRS could assert that the stated
redemption price at maturity of such Regular Certificates should be limited to
their principal amount (subject to the discussion under "--Accrued Interest
Certificates" below), so that such Regular Certificates would be considered for
U.S. federal income tax purposes to be issued at a premium. If such position
were to prevail, the rules described under "--Premium" below would apply. It is
unclear when a loss may be claimed for any unrecovered basis for a Super-Premium
Certificate. It is possible that a holder of a Super-Premium Certificate may
only claim a loss when its remaining basis exceeds
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the maximum amount of future payments, assuming no further prepayments, or when
the final payment is received with respect to such Super-Premium Certificate.
Under the REMIC Regulations, if the issue price of a Regular Certificate
(other than Regular Certificate based on a notional amount) does not exceed 125%
of its actual principal amount, the interest rate is not considered
disproportionately high. Accordingly, such Regular Certificate generally should
not be treated as a Super-Premium Certificate and the rules described below
under "--Premium" below should apply. However, it is possible that holders of
Regular Certificates issued at a premium, even if the premium is less than 25%
of such Certificate's actual principal balance, will be required to amortize the
premium under an original issue discount method or contingent interest method
even though no election under section 171 of the Code is made to amortize such
premium.
Generally, a Regular Certificateholder must include in gross income the
"daily portions," as determined below, of the original issue discount that
accrues on a Regular Certificate for each day the Regular Certificateholder
holds the Regular Certificate, including the purchase date but excluding the
disposition date. In the case of an original holder of a Regular Certificate, a
calculation will be made of the portion of the original issue discount that
accrues during each successive period ("an accrual period") that ends on the day
in the calendar year corresponding to a Distribution Date (or if Distribution
Dates are on the first day or first business day of the immediately preceding
month, interest may be treated as payable on the last day of the immediately
preceding month) and begins on the day after the end of the immediately
preceding accrual period (or on the issue date in the case of the first accrual
period). This will be done, in the case of each full accrual period, by (i)
adding (a) the present value at the end of the accrual period (determined by
using as a discount factor the original yield to maturity of the Regular
Certificates as calculated under the Prepayment Assumption) of all remaining
payments to be received on the Regular Certificate under the Prepayment
Assumption, and (b) any payments included in the stated redemption price at
maturity received during such accrual period, and (ii) subtracting from that
total the "adjusted issue price" of the Regular Certificates at the beginning of
such accrual period. The "adjusted issue price" of a Regular Certificate at the
beginning of the first accrual period is its issue price; the "adjusted issue
price" of a Regular Certificate at the beginning of a subsequent accrual period
is the "adjusted issue price" at the beginning of the immediately preceding
accrual period plus the amount of original issue discount allocable to that
accrual period and reduced by the accrual period. The original issue discount
accrued during an accrual period will then be divided by the number of days in
the period to determine the daily portion of original issue discount for each
day in the accrual period. The calculation of original issue discount under the
method described above will cause the accrual of original issue discount to
either increase or decrease (but never below zero) in a given accrual period to
reflect the fact that prepayments are occurring faster or slower than under the
Prepayment Assumption. With respect to an initial accrual period shorter than a
full accrual period, the daily portions of original issue discount may be
determined according to an appropriate allocation under any reasonable method.
A subsequent purchaser of a Regular Certificate issued with original issue
discount who purchases the Regular Certificate at a cost less than the remaining
stated redemption price at maturity will also be required to include in gross
income the sum of the daily portions of original issue discount on that Regular
Certificate. In computing the daily portions of original issue discount for such
a purchaser (as well as an initial purchaser that purchases at a price higher
than the adjusted issue price but less than the stated redemption price at
maturity), however, the daily portion is reduced by the amount that would be the
daily portion for such day (computed in accordance with the rules set forth
above) multiplied by a fraction, the numerator of which is the amount, if any,
by which the price paid by such holder for that Regular Certificate exceeds the
following amount: (a) the sum of the issue price plus the aggregate amount of
original issue discount that would have been includible in the gross income of
an original Regular Certificateholder (who purchased the Regular Certificate at
its issue price), less (b) any prior payments included in the stated redemption
price at maturity, and the denominator of which is the sum of the daily portions
for that Regular Certificate for all days beginning on the date after the
purchase date and ending on the maturity date computed under the Prepayment
Assumption. A holder who pays an acquisition premium instead may elect to accrue
original issue discount by treating the purchase as original issue.
Variable Rate Regular Certificate. Regular Certificates may provide for
interest based on a variable rate. Interest based on a variable rate will
constitute qualified stated interest and not contingent interest if, generally,
(i) such interest is unconditionally payable at least annually, (ii) the issue
price of the debt instrument does not exceed the total noncontingent principal
payments and (iii) interest is based on a "qualified floating rate", an
"objective
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rate", a combination of a single fixed rate and one or more "qualified floating
rates", one "qualified inverse floating rate", or a combination of "qualified
floating rates" that do not operate in a manner that significantly accelerates
or defers interest payments on such Regular Certificate.
The amount of original issue discount with respect to a Regular
Certificate bearing a variable rate of interest will accrue in the manner
described under "--Original Issue Discount and Premium" above by assuming
generally that the index used for the variable rate will remain fixed throughout
the term of the Certificate. Appropriate adjustments are made for the actual
variable rate.
Although unclear at present, the Depositor intends to treat interest on a
Regular Certificate that is a weighted average of the net interest rates on
Mortgage Loans as qualified stated interest. In such case, the weighted average
rate used to compute the initial pass-through rate on the Regular Certificates
will be deemed to be the index in effect through the life of the Regular
Certificates. It is possible, however, that the IRS may treat some or all of the
interest on Regular Certificates with a weighted average rate as taxable under
the rules relating to obligations providing for contingent payments. Such
treatment may effect the timing of income accruals on such Regular Certificates.
Market Discount. A purchaser of a Regular Certificate may be subject to
the market discount provisions of sections 1276 through 1278 of the Code. Under
these provisions and the OID Regulations, "market discount" equals the excess,
if any, of (i) the Regular Certificate's stated principal amount or, in the case
of a Regular Certificate with original issue discount, the adjusted issue price
(determined for this purpose as if the purchaser had purchased such Regular
Certificate from an original holder) over (ii) the price for such Regular
Certificate paid by the purchaser. A Certificateholder that purchases a Regular
Certificate at a market discount will recognize income upon receipt of each
distribution representing stated redemption price. In particular, under section
1276 of the Code such a holder generally will be required to allocate each such
principal distribution first to accrued market discount not previously included
in income and to recognize ordinary income to that extent. A Certificateholder
may elect to include market discount in income currently as it accrues rather
than including it on a deferred basis in accordance with the foregoing. If made,
such election will apply to all market discount bonds acquired by such
Certificateholder on or after the first day of the first taxable year to which
such election applies. In addition, the OID Regulations permit a
Certificateholder using the accrual method of accounting to elect to accrue all
interest, discount (including de minimis market or original issue discount) and
premium in income as interest, based on a constant yield method. If such an
election is made with respect to a Regular Certificate with market discount, the
Certificateholder will be deemed to have made an election to include in income
currently market discount with respect to all other debt instruments having
market discount that such Certificateholder acquires during the year of the
election or thereafter. Similarly, a Certificateholder that makes this election
for a Certificate that is acquired at a premium will be deemed to have made an
election to amortize bond premium with respect to all debt instruments having
amortizable bond premium that such Certificateholder owns or acquires. See
"--Original Issues Discount and Premium" above. The election to accrue interest,
discount and premium on a constant yield method with respect to a Certificate is
irrevocable.
Market discount with respect to a Regular Certificate will be considered
to be zero if the amount allocable to the Regular Certificate is less than 0.25%
of the Regular Certificate's stated redemption price at maturity multiplied by
the Regular Certificate's weighted average maturity remaining after the date of
purchase. If market discount on a Regular Certificate is considered to be zero
under this rule, the actual amount of market discount must be allocated to the
remaining principal payments on the Regular Certificate and gain equal to such
allocated amount will be recognized when the corresponding principal payment is
made. Treasury regulations implementing the market discount rules have not yet
been issued; therefore, investors should consult their own tax advisors
regarding the application of these rules and the advisability of making any of
the elections allowed under Code sections 1276 through 1278 of the Code.
The Code provides that any principal payment (whether a scheduled payment
or a prepayment) or any gain on disposition of a market discount bond acquired
by the taxpayer after October 22, 1986, shall be treated as ordinary income to
the extent that it does not exceed the accrued market discount at the time of
such payment. The amount of accrued market discount for purposes of determining
the tax treatment of subsequent principal payments or dispositions of the market
discount bond is to be reduced by the amount so treated as ordinary income.
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The Code also grants authority to the Treasury to issue regulations
providing for the computation of accrued market discount on debt instruments,
the principal of which is payable in more than one installment. Until such time
as regulations are issued by the Treasury, rules described in the Legislative
History will apply. Under those rules, the holder of a market discount bond may
elect to accrue market discount either on the basis of a constant interest rate
or according to one of the following methods. For Regular Certificates issued
with original issue discount, the amount of market discount that accrues during
a period is equal to the product of (i) the total remaining market discount,
multiplied by (ii) a fraction, the numerator of which is the original issue
discount accruing during the period and the denominator of which is the total
remaining original issue discount at the beginning of the period. For Regular
Certificates issued without original issue discount, the amount of market
discount that accrues during a period is equal to the product of (a) the total
remaining market discount and (b) a fraction, the numerator of which is the
amount of stated interest paid during the accrual period and the denominator of
which is the total amount of stated interest remaining to be paid at the
beginning of the period. For purposes of calculating market discount under any
of the above methods in the case of instruments (such as the Regular
Certificates) which provide for payments which may be accelerated by reason of
prepayments of other obligations securing such instruments, the same Prepayment
Assumption applicable to calculating the accrual of original issue discount will
apply.
A holder of a Regular Certificate that acquires such Regular Certificate
at a market discount also may be required to defer, until the maturity date of
such Regular Certificate or its earlier disposition in a taxable transaction,
the deduction of a portion of the amount of interest that the holder paid or
accrued during the taxable year on indebtedness incurred or maintained to
purchase or carry the Regular Certificate in excess of the aggregate amount of
interest (including original issue discount) includible in such holder's gross
income for the taxable year with respect to such Regular Certificate. The amount
of such net interest expense deferred in a taxable year may not exceed the
amount of market discount accrued on the Regular Certificate for the days during
the taxable year on which the holder held the Regular Certificate and, in
general, would be deductible when such market discount is includible in income.
The amount of any remaining deferred deduction is to be taken into account in
the taxable year in which the Regular Certificate matures or is disposed of in a
taxable transaction. In the case of a disposition in which gain or loss is not
recognized in whole or in part, any remaining deferred deduction will be allowed
to the extent of gain recognized on the disposition. This deferral rule does not
apply if the Regular Certificateholder elects to include such market discount in
income currently as it accrues on all market discount obligations acquired by
such Regular Certificateholder in that taxable year or thereafter.
Premium. A purchaser of a Regular Certificate that purchases the Regular
Certificate at a cost (not including accrued qualified stated interest) greater
than its remaining stated redemption price at maturity will be considered to
have purchased the Regular Certificate at a premium and may elect to amortize
such premium under a constant yield method. A Certificateholder that makes this
election for a Certificate that is acquired at a premium will be deemed to have
made an election to amortize bond premium with respect to all debt instruments
having amortizable bond premium that such Certificateholder acquires during the
year of the election or thereafter. It is not clear whether the Prepayment
Assumption would be taken into account in determining the life of the Regular
Certificate for this purpose. However, the Legislative History states that the
same rules that apply to accrual of market discount (which rules require use of
a Prepayment Assumption in accruing market discount with respect to Regular
Certificates without regard to whether such Certificates have original issue
discount) will also apply in amortizing bond premium under section 171 of the
Code. The Code provides that amortizable bond premium will be allocated among
the interest payments on such Regular Certificates and will be applied as an
offset against such interest payment.
On June 27, 1996, the IRS published in the Federal Register proposed
regulations on the amortization of bond premium. The foregoing discussion is
based in part on such proposed regulations. On December 30, 1997, the IRS issued
the Amortizable Bond Premium Regulations which generally are effective for bonds
acquired on or after March 2, 1998 or, for holders making an election to
amortize bond premium as described above, the taxable year that includes March
2, 1998 or any subsequent taxable year, will apply to bonds held on or after the
first day of taxable year in which such election is made. Neither the proposed
regulations nor the final regulations, by their express terms, apply to
prepayable securities described in section 1272(a)(6) of the Code such as the
Regular Certificates. Holders of Regular Certificates should consult their tax
advisors regarding the possibility of making an election to amortize any such
bond premium.
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Deferred Interest. Certain classes of Regular Certificates will provide
for Deferred Interest. Any Deferred Interest that accrues with respect to a
class of Regular Certificates will constitute income to the holders of such
Certificates prior to the time distributions of cash with respect to such
Deferred Interest are made. It is unclear, under the OID Regulations, whether
any of the interest on such Certificates will constitute qualified stated
interest or whether all or a portion of the interest payable on the Certificates
must be included in the stated redemption price at maturity of the Certificates
and accounted for as original issue discount (which could accelerate such
inclusion). Interest on Regular Certificates must in any event be accounted for
under an accrual method by the holders of such Certificates. Applying the latter
analysis therefore may result only in a slight difference in the timing of the
inclusion in income of interest on such Regular Certificates.
Effects of Defaults and Delinquencies. Certain Series of Certificates may
contain one or more classes of Subordinate Certificates and, in the event there
are defaults or delinquencies on the Mortgage Loans, amounts that would
otherwise be distributed on the Subordinate Certificates may instead be
distributed on the Senior Certificates. Holders of Subordinate Certificates
nevertheless will be required to report income with respect to such Certificates
under an accrual method without giving effect to delays and reductions in
distributions on such Subordinate Certificates attributable to defaults and
delinquencies on the Mortgage Loans, except to the extent that it can be
established that such amounts are uncollectible. As a result, the amount of
income reported by a holder of a Subordinate Certificate in any period could
significantly exceed the amount of cash distributed to such holder in that
period. The holder will eventually be allowed a loss (or will be allowed to
report a lesser amount of income) to the extent that the aggregate amount of
distributions on the Subordinate Certificate is reduced as a result of defaults
and delinquencies on the Mortgage Loans. However, the timing and character of
such losses or reductions in income are uncertain. Accordingly, holders of
Subordinate Certificates should consult their own tax advisors on this point.
Sale, Exchange or Redemption. If a Regular Certificate is sold, exchanged,
redeemed or retired, the seller will recognize gain or loss equal to the
difference between the amount realized on the sale, exchange, redemption, or
retirement and the seller's adjusted basis in the Regular Certificate. Such
adjusted basis generally will equal the cost of the Regular Certificate to the
seller, increased by any original issue discount and market discount included in
the seller's gross income with respect to the Regular Certificate, and reduced
(but not below zero) by payments included in the stated redemption price at
maturity previously received by the seller and by any amortized premium.
Similarly, a holder who receives a payment which is part of the stated
redemption price at maturity of a Regular Certificate will recognize gain equal
to the excess, if any, of the amount of the payment over the holder's adjusted
basis in the Regular Certificate. A holder of a Regular Certificate that
receives a final payment which is less than the holder's adjusted basis in the
Regular Certificate will generally recognize a loss. Except as provided in the
following paragraph and as provided under "--Market Discount" above, any such
gain or loss will be capital gain or loss, provided that the Regular Certificate
is held as a "capital asset" (generally, property held for investment) within
the meaning of section 1221 of the Code.
Non-corporate taxpayers are subject to reduced maximum rates on long-term
capital gains and are generally subject to tax at ordinary income rates on
short-term capital gains. The deductibility of capital losses is subject to
certain limitations. Prospective investors should consult their own tax advisors
concerning these tax law provisions.
Gain from the sale or other disposition of a Regular Certificate that
might otherwise be capital gain will be treated as ordinary income to the extent
that such gain does not exceed the excess, if any, of (i) the amount that would
have been includible in such holder's income with respect to the Regular
Certificate had income accrued thereon at a rate equal to 110% of the AFR as
defined in section 1274(d) of the Code determined as of the date of purchase of
such Regular Certificate, over (ii) the amount actually includible in such
holder's income.
Gain from the sale or other disposition of a Regular Certificate that
might otherwise be capital gain will be treated as ordinary income, (i) if the
Regular Certificate is held as part of a "conversion transaction" as defined in
section 1258(c) of the Code, up to the amount of interest that would have
accrued at the applicable federal rate under section 1274(d) of the Code in
effect at the time the taxpayer entered into the transaction minus any amount
previously treated as ordinary income with respect to any prior disposition of
property that was held as part of such transaction, or (ii) if the Regular
Certificate is held as part of a straddle. Potential investors should consult
their tax advisors with respect to the tax consequences of ownership and
disposition of an investment in Regular Certificates in their particular
circumstances.
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Regular Certificates will be "evidences of indebtedness" within the
meaning of section 582(c)(1) of the Code so that gain or loss recognized from
the sale of a Regular Certificate by a bank or a thrift institution to which
such section applies will be ordinary income or loss.
The Regular Certificate information reports will include a statement of
the adjusted issue price of the Regular Certificate at the beginning of each
accrual period. In addition, the reports will include information necessary to
compute the accrual of any market discount that may arise upon secondary trading
of Regular Certificates. Because exact computation of the accrual of market
discount on a constant yield method would require information relating to the
holder's purchase price which the REMIC may not have, it appears that the
information reports will only require information pertaining to the appropriate
proportionate method of accruing market discount.
Accrued Interest Certificates. Certain of the Regular Certificates
("Payment Lag Certificates") may provide for payments of interest based on a
period that corresponds to the interval between Distribution Dates but that ends
prior to each such Distribution Date. The period between the Closing Date for
Payment Lag Certificates and their first Distribution Date may or may not exceed
such interval. Purchasers of Payment Lag Certificates for which the period
between the Closing Date and the first Distribution Date does not exceed such
interval could pay upon purchase of the Regular Certificates accrued interest in
excess of the accrued interest that would be paid if the interest paid on the
Distribution Date were interest accrued from Distribution Date to Distribution
Date. If a portion of the initial purchase price of a Regular Certificate is
allocable to interest that has accrued prior to the issue date ("pre-issuance
accrued interest"), and the Regular Certificate provides for a payment of stated
interest on the first payment date (and the first payment date, is within one
year of the issue date) that equals or exceeds the amount of the pre-issuance
accrued interest, then the Regular Certificate's issue price may be computed by
subtracting from the issue price the amount of pre-issuance accrued interest,
rather than as an amount payable on the Regular Certificate. However, it is
unclear under this method how the Proposed OID Regulations treat interest on
Payment Lag Certificates as described above. Therefore, in the case of a Payment
Lag Certificate, the REMIC intends to include accrued interest in the issue
price and report interest payments made on the first Distribution Date as
interest only to the extent such payments represent interest for the number of
days that the Certificateholder has held such Payment Lag Certificate during the
first accrual period.
Investors should consult their own tax advisors concerning the treatment
for federal income tax purposes of Payment Lag Certificates.
Non-Interest Expenses of the REMIC. Under temporary Treasury regulations,
if the REMIC is considered to be a "single-class REMIC", a portion of the
REMIC's servicing, administrative and other noninterest expenses will be
allocated as a separate item to those Regular Certificateholders that are
"pass-through interest holders". Generally, a single-class REMIC is defined as
(i) a REMIC that would be treated as a fixed investment trust under Treasury
regulations but for its qualification as a REMIC or (ii) a REMIC that is
substantially similar to an investment trust but is structured with the
principal purpose of avoiding this allocation requirement imposed by the
temporary regulations. Such a pass-through interest holder would be required to
add its allocable share, if any, of such expenses to its gross income and to
treat the same amount as an item of investment expense. An individual generally
would be allowed a deduction for such expenses only as a miscellaneous itemized
deduction subject to the limitations under section 67 of the Code. That section
allows such deductions only to the extent that in the aggregate such expenses
exceed 2% of the holder's adjusted gross income. In addition, section 68 of the
Code provides that the amount of itemized deductions otherwise allowable for an
individual whose adjusted gross income exceeds a certain amount (the "Applicable
Amount") will be reduced by the lesser of (i) 3% of the excess of the
individual's adjusted gross income over the Applicable Amount or (ii) 80% of the
amount of itemized deductions otherwise allowable for the taxable year. The
amount of additional taxable income recognized by Residual Certificateholders
who are subject to the limitations of either section 67 or section 68 may be
substantial. The REMIC is required to report to each pass-through interest
holder and to the IRS such holder's allocable share, if any, of the REMIC's
non-interest expenses. The term "pass-through interest holder" generally refers
to individuals, entities taxed as individuals and certain pass-through entities
including regulated investment companies, but does not include real estate
investment trusts. Certificateholders that are "pass-through interest holders"
should consult their own tax advisors about the impact of these rules on an
investment in the Regular Certificates.
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Treatment of Realized Losses. Although not entirely clear, it appears that
holders of REMIC Regular Certificates that are corporations should in general be
allowed to deduct as an ordinary loss any loss sustained during the taxable year
on account of any such Certificates becoming wholly or partially worthless and
that, in general, holders of Certificates that are not corporations should be
allowed to deduct as a short-term capital loss any loss sustained during the
taxable year on account of any such Certificates becoming wholly worthless.
Although the matter is not entirely clear, non-corporate holders of Certificates
may be allowed a bad debt deduction at such time that the principal balance of
any such Certificate is reduced to reflect realized losses resulting from any
liquidated Mortgage Loans. The IRS, however, could take the position that
non-corporate holders will be allowed a bad debt deduction to reflect realized
losses only after all Mortgage Loans remaining in the related Trust Fund have
been liquidated or the Certificates of the related Series have been otherwise
retired. Prospective investors in and holders of the Certificates are urged to
consult their own tax advisors regarding the appropriate timing, amount and
character of any loss sustained with respect to such Certificates, including any
loss resulting from the failure to recover previously accrued interest or
discount income. Special loss rules are applicable to banks and thrift
institutions, including rules regarding reserves for bad debts. Such taxpayers
are advised to consult their tax advisors regarding the treatment of losses on
Certificates.
Non-U.S. Persons. Generally, payments of interest (including any payment
with respect to accrued original issue discount) on the Regular Certificates to
a Regular Certificateholder who is a non-U.S. Person not engaged in a trade or
business within the United States will not be subject to federal withholding tax
if (i) such Regular Certificateholder does not actually or constructively own
10% or more of the combined voting power of all classes of equity in the issuer
(which for purposes of this discussion may be defined as the Trust Fund or the
beneficial owners of the related Residual Certificates (the "issuer")); (ii)
such Regular Certificateholder is not a controlled foreign corporation (within
the meaning of section 957 of the Code) related to the issuer; and (iii) such
Regular Certificateholder complies with certain identification requirements
(including delivery of a statement, signed by the Regular Certificateholder
under penalties of perjury, certifying that such Regular Certificateholder is a
foreign person and providing the name and address of such Regular
Certificateholder). If a Regular Certificateholder is not exempt from
withholding, distributions of interest, including distributions in respect of
accrued original issue discount, such holder may be subject to a 30% withholding
tax, subject to reduction under any applicable tax treaty.
Further, it appears that a REMIC Regular Certificate would not be included
in the estate of a nonresident alien individual and would not be subject to
United States estate taxes. However, Certificateholders who are non-resident
alien individuals should consult their tax advisors concerning this question.
Regular Certificateholders who are non-U.S. Persons and persons related to
such holders should not acquire any Residual Certificates, and Residual
Certificateholders and persons related to Residual Certificateholders should not
acquire any Regular Certificates without consulting their tax advisors as to the
possible adverse tax consequences of doing so.
Information Reporting and Backup Withholding. The Master Servicer will
furnish or make available, within a reasonable time after the end of each
calendar year, to each Regular Certificateholder at any time during such year,
such information as may be deemed necessary or desirable to assist Regular
Certificateholders in preparing their federal income tax returns or to enable
holders to make such information available to owners or other financial
intermediaries of holders that hold such Regular Certificates. If a holder,
owner or other recipient of a payment on behalf of an owner fails to supply a
certified taxpayer identification number or if the Secretary of the Treasury
determines that such person has not reported all interest and dividend income
required to be shown on its federal income tax return, 31 % backup withholding
may be required with respect to any payments. Any amounts deducted and withheld
from a distribution to a recipient would be allowed as a credit against such
recipient's federal income tax liability.
New Withholding Regulations. On October 6, 1997, the Treasury Department
issued the New Regulations which make certain modifications to the backup
withholding and information reporting rules described above. The New Regulations
attempt to unify certification requirements and modify reliance standards. The
New Regulations will generally be effective for payments made after December 31,
1999, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
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Residual Certificates
Allocation of the Income of the REMIC to the Residual Certificates. The
REMIC will not be subject to federal income tax except with respect to income
from prohibited transactions and certain other transactions. See "--Prohibited
Transactions and Other Taxes" below. Instead, each original holder of a Residual
Certificate will report on its federal income tax return, as ordinary income,
its share of the taxable income of the REMIC for each day during the taxable
year on which such holder owns any Residual Certificates. The taxable income of
the REMIC for each day will be determined by allocating the taxable income of
the REMIC for each calendar quarter ratably to each day in the quarter. Such
holder's share of the taxable income of the REMIC for each day will be based on
the portion of the outstanding Residual Certificates that such holder owns on
that day. The taxable income of the REMIC will be determined under an accrual
method and will be taxable to the Residual Certificateholders without regard to
the timing or amounts of cash distributions by the REMIC. Ordinary income
derived from Residual Certificates will be "portfolio income" for purposes of
the taxation of taxpayers subject to the limitations on the deductibility of
"passive losses". As residual interests, the Residual Certificates will be
subject to tax rules, described below, that differ from those that would apply
if the Residual Certificates were treated for federal income tax purposes as
direct ownership interests in the Certificates or as debt instruments issued by
the REMIC.
A Residual Certificateholder may be required to include taxable income
from the Residual Certificate in excess of the cash distributed. For example, a
structure where principal distributions are made serially on regular interests
(i.e., a fast-pay, slow-pay structure) may generate such a mismatching of income
and cash distributions (i.e., "phantom income"). This mismatching may be caused
by the use of certain required tax accounting methods by the REMIC, variations
in the prepayment rate of the underlying Mortgage Loans and certain other
factors. Depending upon the structure of a particular transaction, the
aforementioned factors may significantly reduce the after-tax yield of a
Residual Certificate to a Residual Certificateholder. Investors should consult
their own tax advisors concerning the federal income tax treatment of a Residual
Certificate and the impact of such tax treatment on the after-tax yield of a
Residual Certificate.
A subsequent Residual Certificateholder also will report on its federal
income tax return amounts representing a daily share of the taxable income of
the REMIC for each day that such Residual Certificateholder owns such Residual
Certificate. Those daily amounts generally would equal the amounts that would
have been reported for the same days by an original Residual Certificateholder,
as described above. The Legislative History indicates that certain adjustments
may be appropriate to reduce (or increase) the income of a subsequent holder of
a Residual Certificate that purchased such Residual Certificate at a price
greater than (or less than) the adjusted basis such Residual Certificate would
have in the hands of an original Residual Certificateholder. See "--Sale or
Exchange of Residual Certificates" below. It is not clear, however, whether such
adjustments will in fact be permitted or required and, if so, how they would be
made. The REMIC Regulations do not provide for any such adjustments.
Taxable Income of the REMIC Attributable to Residual Interests. The
taxable income of the REMIC will reflect a netting of (i) the income from the
Mortgage Loans and the REMIC's other assets and (ii) the deductions allowed to
the REMIC for interest and original issue discount on the Regular Certificates
and, except as described under "--Non-Interest Expenses of the REMIC" below,
other expenses.
For purposes of determining its taxable income, the REMIC will have an
initial aggregate tax basis in its assets equal to the sum of the issue prices
of the Regular and Residual Certificates (or, if a class of Certificates is not
sold initially, their fair market values). Such aggregate basis will be
allocated among the Mortgage Loans and other assets of the REMIC in proportion
to their respective fair market values. A Mortgage Loan will be deemed to have
been acquired with discount or premium to the extent that the REMIC's basis
therein is less or greater, respectively than its principal balance. Any such
discount (whether market discount or original issue discount) will be includible
in the income of the REMIC as it accrues, in advance of receipt of the cash
attributable to such income, under a method similar to the method described
above for accruing original issue discount on the Regular Certificates. The
REMIC expects to elect under section 171 of the Code to amortize any premium on
the Mortgage Loans. Premium on any Mortgage Loan to which such election applies
would be amortized under a constant yield method. It is likely that the yield of
a Mortgage Loan would be calculated for this purpose taking account of the
Prepayment Assumption. However, such an election would not apply to any Mortgage
Loan originated on or before September
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27, 1985. Instead, premium on such a Mortgage Loan would be allocated among the
principal payments thereon and would be deductible by the REMIC as those
payments become due.
The REMIC will be allowed a deduction for interest and original issue
discount on the Regular Certificates. The amount and method of accrual of
original issue discount will be calculated for this purpose in the same manner
as described above with respect to Regular Certificates except that the 0.25%
per annum de minimis rule and adjustments for subsequent holders described
therein will not apply.
A Residual Certificateholder will not be permitted to amortize the cost of
the Residual Certificate as an offset to its share of the REMIC's taxable
income. However, such taxable income will not include cash received by the REMIC
that represents a recovery of the REMIC's basis in its assets, and, as described
above, the issue price of the Residual Certificates will be added to the issue
price of the Regular Certificates in determining the REMIC's initial basis in
its assets. See "--Sale or Exchange of Residual Certificates" below. For a
discussion of possible adjustments to income of a subsequent holder of a
Residual Certificate to reflect any difference between the actual cost of such
Residual Certificate to such holder and the adjusted basis such Residual
Certificate would have in the hands of an original Residual Certificateholder,
see "--Allocation of the Income of the REMIC to the Residual Certificates"
above.
Additional Taxable Income of Residual Interests. Any payment received by a
holder of a Residual Certificate in connection with the acquisition of such
Residual Certificate will be taken into account in determining the income of
such holder for federal income tax purposes. Although it appears likely that any
such payment would be includible in income immediately upon its receipt or
accrual as ordinary income, the IRS might assert that such payment should be
included in income over time according to an amortization schedule or according
to some other method. Because of the uncertainty concerning the treatment of
such payments, holders of Residual Certificates should consult their tax
advisors concerning the treatment of such payments for income tax purposes.
Net Losses of the REMIC. The REMIC will have a net loss for any calendar
quarter in which its deductions exceed its gross income. Such net loss would be
allocated among the Residual Certificateholders in the same manner as the
REMIC's taxable income. The net loss allocable to any Residual Certificate will
not be deductible by the holder to the extent that such net loss exceeds such
holder's adjusted basis in such Residual Certificate. Any net loss that is not
currently deductible by reason of this limitation may only be used by such
Residual Certificateholder to offset its share of the REMIC's taxable income in
future periods (but not otherwise). The ability of Residual Certificateholders
that are individuals or closely held corporations to deduct net losses may be
subject to additional limitations under the Code.
Mark-to-Market Regulations. Prospective purchasers of a Residual
Certificate should be aware that the IRS finalized regulations (the
"Mark-to-Market Regulations") which provide that a Residual Certificate acquired
after January 3, 1995 cannot be marked to market. The Mark-to-Market Regulations
replaced the temporary regulations which allowed a Residual Certificate to be
marked to market provided that it was not a "negative value" residual interest.
Non-Interest Expenses of the REMIC. The REMIC's taxable income will be
determined in the same manner as if the REMIC were an individual. However, all
or a portion of the REMIC's servicing, administrative and other non-interest
expenses will be allocated as a separate item to Residual Certificateholders
that are "pass-through interest holders". Such a holder would be required to add
an amount equal to its allocable share, if any, of such expenses to its gross
income and to treat the same amount as an item of investment expense.
Individuals are generally allowed a deduction for such an investment expense
only as a miscellaneous itemized deduction subject to the limitations under
section 67 of the Code which allows such deduction only to the extent that, in
the aggregate, all such expenses exceed 2% of an individual's adjusted gross
income. In addition, the personal exemptions and itemized deductions of
individuals with adjusted gross incomes above particular levels are subject to
certain limitations which reduce or eliminate the benefit of such items. The
REMIC is required to report to each pass-through interest holder and to the IRS
such holder's allocable share, if any, of the REMIC's non-interest expenses. The
term "pass-through interest holder" generally refers to individuals, entities
taxed as individuals and certain pass-through entities, but does not include
real estate investment trusts. Residual Certificateholders that are
"pass-through interest holders" should consult their own tax advisors about the
impact of these rules on an investment in the Residual Certificates. See
"--Regular Certificates--Non-Interest Expenses of the REMIC" above.
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Excess Inclusions. A portion of the income on a Residual Certificate
(referred to in the Code as an "excess inclusion") for any calendar quarter
will, with an exception discussed below for certain thrift institutions, be
subject to federal income tax in all events. Thus, for example, an excess
inclusion (i) may not, except as described below, be offset by any unrelated
losses, deductions or loss carryovers of a Residual Certificateholder; (ii) will
be treated as "unrelated business taxable income" within the meaning of section
512 of the Code if the Residual Certificateholder is a pension fund or any other
organization that is subject to tax only on its unrelated business taxable
income (see "Tax-Exempt Investors" below); and (iii) is not eligible for any
reduction in the rate of withholding tax in the case of a Residual
Certificateholder that is a foreign investor. See "--Non-U.S. Persons" below.
The exception for thrift institutions is available only to the institution
holding the Residual Certificate and not to any affiliate of the institution,
unless the affiliate is a subsidiary all the stock of which, and substantially
all the indebtedness of which, is held by the institution, and which is
organized and operated exclusively in connection with the organization and
operation of one or more REMICs.
Except as discussed in the following paragraph, with respect to any
Residual Certificateholder, the excess inclusions for any calendar quarter is
the excess, if any, of (i) the income of such Residual Certificateholder for
that calendar quarter from its Residual Certificate over (ii) the sum of the
"daily accruals" (as defined below) for all days during the calendar quarter on
which the Residual Certificateholder holds such Residual Certificate. For this
purpose, the daily accruals with respect to a Residual Certificate are
determined by allocating to each day in the calendar quarter its ratable portion
of the product of the "adjusted issue price" (as defined below) of the Residual
Certificate at the beginning of the calendar quarter and 120% of the "Federal
long-term rate" in effect at the time the Residual Certificate is issued. For
this purpose, the "adjusted issue price" of a Residual Certificate at the
beginning of any calendar quarter equals the issue price of the Residual
Certificate, increased by the amount of daily accruals for all prior quarters,
and decreased (but not below zero) by the aggregate amount of payments made on
the Residual Certificate before the beginning of such quarter. The "Federal
long-term rate" is an average of current yields on Treasury securities with a
remaining term of greater than nine years, computed and published monthly by the
IRS.
In the case of any Residual Certificates held by a real estate investment
trust, the aggregate excess inclusions with respect to such Residual
Certificates, reduced (but not below zero) by the real estate investment trust
taxable income (within the meaning of section 857(b)(2) of the Code, excluding
any net capital gain), will be allocated among the shareholders of such trust in
proportion to the dividends received by such shareholders from such trust, and
any amount so allocated will be treated as an excess inclusion with respect to a
Residual Certificate as if held directly by such shareholder. Regulated
investment companies, common trust funds and certain cooperatives are subject to
similar rules.
The Small Business Job Protection Act of 1996 has eliminated the special
rule permitting section 593 institutions ("thrift institutions") to use net
operating losses and other allowable deductions to offset their excess inclusion
income from REMIC residual certificates that have "significant value" within the
meaning of the REMIC Regulations, effective for taxable years beginning after
December 31, 1995 except with respect to residual certificates continuously held
by a thrift institution since November 1, 1995.
In addition, the Small Business Job Protection Act of 1996 provides three
rules for determining the effect of excess inclusions on the alternative minimum
taxable income of a Residual Certificateholder. First, the alternative minimum
taxable income for such Residual Certificateholder is determined without regard
to the special rule that taxable income cannot be less than excess inclusion.
Second, the amount of any alternative minimum tax net operating loss deductions
must be computed without regard to any excess inclusions. Third, the Residual
Certificateholder's alternative minimum taxable income for a tax year cannot be
less than excess inclusions for the year. The effect of this last statutory
amendment is to prevent the use of nonrefundable tax credits to reduce a
taxpayer's income tax below its tentative minimum tax computed only on excess
inclusions. These rules are effective for tax years beginning after December 31,
1996, unless a residual holder elects to have such rules apply only to tax years
beginning after August 20, 1996.
Payments. Any distribution made on a Residual Certificate to a Residual
Certificateholder will be treated as a non-taxable return of capital to the
extent it does not exceed the Residual Certificateholder's adjusted basis in
such Residual Certificate. To the extent a distribution exceeds such adjusted
basis, it will be treated as gain from the sale of the Residual Certificate.
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Pass-Through of Miscellaneous Itemized Deductions. As a general rule, all
of the fees and expenses of a REMIC will be taken into account by holders of the
Residual Interests. In the case of a "single class REMIC", however, the expenses
and a matching amount of additional income will be allocated, under temporary
Treasury regulations, among the holders of the Regular Certificates and the
holders of the Residual Certificates on a daily basis in proportion to the
relative amounts of income accruing to each Certificateholder on that day. In
the case of individuals (or trusts, estates or other persons who compute their
income in the same manner as individuals) who own an interest in a Regular
Certificate directly or through a pass-through entity which is required to pass
miscellaneous itemized deductions through to its owners or beneficiaries (e.g.,
a partnership, an S corporation or a grantor trust), such expenses will be
deductible only to the extent that such expenses, plus other "miscellaneous
itemized deductions" of the individual, exceed 2% of such individual's adjusted
gross income. The reduction or disallowance of this deduction coupled with the
allocation of additional income may have a significant impact on the yield of
the Regular Certificate to such a holder. Further, holders (other than
corporations) subject to the alternative minimum tax may not deduct
miscellaneous itemized deductions in determining such holders' alternative
minimum taxable income. In general terms, a single class REMIC is one that
either (i) would qualify, under existing Treasury regulations, as a grantor
trust if it were not a REMIC (treating all interests as ownership interests,
even if they would be classified as debt for federal income tax purposes) or
(ii) is similar to such a trust and is structured with the principal purpose of
avoiding the single class REMIC rules. Unless otherwise stated in the applicable
Prospectus Supplement, the expenses of the REMIC will be allocated to holders of
the related Residual Certificates in their entirety and not to holders of the
related Regular Certificates.
Sale or Exchange of Residual Certificates. If a Residual Certificate is
sold or exchanged, the seller will generally recognize gain or loss equal to the
difference between the amount realized on the sale or exchange and its adjusted
basis in the Residual Certificate (except that the recognition of loss may be
limited under the "wash sale" rules described below). A holder's adjusted basis
in a Residual Certificate generally equals the cost of such Residual Certificate
to such Residual Certificateholder, increased by the taxable income of the REMIC
that was included in the income of such Residual Certificateholder with respect
to such Residual Certificate, and decreased (but not below zero) by the net
losses that have been allowed as deductions to such Residual Certificateholder
with respect to such Residual Certificate and by the distributions received
thereon by such Residual Certificateholder. In general, any such gain or loss
will be capital gain or loss provided the Residual Certificate is held as a
capital asset. However, Residual Certificates will be "evidences of
indebtedness" within the meaning of section 582(c)(1) of the Code, so that gain
or loss recognized from sale of a Residual Certificate by a bank or thrift
institution to which such section applies would be ordinary income or loss.
Except as provided in Treasury regulations yet to be issued, if the seller
of a Residual Certificate reacquires such Residual Certificate or acquires any
other Residual Certificate, any residual interest in another REMIC or similar
interest in a "taxable mortgage pool" (as defined in section 7701(i)) of the
Code during the period beginning six months before, and ending six months after,
the date of such sale, such sale will be subject to the "wash sale" rules of
section 1091 of the Code. In that event, any loss realized by the Residual
Certificateholder on the sale will not be deductible, but instead will increase
such Residual Certificateholder's adjusted basis in the newly acquired asset.
The 1997 Tax Act reduces the maximum rates on long-term capital gains
recognized on capital assets held by individuals taxpayers for more than 18
months as of the date of disposition (and would further reduce the maximum rates
on such gains in the year 2001 and thereafter for certain individual taxpayers
who meet specified conditions). The capital gains rate for capital assets held
by individual taxpayers for more than 12 months but less than 18 months was not
changed by the 1997 Tax Act. The 1997 Tax Act does not change the capital gain
rates for corporations. Prospective investors should consult their own tax
advisors concerning these tax law changes.
Non-corporate taxpayers are subject to reduced maximum rates on long-term
capital gains and are generally subject to tax at ordinary income rates on
short-term capital gains. The deductibility of capital losses is subject to
certain limitations. Prospective investors should consult their own tax advisors
concerning these tax law provisions.
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Prohibited Transactions and Other Taxes
The REMIC is subject to a tax at a rate equal to 100% of the net income
derived from "prohibited transactions". In general, a prohibited transaction
means the disposition of a Mortgage Loan other than pursuant to certain
specified exceptions, the receipt of investment income from a source other than
a Mortgage Loan or certain other permitted investments or the disposition of an
asset representing a temporary investment of payments on the Mortgage Loans
pending payment on the Residual Certificates or Regular Certificates. In
addition, the assumption of a Mortgage Loan by a subsequent purchaser could
cause the REMIC to recognize gain which would also be subject to the 100% tax on
prohibited transactions.
In addition, certain contributions to a REMIC made after the Closing Date
could result in the imposition of a tax on the REMIC equal to 100% of the value
of the contributed property.
It is not anticipated that the REMIC will engage in any prohibited
transactions or receive any contributions subject to the contributions tax.
However, in the event that the REMIC is subject to any such tax, unless
otherwise disclosed in the related Prospectus Supplement, such tax would be
borne first by the Residual Certificateholders, to the extent of amounts
distributable to them, and then by the Master Servicer.
Liquidation and Termination
If the REMIC adopts a plan of complete liquidation, within the meaning of
section 860F(a)(4)(A)(i) of the Code, which may be accomplished by designating
in the REMIC's final tax return a date on which such adoption is deemed to
occur, and sells all of its assets (other than cash) within a 90-day period
beginning on such date, the REMIC will not be subject to any prohibited
transaction tax, provided that the REMIC credits or distributes in liquidation
all of the sale proceeds plus its cash (other than the amounts retained to meet
claims) to holders of Regular and Residual Certificates within the 90-day
period.
The REMIC will terminate shortly following the retirement of the Regular
Certificates. If a Residual Certificateholder's adjusted basis in the Residual
Certificate exceeds the amount of cash distributed to such Residual
Certificateholder in final liquidation of its interest, it would appear that the
Residual Certificateholder would be entitled to a loss equal to the amount of
such excess. It is unclear whether such a loss, if allowed, will be a capital
loss or an ordinary loss.
Administrative Matters
Solely for the purpose of the administrative provisions of the Code, the
REMIC will be treated as a partnership and the Residual Certificateholders will
be treated as the partners. Under Temporary Regulations, however, if there is at
no time during the taxable year more than one Residual Certificateholder, a
REMIC shall not be subject to the rules of subchapter C of chapter 63 of the
Code relating to the treatment of partnership items for a taxable year.
Accordingly, the REMIC will file an annual tax return on Form 1066, U.S. Real
Estate Mortgage Investment Conduit Income Tax Return. In addition, certain other
information will be furnished quarterly to each Residual Certificateholder who
held such Residual Certificate on any day in the previous calendar quarter.
Each Residual Certificateholder is required to treat items on its return
consistently with their treatment on the REMIC's return, unless the Residual
Certificateholder either files a statement identifying the inconsistency or
establishes that the inconsistency resulted from incorrect information received
from the REMIC. The IRS may assert a deficiency resulting from a failure to
comply with the consistency requirement without instituting an administrative
proceeding at the REMIC level. The REMIC does not intend to register as a tax
shelter pursuant to section 6111 of the Code because it is not anticipated that
the REMIC will have a net loss for any of the first five taxable years of its
existence. Any person that holds a Residual Certificate as a nominee for another
person may be required to furnish the REMIC, in a manner to be provided in
Treasury regulations, with the name and address of such person and other
information.
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Tax-Exempt Investors
Any Residual Certificateholder that is a pension fund or other entity that
is subject to federal income taxation only on its "unrelated business taxable
income" within the meaning of section 512 of the Code will be subject to such
tax on that portion of the distributions received on a Residual Certificate that
is considered an "excess inclusion." See "--Residual Certificates--Excess
Inclusions" above.
Non-U.S. Persons
Amounts paid to Residual Certificateholders who are not U.S. Persons (see
"--Regular Certificates--Non-U.S. Persons" above) are treated as interest for
purposes of the 30% (or lower treaty rate) United States withholding tax.
Amounts distributed to Residual Certificateholders should qualify as "portfolio
interest", subject to the conditions described in "--Regular Certificates"
above, but only to the extent that the Mortgage Loans were originated after July
18, 1984. Furthermore, the rate of withholding on any income on a Residual
Certificate that is excess inclusion income will not be subject to reduction
under any applicable tax treaties. See "--Residual Certificates--Excess
Inclusions" above. If the portfolio interest exemption is unavailable, such
amount will be subject to United States withholding tax when paid or otherwise
distributed (or when the Residual Certificate is disposed of) under rules
similar to those for withholding upon disposition of debt instruments that have
original issue discount. The Code, however, grants the Treasury authority to
issue regulations requiring that those amounts be taken into account earlier
than otherwise provided where necessary to prevent avoidance of tax (e.g., where
the Residual Certificates do not have significant value). See "--Residual
Certificates--Excess Inclusions" above. If the amounts paid to Residual
Certificateholders that are not U.S. Persons are effectively connected with
their conduct of a trade or business within the United States, the 30% (or lower
treaty rate) withholding tax will not apply. Instead, the amounts paid to such
non-U.S. Person will be subject to U. S. federal income taxation at regular
graduated rates. For special restrictions on the transfer of Residual
Certificates, see "--Tax-Related Restrictions on Transfers of Residual
Certificates" below.
For this purpose, a "U.S. Person" includes a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
under the laws of the United States or any State thereof or the District of
Columbia (unless in the case of a partnership Treasury regulations are adopted
that provide otherwise) or an estate whose income from sources without the
United States is includible in gross income for United States federal income tax
purposes regardless of its connection with the conduct of a trade or business in
the United States, or a trust if a court within the United States is able to
exercise primary supervision of the administration of the trust and one or more
United States Persons have the authority to control all substantial decisions of
the trust. In addition, certain trusts that would not qualify as U.S. Persons
under the foregoing definition but that are eligible to and make an election to
be treated as U.S. Persons will also be treated as U.S. Persons.
Regular Certificateholders and persons related to such holders should not
acquire any Residual Certificates, and Residual Certificateholders and persons
related to Residual Certificateholders should not acquire any Regular
Certificates without consulting their tax advisors as to the possible adverse
tax consequences of such acquisition.
Tax-Related Restrictions on Transfers of Residual Certificates
Disqualified Organizations. An entity may not qualify as a REMIC unless
there are reasonable arrangements designed to ensure that residual interests in
such entity are not held by "disqualified organizations" (as defined below).
Further, a tax is imposed on the transfer of a residual interest in a REMIC to a
"disqualified organization". The amount of the tax equals the product of (A) an
amount (as determined under the REMIC Regulations) equal to the present value of
the total anticipated "excess inclusions" with respect to such interest for
periods after the transfer and (B) the highest marginal federal income tax rate
applicable to corporations. The tax is imposed on the transferor unless the
transfer is through an agent (including a broker or other middlemen) for a
disqualified organization, in which event the tax is imposed on the agent. The
person otherwise liable for the tax shall be relieved of liability for the tax
if the transferee furnished to such person an affidavit that the transferee is
not a disqualified organization and, at the time of the transfer, such person
does not have actual knowledge that the affidavit is false. A "disqualified
organization" means (A) the United States, any state, possession, or political
subdivision thereof, any foreign government, any international organization, or
any agency or instrumentality of any of the foregoing (provided that such term
does not include an instrumentality if all its activities are subject to tax
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and, except for FHLMC, a majority of its board of directors is not selected by
any such governmental agency), (B) any organization (other than certain farmers'
cooperatives) generally exempt from federal income taxes unless such
organization is subject to the tax on "unrelated business taxable income" and
(C) a rural electric or telephone cooperative.
A tax is imposed on a "pass-through entity" (as defined below) holding a
residual interest in a REMIC if at any time during the taxable year of the
pass-through entity a disqualified organization is the record holder of an
interest in such entity. The amount of the tax is equal to the product of (A)
the amount of excess inclusions for the taxable year allocable to the interest
held by the disqualified organization and (B) the highest marginal federal
income tax rate applicable to corporations. The pass-through entity otherwise
liable for the tax, for any period during which the disqualified organization is
the record holder of an interest in such entity, will be relieved of liability
for the tax if such record holder furnishes to such entity an affidavit that
such record holder is not a disqualified organization and, for such period, the
pass-through entity does not have actual knowledge that the affidavit is false.
For this purpose, a "pass-through entity" means (i) a regulated investment
company, real estate investment trust or common trust fund, (ii) a partnership,
trust or estate and (iii) certain cooperatives. Except as may be provided in
Treasury regulations not yet issued, any person holding an interest in a
pass-through entity as a nominee for another will, with respect to such
interest, be treated as a pass-through entity. The tax on pass-through entities
is generally effective for periods after March 31, 1988, except that in the case
of regulated investment companies, real estate investment trusts, common trust
funds and publicly-traded partnerships the tax shall apply only to taxable years
of such entities beginning after December 31, 1988. Under proposed legislation,
large partnerships (generally with 250 or more partners) will be taxable on
excess inclusion income as if all partners were disqualified organizations.
In order to comply with these rules, the Agreement will provide that no
record or beneficial ownership interest in a Residual Certificate may be,
directly or indirectly, purchased, transferred or sold without the express
written consent of the Master Servicer. The Master Servicer will grant such
consent to a proposed transfer only if it receives the following: (i) an
affidavit from the proposed transferee to the effect that it is not a
disqualified organization and is not acquiring the Residual Certificate as a
nominee or agent for a disqualified organization and (ii) a covenant by the
proposed transferee to the effect that the proposed transferee agrees to be
bound by and to abide by the transfer restrictions applicable to the Residual
Certificate.
Non-economic Residual Certificates. The REMIC Regulations disregard, for
federal income tax purposes, any transfer of a Non-economic Residual Certificate
to a "U.S. Person", as defined in the following section of this discussion,
unless no significant purpose of the transfer is to enable the transferor to
impede the assessment or collection of tax. A "Non-economic Residual
Certificate" is any Residual Certificate (including a Residual Certificate with
a positive value at issuance) unless at the time of transfer, taking into
account the Prepayment Assumption and any required or permitted clean up calls
or required liquidation provided for in the REMIC's organizational documents,
(i) the present value of the expected future distributions on the Residual
Certificate at least equals the product of the present value of the anticipated
excess inclusions and the highest corporate income tax rate in effect for the
year in which the transfer occurs and (ii) the transferor reasonably expects
that the transferee will receive distributions from the REMIC at or after the
time at which taxes accrue on the anticipated excess inclusions in an amount
sufficient to satisfy the accrued taxes. A significant purpose to impede the
assessment or collection of tax exists if the transferor, at the time of the
transfer, either knew or should have known that the transferee would be
unwilling or unable to pay taxes due on its share of the taxable income of the
REMIC. A transferor is presumed not to have such knowledge if (i) the transferor
conducted a reasonable investigation of the transferee and (ii) the transferee
acknowledges to the transferor that the residual interest may generate tax
liabilities in excess of the cash flow and the transferee represents that it
intends to pay such taxes associated with the residual interest as they become
due. If a transfer of a Non-economic Residual Certificate is disregarded, the
transferor would continue to be treated as the owner of the Residual Certificate
and would continue to be subject to tax on its allocable portion of the net
income of the REMIC.
Proposed Treasury regulations issued on February 4, 2000 (the "New
Proposed Regulations") would modify the safe harbor which, if satisfied,
provides that transfers of non-economic residual interests are not disregarded
for federal income tax purposes. Under the New Proposed Regulations, a transfer
of a non-economic residual interest will not qualify under this safe harbor
unless the present value of the anticipated tax liabilities associated with
holding the residual interest does not exceed the present value of the sum of
(i) any consideration
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given to the transferee to acquire the interest, (ii) expected future
distributions on the interest, and (iii) any anticipated tax savings associated
with holding the interest as the REMIC generates losses. For purposes of this
calculation, the present value generally is calculated using a discount rate
equal to applicable federal rate. The Proposed Regulations indicate that the
effective date of the modification to the safe harbor requirements could be as
early as February 4, 2000.
In addition, President Clinton's Fiscal Year 2001 Budget Proposal contains
a provision under which a REMIC would be secondarily liable for the tax
liability of its residual interest. The proposal states that it would be
effective for REMICs created after the date of enactment. It is unknown whether
this provision will be included in any bill introduced to Congress this year or
if introduced whether it will be enacted. Prospective investors in REMIC
residual interests should consult their tax advisors regarding the New Proposed
Regulations and the Fiscal Year 2001 Budget Proposals.
Foreign Investors. The REMIC Regulations provide that the transfer of a
Residual Certificate that has a "tax avoidance potential" to a "foreign person"
will be disregarded for federal income tax purposes. This rule appears to apply
to a transferee who is not a "U.S. Person", as defined below, unless such
transferee's income in respect of the Residual Certificate is effectively
connected with the conduct of a United States trade or business. A Residual
Certificate is deemed to have a tax avoidance potential unless, at the time of
transfer, the transferor reasonably expects that the REMIC will distribute to
the transferee amounts that will equal at least 30% of each excess inclusion and
that such amounts will be distributed at or after the time the excess inclusion
accrues and not later than the end of the calendar year following the year of
accrual. If the non-U.S. Person transfers the Residual Certificate to a U.S.
Person, the transfer will be disregarded and the foreign transferor will
continue to be treated as the owner, if the transfer has the effect of allowing
the transferor to avoid tax on accrued excess inclusions. The provisions in the
REMIC Regulations regarding transfers to foreign persons of Residual
Certificates that have tax avoidance potential are effective for all transfers
after June 30, 1992. The Agreement will provide that no record or beneficial
ownership interest in a Residual Certificate may be, directly or indirectly,
transferred to a non-U.S. Person unless such person provides the Trustee with a
duly completed IRS Form 4224 and the Trustee consents to such transfer in
writing.
For purposes of this discussion, a "U.S. Person" means a citizen or
resident of the United States, a corporation, partnership (including an entity
treated as a corporation or partnership for U.S. federal income tax purposes) or
other entity created or organized in or under the laws of the United States or
any State thereof or the District of Columbia (unless in the case of a
partnership Treasury regulations are adopted that provide otherwise) or an
estate whose income from sources outside the United States is includable in
gross income for federal income tax purposes regardless of its connection with
the conduct of a trade or business within the United States, or a trust if a
court within the United States is able to exercise primary supervision of the
administration of the trust and one or more U.S. Persons have the authority to
control all substantial decisions of the trust. In addition, certain trusts that
would not qualify as U.S. Persons under the foregoing definition but that are
eligible to and make an election to be treated as U.S. Persons will also be
treated as U.S. Persons.
Any attempted transfer or pledge in violation of the transfer restrictions
shall be absolutely null and void and shall vest no rights in any purported
transferee. Investors in Residual Certificates are advised to consult their own
tax advisors with respect to transfers of the Residual Certificates and, in
addition, passthrough entities are advised to consult their own tax advisors
with respect to any tax which may be imposed on a pass-through entity.
STATE TAX CONSIDERATIONS
In addition to the federal income tax consequences described in "Certain
Federal Income Tax Considerations", potential investors should consider the
state and local income tax consequences of the acquisition, ownership, and
disposition of the Certificates. State and local income tax law may differ
substantially from the corresponding federal law, and this discussion does not
purport to describe any aspect of the income tax laws of any state or locality.
Therefore, potential investors should consult their own tax advisors with
respect to the various tax consequences of investments in the Certificates.
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ERISA CONSIDERATIONS
The following describes certain considerations under the Employee
Retirement Security Act of 1974, as amended ("ERISA"), and the Code, which apply
only to Certificates of a Series that are not divided into subclasses. If
Certificates are divided into subclasses the related Prospectus Supplement will
contain information concerning considerations relating to ERISA and the Code
that are applicable to such Certificates.
ERISA and the Code impose requirements on certain employee benefit plans
(and on certain other retirement plans and arrangements, including individual
retirement accounts and annuities and Keogh plans) and on collective investment
funds and separate accounts in which such plans, accounts or arrangements are
invested (collectively, "Plans") and on persons who are fiduciaries with respect
to such Plans. Generally, ERISA applies to investments made by Plans. Among
other things, ERISA requires that the assets of Plans be held in trust and that
the trustee, or other duly authorized fiduciary, have exclusive authority and
discretion to manage and control the assets of such Plans. ERISA also imposes
certain duties on persons who are fiduciaries of Plans. Under ERISA, any person
who exercises any authority or control respecting the management or disposition
of the assets of a Plan is considered to be a fiduciary of such Plan (subject to
certain exceptions not here relevant). Certain employee benefit plans, such as
governmental plans (as defined in section 3(32) of ERISA) and, if no election
has been made under section 410(d) of the Code, church plans (as defined in
section 3(33) of ERISA), are not subject to ERISA requirements. Accordingly,
assets of such plans may be invested in Certificates without regard to the ERISA
considerations described above and below, subject to the provisions of
applicable state law. Any such plan which is qualified and exempt from taxation
under sections 401(a) and 501(a) of the Code, however, is subject to the
prohibited transaction rules set forth in section 503 of the Code.
On November 13, 1986, the United States Department of Labor (the "DOL")
issued final regulations concerning the definition of what constitutes the
assets of a Plan. (Labor Reg. Section 2510.3-101) Under this regulation, the
underlying assets and properties of corporations, partnerships, trusts and
certain other entities in which a Plan makes an "equity" investment could be
deemed for purposes of ERISA to be assets of the investing Plan in certain
circumstances. However, the regulation provides that, generally, the assets of a
corporation, partnership or trusts in which a Plan invests will not be deemed
for purposes of ERISA to be assets of such Plan if the equity interest acquired
by the investing Plan is a publicly-offered security. A publicly-offered
security, as defined in Labor Reg. Section 2510.3-101, is a security that is
widely held, freely transferable and registered under the Exchange Act.
In addition to the imposition of general fiduciary standards of investment
prudence and diversification, ERISA and the Code prohibit a broad range of
transactions involving Plan assets and persons ("Parties in Interest") having
certain specified relationships to a Plan and imposes additional prohibitions
where Parties in Interest are fiduciaries with respect to such Plan. Because the
assets of the trust may be deemed Plan assets of each Plan that purchases
Certificates, an investment in the Certificates by a Plan might be, or give rise
to, a transaction prohibited under sections 406 and 407 of ERISA and subject to
an excise tax under section 4975 of the Code unless a statutory, regulatory or
administrative exemption applies.
In Prohibited Transaction Exemption 83-1 ("PTE 83-1"), the DOL exempted
from ERISA's prohibited transaction rules certain transactions relating to the
operation of residential mortgage pool investment trusts and the purchase, sale
and holding of "mortgage pool pass-through certificates" in the initial issuance
of such certificates. PTE 83-1 permits, subject to certain conditions,
transactions which might otherwise be prohibited between Plans and Parties in
Interest with respect to those Plans related to the origination, maintenance and
termination of mortgage pools consisting of mortgage loans secured by first or
second mortgages or deeds of trust on single-family residential property, and
the acquisition and holding of certain mortgage pool pass-through certificates
representing an interest in such mortgage pools by Plans. If the general
conditions (discussed below) of PTE 83-1 are satisfied, investments by a Plan in
Certificates that represent interests in a Mortgage Pool consisting of Single
Family Loans ("Single Family Certificates") will be exempt from the prohibitions
of sections 406(a) and 407 of ERISA (relating generally to transactions with
Parties in Interest who are not fiduciaries) if the Plan purchases the Single
Family Certificates at no more than fair market value and will be exempt from
the prohibitions of sections 406(b)(1) and (2) of ERISA (relating generally to
transactions with fiduciaries) if, in addition, the purchase is approved by an
independent fiduciary, no sales commission is paid to the pool sponsor, the Plan
does not purchase more than 25% of all Single Family Certificates, and at least
50% of all Single Family Certificates are purchased by persons
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independent of the pool sponsor or pool trustee. PTE 83-1 does not provide an
exemption for transactions involving Subordinate Certificates or for
Certificates representing an interest in a Mortgage Pool containing Multifamily
Loans or Contracts or Cooperative Loans. Accordingly, unless the related
Prospectus Supplement indicates that an exemption other than PTE 83-1 is
available, no transfer of a Subordinate Certificate or a Certificate which is
not a Single Family Certificate may be made to a Plan.
The discussion in this and the next succeeding paragraph applies only to
Single Family Certificates. The Depositor believes that, for purposes of PTE
83-1, the term "mortgage pass-through certificate" would include: (i)
Certificates issued in a Series consisting of only a single class of
Certificates; and (ii) Senior Certificates issued in a Series in which there is
only one class of Senior Certificates; provided that the Certificates in the
case of clause (i), or the Senior Certificates in the case of clause (ii),
evidence the beneficial ownership of both a specified percentage (greater than
0%) of future interest payments and a specified percentage (greater than 0%) of
future principal payments on the Mortgage Loans. It is not clear whether a class
of Certificates that evidences the beneficial ownership of a specified
percentage of interest payments only or principal payments only, or of a
notional amount of either principal or interest payments would be a "mortgage
pass-through certificate" for purposes of PTE 83-1.
PTE 83-1 sets forth three general conditions which must be satisfied for
any transaction to be eligible for exemption: (i) the maintenance of a system of
insurance or other protection for the pooled mortgage loans and property
securing such loans, and for indemnifying Certificateholders against reductions
in pass-through payments due to property damage or defaults in loan payments in
an amount not less than the greater of one percent of the aggregate principal
balance of all covered pooled mortgage loans or the principal balance of the
largest covered pooled mortgage loan; (ii) the existence of a pool trustee who
is not an affiliate of the pool sponsor; and (iii) a limitation on the amount of
the payment retained by the pool sponsor, together with other funds inuring to
its benefit, to not more than adequate consideration for selling the mortgage
loans plus reasonable compensation for services provided by the pool sponsor to
the Mortgage Pool. The Depositor believes that the first general condition
referred to above will be satisfied with respect to the Certificates in a Series
issued without a subordination feature, or the Senior Certificates only in a
Series issued with a subordination feature, provided that the subordination and
Reserve Fund, subordination by shifting of interests, the pool insurance or
other form of credit enhancement described herein (such subordination, pool
insurance or other form of credit enhancement being the system of insurance or
other protection referred to above) with respect to a Series of Certificates is
maintained in an amount not less than the greater of one percent of the
aggregate principal balance of the Mortgage Loans or the principal balance of
the largest Mortgage Loan. See "Description of the Certificates". In the absence
of a ruling that the system of insurance or other protection with respect to a
Series of Certificates satisfies the first general condition referred to above,
there can be no assurance that these features will be so viewed by the DOL. The
Trustee will not be affiliated with the Depositor.
Each Plan fiduciary who is responsible for making the investment decisions
whether to purchase or commit to purchase and to hold Single Family Certificates
must make its own determination as to whether the first and third general
conditions, and the specific conditions described briefly in the preceding
paragraph, of PTE 83-1 have been satisfied, or as to the availability of any
other prohibited transaction exemptions. Each Plan fiduciary should also
determine whether, under the general fiduciary standards of investment prudence
and diversification, an investment in the Certificates is appropriate for the
Plan, taking into account the overall investment policy of the Plan and the
composition of the Plan's investment portfolio.
On September 6, 1990 the DOL issued to Greenwich Capital Markets, Inc. an
individual exemption (Prohibited Transaction Exemption 90-59, as amended;
Exemption Application No. D-8374, 55 Fed. Reg. 36724 (1990)) (the "Underwriter
Exemption") which applies to certain sales and servicing of "certificates" that
are obligations of a "trust" with respect to which Greenwich Capital Markets,
Inc. is the underwriter, manager or co-manager of an underwriting syndicate. The
Underwriter Exemption provides relief which is generally similar to that
provided by PTE 83-1, but is broader in several respects.
The Underwriter Exemption contains several requirements, some of which
differ from those in PTE 83-1. The Underwriter Exemption contains an expanded
definition of "certificate" which includes an interest which entitles the holder
to pass-through payments of principal, interest and/or other payments. The
Underwriter Exemption contains an expanded definition of "trust" which permits
the trust corpus to consist of secured consumer receivables, including
obligations secured by shares issued by a cooperative housing association. The
definition of
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"trust," however, does not include any investment pool unless, inter alia, (i)
the investment pool consists only of assets of a type which have been included
in other investment pools, (ii) certificates evidencing interests in such other
investment pools have been purchased by investors other than Plans for at least
one year prior to the Plan's acquisition of certificates pursuant to the
Underwriter Exemption, and (iii) certificates in such other investment pools
have been rated in one of the three highest generic rating categories of the
four credit rating agencies noted below. Generally, the Underwriter Exemption
holds that the acquisition of the certificates by a Plan must be on terms
(including the price for the certificates) that are at least as favorable to the
Plan as they would be in an arm's length transaction with an unrelated party.
The Underwriter Exemption requires that the rights and interests evidenced by
the certificates not be "subordinated" to the rights and interests evidenced by
other certificates of the same trust. The Underwriter Exemption requires that
certificates acquired by a Plan have received a rating at the time of their
acquisition that is in one of the three highest generic rating categories of
Standard & Poor's Ratings Services, Moody's Investors Service, Inc., Duff &
Phelps Inc. or Fitch IBCA, Inc. The Underwriter Exemption specifies that the
pool trustee must not be an affiliate of the pool sponsor, nor an affiliate of
the Underwriter, the pool servicer, any obligor with respect to mortgage loans
included in the trust constituting more than five percent of the aggregate
unamortized principal balance of the assets in the trust, or any affiliate of
such entities. Finally, the Underwriter Exemption stipulates that any Plan
investing in the certificates must be an "accredited investor" as defined in
Rule 501(a)(1) of Regulation D of the Securities and Exchange Commission under
the Securities Act of 1933, as amended.
Any Plan fiduciary which proposes to cause a Plan to purchase Certificates
should consult with their counsel concerning the impact of ERISA and the Code,
the applicability of PTE 83-1 and the Underwriter Exemption, and the potential
consequences in their specific circumstances, prior to making such investment.
Moreover, each Plan fiduciary should determine whether under the general
fiduciary standards of investment procedure and diversification an investment in
the Certificates is appropriate for the Plan, taking into account the overall
investment policy of the Plan and the composition of the Plan's investment
portfolio.
LEGAL INVESTMENT
The Prospectus Supplement for each series of Certificates will specify
which, if any, of the Classes of Certificates offered thereby constitute
"mortgage related securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984, as amended ("SMMEA"). Classes of Certificates that
qualify as "mortgage related securities" will be legal investments for persons,
trusts, corporations, partnerships, associations, business trusts and business
entities (including depository institutions, life insurance companies and
pension funds) created pursuant to or existing under the laws of the United
States or of any state (including the District of Columbia and Puerto Rico)
whose authorized investments are subject to state regulation to the same extent
as, under applicable law, obligations issued by or guaranteed as to principal
and interest by the United States or any such entities. Under SMMEA, if a state
enacts legislation prior to October 4, 1991 specifically limiting the legal
investment authority of any such entities with respect to "mortgage related
securities," Certificates will constitute legal investments for entities subject
to such legislation only to the extent provided therein. Approximately
twenty-one states adopted such legislation prior to the October 4, 1991
deadline. SMMEA provides, however, that in no event will the enactment of any
such legislation affect the validity of any contractual commitment to purchase,
hold or invest in Certificates, or require the sale or other disposition of
Certificates, so long as such contractual commitment was made or such
Certificates were acquired prior to the enactment of such legislation.
SMMEA also amended the legal investment authority of federally-chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal in Certificates
without limitations as to the percentage of their assets represented thereby,
federal credit unions may invest in mortgage related securities, and national
banks may purchase Certificates for their own account without regard to the
limitations generally applicable to investment securities set forth in 12 U.S.C.
24 (Seventh), subject in each case to such regulations as the applicable federal
authority may prescribe. In this connection, federal credit unions should review
the National Credit Union Administration ("NCUA") Letter to Credit Unions No.
96, as modified by Letter to Credit Unions No. 108, which includes guidelines to
assist federal credit unions in making investment decisions for mortgage related
securities, and the NCUA's regulation "Investment and Deposit Activities" (12
C.F.R. Part 703), which sets forth certain restrictions on investment by federal
credit unions in mortgage related securities.
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All depository institutions considering an investment in the Certificates
(whether or not the Class of Certificates under consideration for purchase
constitutes a "mortgage related security") should review the Federal Financial
Institutions Examination Council's Supervisory Policy Statement on the
Securities Activities (to the extent adopted by their respective regulators)
(the "Policy Statement"), setting forth, in relevant part, certain securities
trading and sales practices deemed unsuitable for an institution's investment
portfolio, and guidelines for (and restrictions on) investing in mortgage
derivative products, including "mortgage related securities", which are
"high-risk mortgage securities" as defined in the Policy Statement. According to
the Policy Statement, such "high-risk mortgage securities" include securities
such as Certificates not entitled to distributions allocated to principal or
interest, or Subordinated Certificates. Under the Policy Statement, it is the
responsibility of each depository institution to determine, prior to purchase
(and at stated intervals thereafter), whether a particular mortgage derivative
product is a "high-risk mortgage security", and whether the purchase (or
retention) of such a product would be consistent with the Policy Statement.
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not limited
to, "prudent investor" provisions, percentage-of-assets limits and provisions
which may restrict or prohibit investment in securities which are not "interest
bearing" or "income paying."
There may be other restrictions on the ability of certain investors,
including depository institutions, either to purchase Certificates or to
purchase Certificates representing more than a specified percentage of the
investor's assets. Investors should consult their own legal advisors in
determining whether and to what extent the Certificates constitute legal
investments for such investors.
METHOD OF DISTRIBUTION
The Certificates offered hereby and by the Prospectus Supplement will be
offered in Series. The distribution of the Certificates may be effected from
time to time in one or more transactions, including negotiated transactions, at
a fixed public offering price or at varying prices to be determined at the time
of sale or at the time of commitment therefor. If so specified in the related
Prospectus Supplement and subject to the receipt of any required approvals from
the Board of Governors of the Federal Reserve System, the Certificates will be
distributed in a firm commitment underwriting, subject to the terms and
conditions of the underwriting agreement, by Greenwich Capital Markets, Inc.
("GCM") acting as underwriter with other underwriters, if any, named therein. In
such event, the related Prospectus Supplement may also specify that the
underwriters will not be obligated to pay for any Certificates agreed to be
purchased by purchasers pursuant to purchase agreements acceptable to the
Depositor. In connection with the sale of the Certificates, underwriters may
receive compensation from the Depositor or from purchasers of the Certificates
in the form of discounts, concessions or commissions. The related Prospectus
Supplement will describe any such compensation paid by the Depositor.
Alternatively, the related Prospectus Supplement may specify that the
Certificates will be distributed by GCM acting as agent or in some cases as
principal with respect to Certificates that it has previously purchased or
agreed to purchase. If GCM acts as agent in the sale of Certificates, GCM will
receive a selling commission with respect to each Series of Certificates,
depending on market conditions, expressed as a percentage of the aggregate
principal balance of the related Mortgage Assets as of the Cut-off Date. The
exact percentage for each Series of Certificates will be disclosed in the
related Prospectus Supplement. To the extent that GCM elects to purchase
Certificates as principal, GCM may realize losses or profits based upon the
difference between its purchase price and the sales price. The Prospectus
Supplement with respect to any Series offered other than through underwriters
will contain information regarding the nature of such offering and any
agreements to be entered into between the Depositor and purchasers of
Certificates of such Series.
The Depositor will indemnify GCM and any underwriters against certain
civil liabilities, including liabilities under the Securities Act of 1933, as
amended, or will contribute to payments GCM and any underwriters may be required
to make in respect thereof.
In the ordinary course of business, GCM and the Depositor may engage in
various securities and financing transactions, including repurchase agreements
to provide interim financing of the Depositor's mortgage loans pending the sale
of such mortgage loans or interests therein, including the Certificates.
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The Depositor anticipates that the Certificates will be sold primarily to
institutional investors. Purchasers of Certificates, including dealers, may,
depending on the facts and circumstances of such purchases, be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended, in
connection with reoffers and sales of Certificates by them. Holders of
Certificates should consult with their legal advisors in this regard prior to
any such reoffer or sale.
LEGAL MATTERS
The legality of the Certificates of each Series, including certain federal
income tax consequences with respect thereto, will be passed upon for the
Depositor by Brown & Wood LLP, One World Trade Center, New York, New York 10048.
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FINANCIAL INFORMATION
A new Trust Fund will be formed with respect to each Series of
Certificates and no Trust Fund will engage in any business activities or have
any assets or obligations prior to the issuance of the related Series of
Certificates. Accordingly, no financial statements with respect to any Trust
Fund will be included in this Prospectus or in the related Prospectus
Supplement.
AVAILABLE INFORMATION
The Depositor has filed with the SEC (the ("SEC") a Registration Statement
under the Securities Act of 1933, as amended, with respect to the Certificates.
This Prospectus, which forms a part of the Registration Statement, and the
Prospectus Supplement relating to each Series of Certificates contain summaries
of the material terms of the documents referred to herein and therein, but do
not contain all of the information set forth in the Registration Statement
pursuant to the Rules and Regulations of the SEC. For further information,
reference is made to such Registration Statement and the exhibits thereto. Such
Registration Statement and exhibits can be inspected and copied at prescribed
rates at the public reference facilities maintained by the SEC at its Public
Reference Section, 450 Fifth Street, N. W., Washington, D.C. 20549, and at its
Regional Offices located as follows: Midwest Regional Office, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511; and New York Regional Office,
7 World Trade Center, New York, New York 10048. In addition, the SEC maintains a
website at http://www.sec.gov containing reports, proxy and information
statements and other information regarding registrants, including the Depositor,
that file electronically with the SEC.
RATINGS
It is a condition to the issuance of the Certificates of each Series
offered hereby and by the Prospectus Supplement that they shall have been rated
in one of the four highest rating categories by the nationally recognized
statistical rating agency or agencies specified in the related Prospectus
Supplement.
Ratings on mortgage pass-through certificates address the likelihood of
receipt by certificateholders of all distributions on the underlying mortgage
loans. These ratings address the structural, legal and issuer-related aspects
associated with such certificates, the nature of the underlying mortgage loans
and the credit quality of the credit enhancer or guarantor, if any. Ratings on
mortgage pass-through certificates do not represent any assessment of the
likelihood of principal prepayments by mortgagors or of the degree by which such
prepayments might differ from those originally anticipated. As a result,
certificateholders might suffer a lower than anticipated yield, and, in
addition, holders of stripped pass-through certificates in certain cases might
fail to recoup their underlying investments.
A security rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the assigning rating
organization. Each security rating should be evaluated independently of any
other security rating.
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INDEX OF DEFINED TERMS
Page
----
1986 Act.....................................................................65
Accrual Certificates.........................................................28
AFR..........................................................................67
Agency Securities............................................................12
Agreement....................................................................15
Amortizable Bond Premium Regulations.........................................61
Applicable Amount............................................................76
APR..........................................................................16
ARM Loans....................................................................65
Asset Conservation Act.......................................................56
Available Funds..............................................................27
Bankruptcy Bond..............................................................36
Bankruptcy Code..............................................................39
BIF..........................................................................41
CERCLA.......................................................................56
Certificate Account..........................................................42
Certificate Principal Balance................................................28
Certificate Register.........................................................26
Certificates.................................................................12
Charter Act..................................................................19
Closing Date.................................................................70
Code.........................................................................45
Collateral Value
Collateral Value.............................................................14
Contingent Payment Regulations...............................................66
Contracts....................................................................12
Cooperative Loans............................................................15
Cooperatives.................................................................15
Deferred Interest............................................................66
Detailed Description.........................................................12
Determination Date...........................................................28
DOL..........................................................................85
EPA..........................................................................56
ERISA........................................................................85
Events of Default............................................................49
FDIC.........................................................................24
FHA..........................................................................15
FHA Loans....................................................................16
FHLMC........................................................................12
FHLMC Act....................................................................18
FHLMC Certificate Group......................................................18
FNMA.........................................................................12
FTC Rule.....................................................................58
Garn-St Germain Act..........................................................58
GCA..........................................................................22
GCM..........................................................................89
GNMA.........................................................................12
GNMA Certificate.............................................................17
GNMA I Certificates..........................................................17
GNMA II Certificates.........................................................17
GNMA Issuer..................................................................17
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Guaranty Agreement...........................................................17
Housing Act..................................................................16
HUD..........................................................................34
Insolvency Trustee...........................................................39
Insurance Proceeds...........................................................42
Insured Expenses.............................................................42
IRS..........................................................................61
Legislative History..........................................................65
Liquidation Expenses.........................................................42
Liquidation Proceeds.........................................................42
Loan-to-Value Ratio..........................................................14
Manufactured Homes...........................................................16
Manufacturer Invoice Price...................................................14
Mark-to-Market Regulations...................................................79
Master REMIC.................................................................69
Mortgage.....................................................................40
Mortgage Assets..............................................................12
Mortgage Loans...............................................................12
Mortgage Pool................................................................12
Mortgage Pool Insurance Policy...............................................33
Mortgage Rate................................................................13
Mortgaged Properties.........................................................12
Multifamily Loans............................................................12
NCUA.........................................................................88
New Regulations..............................................................68
Non-economic Residual Certificate............................................84
OID Regulations..............................................................62
Parties in Interest..........................................................86
Payment Lag Certificates.....................................................75
Permitted Investments........................................................42
Plans........................................................................85
PMBS Agreement...............................................................21
PMBS Issuer..................................................................21
PMBS Servicer................................................................21
PMBS Trustee.................................................................21
Policy Statement.............................................................88
Pool Insurer.................................................................33
Prepayment Assumption........................................................65
Primary Insurer..............................................................46
Primary Mortgage Insurance Policy............................................13
Principal Prepayments........................................................29
PTE 83-1.....................................................................86
Purchase Price...............................................................25
Rating Agency................................................................42
RCRA.........................................................................56
Record Date..................................................................26
Refinance Loans..............................................................14
Regular Certificateholders...................................................70
Regular Certificates.........................................................69
Relief Act...................................................................59
REMIC........................................................................27
REMIC Regulations............................................................59
Reserve Account..............................................................27
Residual Certificates........................................................69
Retained Interest............................................................26
SAIF.........................................................................41
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SEC..........................................................................22
Sellers......................................................................12
Senior Certificates..........................................................32
Series.......................................................................12
Single Family Certificates...................................................86
Single Family Loans..........................................................12
SMMEA........................................................................88
Special Hazard Insurance Policy..............................................35
Special Hazard Insurer.......................................................35
Stripped ARM Obligations.....................................................66
Stripped Bond Certificates...................................................63
Stripped Coupon Certificates.................................................63
Subordinated Certificates....................................................32
Sub-Servicer.................................................................14
Sub-Servicing Account........................................................41
Sub-Servicing Agreement......................................................43
Subsidiary REMIC.............................................................69
Super-Premium Certificates...................................................71
Support Agreement............................................................30
Support Servicer.............................................................30
Title V......................................................................59
Treasury.....................................................................62
Trust Fund...................................................................12
U.S. Person..................................................................68
UCC..........................................................................52
Underwriter Exemption........................................................87
VA ..........................................................................15
VA Guaranty Policy...........................................................35
VA Loans.....................................................................16
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================================================================================
$464,637,631 (Approximate)
RESECURITIZATION MORTGAGE TRUST CERTIFICATES,
SERIES 2000-A
$ 54,265,000 Class A-1 6.50% Certificates
$ 19,480,941 Class A-2 6.50% Certificates
$ 55,646,371 Class A-3 6.50% Certificates
$ 56,275,462 Class A-4 6.50% Certificates
$ 32,524,402 Class A-5 6.50% Certificates
$ 22,000,000 Class A-6 6.50% Certificates
$ 91,611,289 Class A-7 6.50% Certificates
$111,411,000 Class A-8 6.50% Certificates
$ 21,423,065 Class A-9 6.50% Certificates
$ 101 Class A-R 6.50% Certificate
GREENWICH CAPITAL ACCEPTANCE, INC.
Depositor
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PROSPECTUS SUPPLEMENT
---------------------
GREENWICH CAPITAL
- --------------------------------------------------------------------------------
You should rely on the information contained or incorporated by reference in
this prospectus supplement and the accompanying prospectus. We have not
authorized anyone to provide you with different information.
We are not offering the offered certificates in any state where the offer is not
permitted.
Until the expiration of 90 days after the date of this prospectus supplement,
all dealers selling the offered certificates, whether or not participating in
this distribution, will deliver a prospectus supplement and the prospectus to
which it relates. This delivery requirement is in addition to the obligation of
dealers to deliver a prospectus supplement and prospectus when acting as
underwriters and with respect to their unsold allotment or subscriptions.
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