<PAGE>
PROSPECTUS SUPPLEMENT
(To Prospectus Dated March 23, 1999)
$ 53,964,000
HOMEGOLD FINANCIAL, INC.
(Parent of Originator)
[Logo] HOMEGOLD, INC.
(Servicer & Originator)
PRUDENTIAL SECURITIES
SECURED FINANCING CORPORATION
(Depositor)
HomeGold Home Equity Loan Trust 1999-1
Home Equity Loan Asset-Backed Notes, Series 1999-1
$18,418,000 Class A-1 6.87% Asset-Backed Notes
$35,546,000 Class A-2 6.82% Asset-Backed Notes
Consider carefully the risk factors beginning on page S-10 of this prospectus
supplement and on page 12 of the accompanying prospectus.
The notes represent obligations of the trust only and do not represent an
interest in or obligation of HomeGold Financial, Inc., HomeGold, Inc.,
Prudential Securities Secured Financing Corporation, First Union National Bank,
Wilmington Trust Company, or any of their affiliates.
This prospectus supplement may be used to offer and sell the notes only if
accompanied by the prospectus.
The trust will issue:
o The two classes of senior Class A Notes listed above.
o A Certificate, which is not being offered, which represents the beneficial
ownership interest in the trust.
The Class A Notes:
o Represent debt obligations of a trust supported primarily by two segregated
pools of closed-end, first and junior lien fixed-rate and adjustable-rate
home equity loans.
o Currently have no trading market.
o Receive distributions on the 15th day of each month, or the business day
immediately following the 15th day, beginning on June 15, 1999.
o Will have the benefit of an insurance policy from Financial Security
Assurance, Inc. which will guarantee timely payment of interest and the
ultimate payment of principal, as described in this prospectus supplement.
[FSA LOGO]
The Class A Notes will be purchased by Prudential Securities Incorporated,
as underwriter, and will be offered by the underwriter from time to time to the
public in negotiated transactions or otherwise at varying prices to be
determined at the time of sale. Proceeds from the sale of the Class A Notes are
expected to be approximately 99.994% of the aggregate principal amount of the
Class A Notes before deducting expenses estimated to be approximately $500,000
in the aggregate.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement is accurate or complete. Any representation to the
contrary is a criminal offense.
PRUDENTIAL SECURITIES
May 19, 1999
<PAGE>
IMPORTANT NOTICE ABOUT THE INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We tell you about the notes in two separate documents that progressively
provide more detail: (1) the accompanying prospectus, which provides general
information, some of which may not apply to the notes, and (2) this prospectus
supplement, which describes the specific terms of the notes and may be different
from the information in the prospectus.
If the terms of the notes and any other information contained herein vary
between this prospectus supplement and the accompanying prospectus, you should
rely on the information in this prospectus supplement.
We include cross-references in this prospectus supplement and the
accompanying prospectus to captions in these materials where you can find
further related discussions. The following table of contents and the table of
contents included in the accompanying prospectus provide the pages on which
these captions are located.
You can find a listing of the pages where the definition of defined terms
used in this prospectus supplement are set forth under "Index of Defined Terms"
beginning on page S-95 in this prospectus supplement and under the caption
"Index of Significant Definitions" beginning on page 104 in the accompanying
prospectus.
Some persons participating in this offering may engage in transactions that
stabilize, maintain, or in some way affect the price of the notes. These types
of transactions may include stabilizing the purchase of notes to cover syndicate
short positions and the imposition of penalty bids. For a description of these
activities, please read the section entitled "Plan of Distribution" in this
prospectus supplement.
TABLE OF CONTENTS
Prospectus Supplement
SUMMARY...........................................S-4
RISK FACTORS.....................................S-10
THE INSURER......................................S-17
THE TRUST........................................S-19
THE SERVICER AND THE ORIGINATOR..................S-20
HOMEGOLD FINANCIAL, INC..........................S-21
THE BACK-UP SERVICER.............................S-22
THE MORTGAGE POOLS...............................S-22
YIELD ON THE NOTES...............................S-60
DESCRIPTION OF THE NOTES.........................S-67
CERTAIN FEDERAL INCOME TAX CONSEQUENCES..........S-88
STATE AND LOCAL TAX CONSIDERATIONS...............S-90
USE OF PROCEEDS..................................S-91
PLAN OF DISTRIBUTION.............................S-91
LEGAL MATTERS....................................S-92
EXPERTS..........................................S-92
RATINGS..........................................S-92
LEGAL INVESTMENT.................................S-93
ERISA CONSIDERATIONS.............................S-93
INDEX OF DEFINED TERMS...........................S-95
Prospectus
REPORTS.............................................3
AVAILABLE INFORMATION...............................3
INCORPORATION OF CERTAIN INFORMATION
BY REFERENCE......................................3
SUMMARY OF PROSPECTUS...............................4
RISK FACTORS.......................................12
THE TRUST FUNDS....................................17
DESCRIPTION OF THE CERTIFICATES....................29
CREDIT SUPPORT.....................................43
PREPAYMENT AND YIELD CONSIDERATIONS................49
USE OF PROCEEDS....................................53
THE DEPOSITOR......................................53
UNDERWRITING GUIDLEINES............................54
SERVICING OF THE MORTGAGE LOANS
AND CONTRACTS....................................55
THE POOLING AND SERVICING AGREEMENT................66
CERTAIN LEGAL ASPECTS
OF THE MORTAGE LOANS AND CONTRACTS...............69
CERTAIN FEDERAL INCOME TAX CONSEQUENCES............84
ERISA CONSIDERATIONS...............................97
LEGAL INVESTMENT .................................101
PLAN OF DISTRIBUTION..............................102
LEGAL MATTERS.....................................102
RATING............................................103
ADDITIONAL INFORMATION............................103
INDEX OF SIGNIFICANT DEFINITIONS..................104
S-2
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Federal securities law requires the filing of certain information with the
Securities and Exchange Commission (the "SEC"), including annual, quarterly and
special reports, proxy statements and other information. You can read and copy
these documents at the public reference facility maintained by the SEC at
Judiciary Plaza, 450 Fifth Street, NW, Room 1024, Washington, DC 20549. You can
also copy and inspect such reports, proxy statements and other information at
the following regional offices of the SEC:
New York Regional Office Chicago Regional Office
Seven World Trade Center Citicorp Center
Suite 1300 500 West Madison Street, Suite 1400
New York, NY 10048 Chicago, Illinois 60661
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. SEC filings are also available to the public on the SEC's web
site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information that we incorporate by
reference is considered to be part of this prospectus supplement, and later
information that we file with the SEC will automatically update and supersede
this information.
This prospectus supplement and the accompanying prospectus are part of a
registration statement filed by the Depositor with the SEC (Registration No.
333-74589). You may request a free copy of any of the above filings by writing
or calling:
Prudential Securities
Secured Financing Corporation
One New York Plaza, 14th Floor
New York, NY 10292
Attention: Asset-Backed Securities
(212) 778-1000
You should rely only on the information incorporated by reference or
provided in this prospectus supplement or the accompanying prospectus. We have
not authorized anyone else to provide you with different information. You should
not assume that the information in this prospectus supplement or the
accompanying prospectus is accurate as of any date other than the date on the
cover page of this prospectus supplement or the accompanying prospectus.
S-3
<PAGE>
SUMMARY
o This summary highlights selected information from this prospectus
supplement 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 the offering of the notes, read carefully this entire prospectus
supplement and the accompanying prospectus.
o This summary provides an overview of certain calculations, cash flows
and other information to aid your understanding and is qualified by the
full description of these calculations, cash flows and other information in
this prospectus supplement and the accompanying prospectus.
-------------------------------------------------
Home Equity Loan Asset-Backed Notes,
Series 1999-1
Class A-1 Notes and Class A-2 Notes
<TABLE>
<CAPTION>
Initial Rating
of Notes(1)
-----------------
Initial
Principal Interest Rate Final S&P Moody's
Class Balance (per annum) Maturity Date Rating Rating
- ----------------------------------- ----------- ------------- -------------- ------ ------
<S> <C> <C> <C> <C> <C>
Class A-1........................ $18,418,000 6.87%(2) July 15, 2029 AAA Aaa
Class A-2........................ $35,546,000 6.82%(3) August 15, 2029 AAA Aaa
- ------------------------------------
</TABLE>
(1) A description of the ratings of the notes is set forth under the heading
"Ratings" in this prospectus supplement.
(2) 7.37% for each accrual period ending after the date on which the servicer
could exercise its option to redeem the notes.
(3) 7.32% for each accrual period ending after the date on which the servicer
could exercise its option to redeem the notes.
The trust will issue the notes in book-entry form through the
facilities of The Depository Trust Company. We refer you to "Description of the
Notes -- General" and "--Book-Entry Registration and Definitive Notes" for more
detail.
S-4
<PAGE>
Trust
o HomeGold Home Equity Loan Trust 1999-1.
Depositor
o Prudential Securities Secured Financing Corporation.
Originator and Servicer
o HomeGold, Inc.
Back-up Servicer
o Fairbanks Capital Corp.
Seller
o Emergent Mortgage Holdings Corporation.
Owner Trustee
o Wilmington Trust Company, a Delaware banking corporation.
Indenture Trustee
o First Union National Bank, a national banking association.
Insurer
o Financial Security Assurance Inc., a New York monoline stock insurance
corporation.
Cut-Off Date
o The opening of business on May 1, 1999.
Closing Date
o On or about May 27, 1999.
Payment Dates
o The 15th day of each month or if such day is not a business day, the next
business day. The first payment date will be June 15, 1999.
Record Dates
o The close of business on last business day of the month preceding the month
of a payment date.
Mortgage Loans
o On the closing date, the trust will acquire two separate groups of
closed-end, fixed-rate and adjustable-rate home equity loans evidenced by
promissory notes and secured by first and junior lien mortgages on
single-family residences including manufactured houses. The mortgage loans
in the first group, Group I, principally secure the Class A-1 Notes and
those in the second group, Group II, principally secure the Class A-2
Notes.
S-5
<PAGE>
o As of May 1, 1999, there were 679 mortgage loans in Group I and 594
mortgage loans in Group II, each having the following characteristics:
Group I Mortgage Loans
Number of Mortgage Loans: 679
Range of Outstanding Principal Balances: $1,281.35 to
$447,294.91
Average Outstanding Principal $29,973.32
Balance(1):
Aggregate Outstanding Principal $19,838,079.61
Balance of Fixed-Rate Mortgage Loans
Aggregate Outstanding Principal $513,802.63
Balance of Adjustable-Rate Mortgage
Loans
Range of Remaining Term to Stated Maturity: 11 to 359 months
Weighted Average Remaining Term to 182.74 months
Stated Maturity(1):
Range of Mortgage Rates: 8.000 - 18.428%
Weighted Average Mortgage Rate(1): 12.005%
Weighted Average Net Mortgage Rate(1): 11.505%
Percent First Lien(1) 67.27%
Percent Junior Lien(1) 32.73%
Geographic Concentrations in Excess
of 5%(1):
South Carolina........................ 39.14%
North Carolina........................ 13.98%
Florida............................... 6.20%
Texas................................. 5.12%
(1) .......................Approximate
Group II Mortgage Loans
Number of Mortgage Loans: 594
Range of Outstanding Principal Balances: $14,406.87 to
$206,250.00
Average Outstanding Principal $66,124.58
Balance(1):
Aggregate Outstanding Principal $37,906,313.62
Balance of Fixed-Rate Mortgage Loans
Aggregate Outstanding Principal $1,371,685.42
Balance of Adjustable-Rate Mortgage
Loans
Range of Remaining Term to Stated Maturity: 33 to 359 months
Weighted Average Remaining Term to 222.89 months
Stated Maturity(1):
Range of Mortgage Rates: 6.100 - 18.990%
Weighted Average Mortgage Rate(1): 10.649%
Weighted Average Net Mortgage Rate(1): 10.149%
Percent First Lien(1) 92.80%
Percent Junior Lien(1) 7.20%
Geographic Concentrations in Excess of 5%(1):
South Carolina ...................... 60.28%
North Carolina ...................... 7.86%
(1) .......................Approximate
Substitutions and Amendments
Subject to limitations, HomeGold Inc., as servicer, may, at its option,
substitute mortgage loans included in either Group and amend mortgage loans in
either Group.
Interest Distributions
On each payment date, you will be entitled to receive interest on your Class A
Note that accrued during the related accrual period, calculated at the related
rate of interest set forth below.
Interest accrues on the Class A Notes for the calendar month immediately
preceding each payment date.
Class A-1 Interest Rate
For each accrual period, interest will accrue on the Class A-1 Notes at an
annual rate of interest equal to 6.87% (for each accrual period ending on or
prior to the date on which the servicer could exercise its option to redeem the
Class A-1 Notes) or 7.37% (for each accrual period ending after such date).
Class A-2 Interest Rate
For each accrual period, interest will accrue on the Class A-2 Notes at an
annual rate of interest equal to 6.82% (for each accrual period ending on or
prior to the date on which the servicer, could exercise its option to redeem the
Class A-2 Notes) or 7.32% (for each accrual period ending after such date).
We refer you to "Description of the Notes--Interest Payments" in this prospectus
supplement for more information.
Principal Distributions
Principal will be paid on each class of notes on each payment date in reduction
of the outstanding principal balance of such notes.
The amount of principal payable with respect to each class of notes will be paid
in accordance with the priority of distributions set forth in this prospectus
supplement and will generally consist of the amount of principal collections
received on the mortgage loans in the related group during the prior month, plus
S-6
<PAGE>
accelerated principal payments, funded from excess interest, which will be paid
to the extent needed to reach and maintain the required level of
overcollateralization.
We refer you to "Description of the Notes --Principal Payments" in this
prospectus supplement for more information regarding the calculation as to the
amount of principal the notes are entitled to receive on each payment date.
Servicing Fee
The servicing fee on any payment date to be retained by the servicer shall be an
annual rate of 0.50% of the then outstanding principal balance of the mortgage
loans in both groups. Unless it shall become servicer, the back-up servicer will
also be entitled to a fee at the annual rate of 0.06% of the then outstanding
principal balance of the mortgage loans in both groups. The 0.50% servicing fee
rate may be increased to up to 0.75% if HomeGold, Inc. ceases to be the servicer
and delinquencies exceed certain thresholds.
Credit Enhancement
Credit enhancement reduces the risk of harm to the holders of notes from
shortfalls in payments received from and losses incurred on the underlying pools
of mortgage loans. The credit enhancement provided for the benefit of the notes
consists of the following:
Subordination of the Certificate. The trust is issuing a certificate
representing the entire beneficial ownership interest in the two mortgage loan
groups. Payments on the certificate are subordinated to payments due on the
notes as described elsewhere in this prospectus supplement. This subordination
of the certificate provides credit enhancement to the notes.
Overcollateralization. Additional credit enhancement will result from the fact
that the aggregate principal balance of the mortgage loans in each group is
initially greater than the principal balance of the notes of the related class.
In addition, the indenture provides for the accelerated principal payments to be
paid on the notes in order to initially attain and thereafter maintain a certain
overcollateralization level for each group. Once the required level of
overcollateralization is reached for each group, the acceleration feature for
the related class of notes will cease, unless either it is necessary to maintain
the required level of overcollateralization, or the required level of
overcollateralization increases.
Application of Excess Cashflow. Generally, because more interest is paid on the
mortgage loans in each group than is necessary to pay the interest due on the
related class of notes, there probably will be excess cashflow each month. Some
of the excess cashflow for each group will be used as principal payments on the
related class of notes to create overcollateralization until the required level
of overcollateralization has been reached and, thereafter, maintained.
Crosscollateralization. The excess cashflow available from one group is also
available to crosscollateralize the other group, but only to a limited extent.
The Insurance Policy. On the closing date, Financial Security Assurance Inc.
will issue a financial guaranty insurance policy for the benefit of the holders
of the notes. The insurance policy will irrevocably and unconditionally guaranty
payment on each payment date of scheduled interest on the notes and payment on
the final stated maturity date of the outstanding principal balance of the
related class of notes.
On any payment date, the insurer will generally be required to make available
the amount, if any, by which the amount required to be distributed on such
payment date, including
o scheduled interest on the notes,
S-7
<PAGE>
o the amount, if any, by which the aggregate outstanding principal balance of
the notes, after taking into account the payment of principal from all
other sources exceeds the sum of the aggregate principal balance of the
mortgage loans, and
o on the final stated maturity date for a class of notes, the outstanding
principal balance of such class of notes, in the event that the amount
available for distribution on such final payment date is less than the full
amount due.
The insurer will be entitled to reimbursement from the trust for all payments
made in respect of the insurance policy.
The insurance policy does not guarantee the notes any specified rate of
principal repayment. In addition, shortfalls in interest due to prepayments and
the imposition of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended, will not be covered under the insurance policy.
So long as the insurer is not in default of its obligations under the insurance
policy, the insurer has the right to exercise all rights of the holders of the
notes without any consent of the holders. Such holders may exercise their rights
only with the prior written consent of the insurer, except as provided in the
indenture.
We refer you to "Description of the Notes--Overcollateralization and
Cross-collateralization Provisions" in this prospectus supplement for more
detail.
Monthly Advances
The servicer must make advances in respect of delinquent payments of interest on
the mortgage loans as described in this prospectus supplement but only to the
extent that it determines that these advances would be recoverable from future
payments and collections on the mortgage loans. The credit enhancement will
provide protection for you resulting from any shortfalls due to the servicer's
not recovering these monthly advances.
We refer you to "Description of the Notes--General" in this prospectus
supplement for more detail.
Option of the Servicer to Call Either Class of Notes
The servicer may, at its option, call the Class A-1 Notes or the Class A-2 Notes
on any payment date on which the aggregate outstanding principal balance of such
class is equal to or less than 10% of the original aggregate principal balance
of such class. In order to exercise its call, the servicer must pay an amount
equal to the outstanding balance of the mortgage loans in the related group,
plus accrued interest at the mortgage rate plus certain other amounts and, in
any event, not less than the aggregate principal balance of such class on such
payment date, plus accrued and unpaid interest thereon, and any unpaid amounts
due the insurer in respect of such class.
We refer you to "Description of the Notes--Optional Clean-up Call" in this
prospectus supplement for more detail.
Final Maturity Dates
If the notes have not already been paid in full, the outstanding principal
amount of the Class A-1 Notes will be paid in full on the payment date in July
2029 and the outstanding principal amount of the Class A-2 Notes will be paid in
full on the payment date in August 2029. Because principal prepayments on the
mortgage loans will occur, it is expected that each class of notes will be paid
in full substantially earlier than the final maturity date for each class of
notes.
S-8
<PAGE>
Special Yield Considerations
The yield to maturity on the notes will depend, in general, on (i) the purchase
price and (ii) the rate and timing of principal payments (including insured
payments, prepayments and collections upon defaults, liquidations and
repurchases) on the mortgage loans in the related group and the application
thereof to reduce the note principal balance of the related class of notes, as
well as other factors.
In general, if the notes are purchased at a premium and principal distributions
thereon occur at a rate faster than anticipated at the time of purchase, the
investor's actual yield to maturity will be lower than that assumed at the time
of purchase. Also, if the notes are purchased at a discount and principal
distributions thereon occur at a rate slower than that assumed at the time of
purchase, the investor's actual yield to maturity will be lower than that
originally anticipated.
Federal Income Tax Consequences
Dewey Ballantine LLP, special tax counsel, is of the opinion that the notes will
be characterized as debt for federal income tax purposes. By your acceptance of
a note, you agree to treat the notes as debt.
We refer you to "Certain Federal Income Tax Consequences" in this prospectus
supplement and in the prospectus for more detail.
ERISA Considerations
Subject to the considerations and conditions described under "ERISA
Considerations" in this prospectus supplement and prospectus, we expect that
pension, profit-sharing or other employee benefit plans, as well as individual
retirement accounts and certain types of Keogh Plans may purchase the notes. You
should consult with your counsel regarding the applicability of the provisions
of ERISA before purchasing a note.
We refer you to "ERISA Considerations" in this prospectus supplement and in the
prospectus.
Legal Investment
The notes will not be "mortgage related securities" for purposes of the
Secondary Mortgage Market Enhancement Act of 1984.
We refer you to "Legal Investment" in this prospectus supplement and in the
prospectus for more detail.
Ratings
The trust will not issue the notes unless they have been assigned the ratings
designated on page S-4.
You must not assume that the ratings initially assigned to each class of notes
will not subsequently be lowered, qualified or withdrawn by the rating agencies.
We refer you to "Ratings" in this prospectus supplement for more detail.
S-9
<PAGE>
RISK FACTORS
In addition to the matters described elsewhere in this Prospectus
Supplement and the Prospectus, prospective investors should carefully consider
the following factors before deciding to invest in the notes.
Risks Due to Underwriting HomeGold, Inc. acquires/originates mortgage loans
Standards and Potential made to borrowers who have limited access to credit
Delinquencies or who may be considered credit-impaired by
conventional lending standards and accordingly do
not qualify for loans conforming to FNMA or FHLMC
guidelines. A borrower's past credit history may not
preclude HomeGold, Inc. from acquiring/originating a
loan; however, it may reduce the size (and
consequently the loan-to-value ratio) of the loan
that HomeGold, Inc. is willing to make. As a result
of this approach to underwriting, the mortgage loans
owned by the trust may experience higher rates of
delinquencies, defaults and foreclosures than
mortgage loans underwritten in conformance with FNMA
or FHLMC guidelines. In addition, changes in the
values of properties securing the mortgage loans may
have a greater effect on the delinquency,
foreclosure, bankruptcy and loss experience of the
mortgage loans than on mortgage loans originated to
conform to FNMA or FHLMC guidelines. No assurance
can be given that the values of the properties
securing the mortgage loans have remained or will
remain at the levels in effect on the dates of
origination of the related mortgage loans.
Risks Associated with A majority of the mortgage loans in each group may
Prepayments be prepaid in whole or in part at any time without
penalty. In addition, a substantial portion of the
mortgage loans contain due-on-sale provisions which,
to the extent enforced by HomeGold, Inc., will
result in prepayment of such mortgage loans in the
event the property securing the mortgage loan is
sold by the borrower. The rate of prepayments on
fixed-rate mortgage loans is sensitive to prevailing
interest rates. Generally, if prevailing interest
rates fall significantly below the interest rates on
the mortgage loans, the mortgage loans are likely to
be subject to higher prepayment rates than if
prevailing rates remain at or above the interest
rates on the mortgage loans. Conversely, if
prevailing interest rates rise significantly above
the interest rates on the mortgage loans, the rate
of prepayments is likely to decrease. The average
life of the notes and, if purchased at other than
par, the yields realized by note owners will be
sensitive to levels of payment on the mortgage
loans. In general, the yield on a note that is
purchased at a premium from the outstanding
principal amount thereof may be adversely
affected by a higher than anticipated level of
prepayments of the mortgage loans. Conversely, the
yield on a note that is purchased at a discount from
the outstanding principal amount thereof may be
adversely
S-10
<PAGE>
affected by a lower than anticipated level.
See "Yield on the Notes" in this prospectus
supplement.
Risks Due to Geographic Of the mortgage loans in Group I (as a percentage of
Concentration that group's aggregate principal balance):
approximately 39.14% are secured by mortgaged
properties located in South Carolina, approximately
13.98% are secured by mortgaged properties located
in North Carolina, approximately 6.20% are secured
by mortgaged properties located in Florida, and
approximately 5.12% are secured by mortgaged
properties located in Texas. Of the mortgage loans
in Group II (as a percentage of that group's
aggregate principal balance): approximately 60.28%
are secured by mortgaged properties located in South
Carolina, and approximately 7.86% are secured by
mortgaged properties located in North Carolina. If
the residential real estate markets in any of such
States should experience an overall decline in
property values after the dates of origination of
these mortgage loans, the rates of delinquencies,
foreclosures, bankruptcies and losses on these
mortgage loans may increase, perhaps substantially.
See "The Mortgage Pool--Underwriting Standards;
Representations" in this prospectus supplement.
Additional Risks 32.73% of the mortgage loans in Group I (as a
Associated with percentage of that group's the Mortgage Loans
Mortgage Loans aggregate principal balance) and 7.20% of the
mortgage loans in Group II (as a percentage of that
group's aggregate principal balance) are junior lien
mortgage loans. The proceeds from any liquidation,
insurance or condemnation proceedings will be
available to satisfy the outstanding balance of a
junior mortgage loan only to the extent that the
claims of the senior mortgagee or beneficiary have
been satisfied in full, including any related
foreclosure costs. A mortgagee with a junior lien
may not foreclose on the related mortgaged property
unless it forecloses subject to the related senior
mortgage or mortgages, in which case it must either
pay the entire amount of each senior mortgage to the
applicable mortgagee at or prior to the foreclosure
sale or undertake the obligation to make payments on
each senior mortgage in the event of default
thereunder. As a result, the prepayment, delinquency
and foreclosure experience of mortgage loans with
junior liens on the related mortgaged properties may
differ from those with only first mortgages.
Information is provided under "The Mortgage Pools"
in this prospectus supplement with respect to the
loan-to-value ratios of the mortgage loans as of May
1, 1999. As discussed in the prospectus under "Risk
Factors," the value of the mortgaged properties
underlying such loans could be adversely affected by
a number of factors. As a result, despite the
amortization of the junior and senior mortgage loans
on such mortgaged properties, there can be no
S-11
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assurance that the combined loan-to-value ratios of
such loans, determined as of any date, will be the
same or lower than the combined loan-to-value ratios
for such loans, determined as of the origination
date, May 1, 1999 or any other date.
Risk of Higher Default 54.95% of the mortgage loans in Group I (as a
Rates for Mortgage Loans percentage of that group's aggregate principal
with Balloon Payments balance) and 56.38% of the mortgage loans in Group
II (as a percentage of that group's aggregate
principal balance) are loans that provide for the
payment of the unamortized principal balance of the
mortgage loan in a single payment at maturity. These
mortgage loans are known as "balloon loans," and
they provide for equal monthly payments, consisting
of principal and interest, based on an amortization
schedule over the original term, and a single
payment of the remaining balance of the balloon loan
at maturity or some specified date. Amortization of
a balloon loan based on a scheduled period that is
longer than the term of the loan results in a
remaining principal balance at maturity that is
substantially larger than the regular scheduled
payments. We do not have any information regarding
the default history or prepayment history of
payments on balloon loans. Because borrowers of
balloon loans are required to make substantial
single payments upon maturity, it is possible that
the default risk associated with the balloon loans
is greater than that associated with
fully-amortizing mortgage loans.
Risks Relating to High 18.74% of the mortgage loans in Group I (as a
Loan-To-Value Mortgage percentage of that group's aggregate principal
Loans balance) and 16.21% of the mortgage loans in Group
II (as a percentage of that group's aggregate
principal balance) have original combined
loan-to-value ratios generally in excess of 100%.
These loans present the following risks:
Underwriting Criteria Limitations
Since the mortgagor's creditworthiness for a high
loan-to-value mortgage loan is the primary
consideration in underwriting the loan, depending on
when HomeGold, Inc. originated or purchased the high
loan-to-value mortgage loan, different underwriting
criteria may be used. Thus, some high loan-to-value
mortgage loans may be of a different credit quality
and may be more likely to experience delinquencies,
defaults and losses than other high loan-to-value
mortgage loans, or other mortgage loans.
Inadequate Security for the High Loan-To-Value
Mortgage Loans
Since the high loan-to-value mortgage loans have
combined loan-to-value ratios which generally exceed
100%, the properties securing the high loan-to-value
mortgages are unlikely to provide adequate security
for such mortgage loans. If the security is not
adequate, any losses in connection with such
mortgage loans may affect the timing
S-12
<PAGE>
of principal payments to you. The higher the
combined loan-to-value ratios, the more severe any
loss is likely to be.
Relocation and Taking on More Debt
If a mortgagor with a high loan-to-value mortgage
loan relocates and sells the mortgaged property,
that borrower may be unable to pay off the high
loan-to-value mortgage loan in full from the
proceeds of the sale. Also, after high loan-to-value
mortgage loans are used for debt consolidation,
borrowers may still take on more consumer debt.
Either circumstance could impair their ability to
service their debts and increase rates of
delinquencies, defaults and losses.
Limited Experience with High Loan-To-Value Mortgage
Loans
High loan-to-value mortgage loans have been
originated by HomeGold, Inc. in significant volume
for less than two years. There is no meaningful
historical performance data on the likely
delinquency, default and loss experience of these
types of loans over an extended period of time or in
differing economic and interest rate environments.
Notwithstanding the lack of an extended performance
history for these loans, most of these loans have
been outstanding at least one year and have not
experienced delinquencies, defaults and losses
materially higher than other loans in HomeGold,
Inc.'s portfolio.
Bankruptcy Reform
Bankruptcy reform legislation is being considered
which would treat high loan-to-value mortgage loans
in whole or in part as unsecured debt if the value
of the property is less than the amount of the loan.
Whether legislation along these lines will be
enacted is uncertain. If enacted, the legislation
could adversely affect the amount recoverable in the
event of defaults on high loan-to-value mortgage
loans.
Risks Associated With Year HomeGold, Inc. is faced with the task of completing
2000 Compliance its goals for compliance in connection with the year
2000 issue. The year 2000 issue is the result of
prior computer programs being written using two
digits to define the applicable year. Any computer
programs that have time-sensitive software may
recognize a date using "00" as the year 1900 rather
than the year 2000. Any such occurrence could result
in major computer system failure or miscalculations.
Although HomeGold, Inc. has been assured by its
third party computer system provider that such
servicing system will be year 2000 compliant prior
to the year 2000, it is presently engaged in various
procedures to determine if the computer systems and
software of this and other suppliers and agents will
be year 2000
S-13
<PAGE>
compliant.
In the event that HomeGold, Inc., any subservicer or
any of their suppliers or agents do not successfully
and timely achieve year 2000 compliance, HomeGold,
Inc.'s performance of its obligations under the Sale
and Servicing Agreement could be adversely affected.
This could result in delays in processing payments
on the mortgage loans and could cause a delay in
distributions to you.
Risk of Potential Early HomeGold, Inc., as servicer, may, at its option,
Redemption or Payment of call the Class A-1 Notes or the Class A-2 Notes,
Notes separately, on any payment date on which the
aggregate outstanding principal balance of the
related class of notes is equal to or less than 10%
of the aggregate original principal balance of such
class of Notes by paying an amount equal to the
outstanding balance of the mortgage loans in the
related group, plus accrued interest at the mortgage
rate plus certain other amounts and, in any event,
not less than the aggregate principal balance of
such class on such payment date, plus accrued and
unpaid interest thereon, and any unpaid amounts due
the insurer in respect of such class. Accordingly,
any such redemption may result in accelerated
payments in respect of the principal of such class
of notes.
See "Description of the Notes--Optional Clean-up
Call" in this prospectus supplement.
Risks in the Event of HomeGold, Inc. has taken steps in structuring the
Insolvency of HomeGold, transactions contemplated hereby that are intended
Inc. to make it unlikely that a voluntary or involuntary
application for relief from creditors by HomeGold,
Inc. under the United States Bankruptcy Code or
similar applicable state laws would result in the
substantive consolidation of the assets and
liabilities of Emergent Mortgage Holdings
Corporation with those of HomeGold, Inc. These steps
include the creation of Emergent Mortgage Holdings
Corporation as a separate, limited-purpose entity
pursuant to its Certificate of Incorporation, which
contains certain limitations (including restrictions
on the nature of Emergent Mortgage Holdings
Corporation's businesses) and a restriction on the
ability of Emergent Mortgage Holdings Corporation to
commence a voluntary case or proceeding under any
insolvency law without the unanimous affirmative
vote of all of the members of the board of directors
of Emergent Mortgage Holdings Corporation. The
Certificate of Incorporation of Emergent Mortgage
Holdings Corporation also includes a provision that
requires Emergent Mortgage Holdings Corporation to
have at least two directors who qualify under the
Certificate of Incorporation as "independent
directors."
Emergent Mortgage Holdings Corporation has received
the advice of counsel, concluding on the basis of a
reasoned analysis of analogous
S-14
<PAGE>
case law (although there is no precedent based on
directly similar facts) to the effect that, subject
to certain facts, assumptions and qualifications
specified therein, (i) a court would conclude that
the assets and liabilities of Emergent Mortgage
Holdings Corporation would not be consolidated with
the assets and liabilities of HomeGold, Inc. in the
event of the application of the federal bankruptcy
laws to HomeGold, Inc. and (ii) the transfer of the
mortgage loans to Emergent Mortgage Holdings
Corporation will not be a "preferential" transfer.
If a court concluded otherwise, or a filing were
made under any insolvency law by or against Emergent
Mortgage Holdings Corporation, or if an attempt were
made to litigate any of the foregoing issues, delays
in the distributions on the notes (and possible
reductions in the amount of such distributions)
could occur. Emergent Mortgage Holdings Corporation
does not expect to have any significant assets or
sources of funds.
As of March 31, 1999, HomeGold, Inc. had negative
shareholders' equity. Effective May 1, 1999, $20
million in subordinated indebtedness of HomeGold,
Inc. to its parent, HomeGold Financial, Inc., or
affiliated companies was converted into equity. As a
result of this transaction, HomeGold, Inc. has
positive shareholders' equity. Nonetheless, in the
event of a voluntary or involuntary application for
relief from creditors by or with regard to HomeGold,
Inc., the transfer of the mortgage loans and the
offering may be challenged as a "preferential"
transfer subject to avoidance by HomeGold, Inc. or
its bankruptcy trustee.
Fairbanks Capital Corp. has been designated to act
as servicer in the event of a voluntary or
involuntary application for relief from creditors by
or with regard to HomeGold, Inc. or the occurrence
of certain other events or circumstances.
S-15
<PAGE>
Risks Associated with Approximately 28.46% of the mortgage loans in Group
"Piggy Back" Mortgage I (as a percentage of that group's aggregate
Loans principal balance) and 48.53% of the mortgage loans
in Group II (as a percentage of that group's
aggregate principal balance) are first lien mortgage
loans secured by mortgaged properties which are also
encumbered by junior lien mortgages that were
originated or acquired by HomeGold, Inc. These
junior loans are called "piggy back mortgage loans."
Some of the mortgage loans in Group I and Group II
are piggy back mortgage loans, which may experience
different rates of delinquency, foreclosure and
losses than the other mortgage loans secured by
mortgaged properties not encumbered by junior lien
mortgages. In addition, piggy back mortgage loans
may have different prepayment characteristics than
the other mortgage loans secured by mortgaged
properties not encumbered by junior lien mortgages.
No representation is made that any other first lien
mortgage loans secured by mortgaged properties in
either group are not subject to junior liens in
favor of persons other than HomeGold, Inc.
See "The Mortgage Pool--Pool Information" in this
prospectus supplement.
S-16
<PAGE>
THE INSURER
The following information has been supplied by Financial Security Assurance
Inc. (the "Insurer") for inclusion in this Prospectus Supplement.
General
The Insurer is a monoline insurance company incorporated in 1984 under the
laws of the State of New York. The Insurer is licensed to engage in financial
guaranty insurance business in all 50 states, the District of Columbia and
Puerto Rico.
The Insurer and its subsidiaries are engaged in the business of writing
financial guaranty insurance, principally in respect of securities offered in
domestic and foreign markets. In general, financial guaranty insurance consists
of the issuance of a guaranty of scheduled payments of an issuer's securities,
thereby enhancing the credit rating of those securities in consideration for the
payment of a premium to the insurer. The Insurer and its subsidiaries
principally insure asset-backed, collateralized and municipal securities.
Asset-backed securities are generally supported by residential mortgage loans,
consumer or trade receivables, securities or other assets having an
ascertainable cash flow or market value. Collateralized securities include
public utility first mortgage bonds and sale/leaseback obligation bonds.
Municipal securities consist largely of general obligation bonds, special
revenue bonds and other special obligations of state and local governments. The
Insurer insures both newly-issued securities sold in the primary market and
outstanding securities sold in the secondary market that satisfy the Insurer's
underwriting criteria.
The Insurer is a wholly-owned subsidiary of Financial Security Assurance
Holdings Ltd. ("Holdings"), a New York Stock Exchange listed company. Major
shareholders of Holdings include Fund American Enterprises Holdings, Inc.,
MediaOne Capital Corporation, The Tokio Marine and Fire Insurance Co., Ltd. and
XL Capital Ltd. No shareholder of Holdings is obligated to pay any debt of the
Insurer or any claim under any insurance policy issued by the Insurer or to make
any additional contribution to the capital of the Insurer.
The principal executive offices of the Insurer are located at 350 Park
Avenue, New York, New York 10022, and its telephone number at that location is
(212) 826-0100.
Reinsurance
Pursuant to an intercompany agreement, liabilities on financial guaranty
insurance written or reinsured from third parties by the Insurer or any of its
domestic or Bermuda operating insurance company subsidiaries are generally
reinsured among such companies on an agreed-upon percentage substantially
proportional to their respective capital, surplus and reserves, subject to
applicable statutory risk limitations. In addition, the Insurer reinsures a
portion of its liabilities under certain of its financial guaranty insurance
policies with other reinsurers under various quota share treaties and on a
transaction-by-transaction basis. Such reinsurance is utilized by the Insurer as
a risk management device and to comply with certain statutory and rating agency
requirements; it does not alter or limit the Insurer's obligations under any
financial guaranty insurance policy.
S-17
<PAGE>
Rating of Claims-Paying Ability
The Insurer's insurance financial strength is rated "Aaa" by Moody's. The
Insurer's insurer financial strength is rated "AAA" by S&P and Standard & Poor's
(Australia) Pty. Ltd. The Insurer's claims-paying ability is rated "AAA" by
Fitch IBCA, Inc. and Japan Rating and Investment Information, Inc. Such ratings
reflect only the views of the respective rating agencies, are not
recommendations to buy, sell or hold securities and are subject to revision or
withdrawal at any time by such rating agencies. See "Ratings" herein.
Capitalization
The following table sets forth the capitalization of the Insurer and its
subsidiaries on the basis of generally accepted accounting principles as of
March 31, 1999 (in thousands):
March 31, 1999
--------------
(Unaudited)
Deferred Premium Revenue
(net of prepaid reinsurance premiums) ................. $ 512,383
Surplus Notes .............................................. 120,000
Minority Interest .......................................... 20,973
Shareholder's Equity:
Common Stock .......................................... 15,000
Additional Paid-In Capital ............................ 706,117
Accumulated Other Comprehensive
Income (net of deferred income taxes) ............. 25,879
Accumulated Earnings .................................. 391,745
Total Shareholder's Equity ................................. 1,138,741
----------
Total Deferred Premium Revenue, Surplus Notes,
Minority Interest and Shareholder's Equity ............ $1,792,097
==========
For further information concerning the Insurer, see the Consolidated
Financial Statements of the Insurer and Subsidiaries, and the notes thereto,
incorporated by reference herein. The Insurer's financial statements are
included as exhibits to the Annual Report on Form 10-K and Quarterly Reports on
Form 10-Q filed with the Securities and Exchange Commission by Holdings and may
be reviewed at the EDGAR website maintained by the Securities and Exchange
Commission and at Holdings's website, http://www.FSA.com. Copies of the
statutory quarterly and annual statements filed with the State of New York
Insurance Department by the Insurer are available upon request to the State of
New York Insurance Department.
Incorporation of Certain Documents by Reference
In addition to the documents described under "Incorporation of Certain
Information by Reference" in the Prospectus, the financial statements of the
Insurer included in or as exhibits to the following documents which have been
filed with the Securities and Exchange Commission by
S-18
<PAGE>
Holdings, are hereby incorporated by reference in this Prospectus Supplement:
(a) the Annual Report on Form 10-K for the year ended December 31, 1998 and (b)
the Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.
All financial statements of the Insurer and its subsidiaries included in
documents filed by Holdings pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended, subsequent to the date of this
Prospectus Supplement and prior to the termination of the offering of the Class
A Notes shall be deemed to be incorporated by reference into this Prospectus
Supplement and to be a part hereof from the respective dates of filing such
documents.
The Originator has informed the Insurer that the Originator will provide
without charge to any person to whom this Prospectus Supplement is delivered,
upon oral or written request of such person, a copy of any or all of the
foregoing financial statements incorporated by reference. Requests for such
copies should be directed to HomeGold, Inc., 3901 Pelham Rd., South Carolina
29615, Attn: Laird Minor.
The Issuer hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the financial
statements of the Insurer included in or as an exhibit to the Annual Report of
Holdings filed pursuant to section 13(a) or section 15(d) of the Securities and
Exchange Act of 1934 that is incorporated by reference in the Registration
Statement (as defined in the Prospectus) shall be deemed to be a new
registration statement relating to the Notes, and the offering of the Notes at
that time shall be deemed to be the initial bona fide offering thereof.
Insurance Regulation
The Insurer is licensed and subject to regulation as a financial guaranty
insurance corporation under the laws of the State of New York, its state of
domicile. In addition, the Insurer and its insurance subsidiaries are subject to
regulation by insurance laws of the various other jurisdictions in which they
are licensed to do business. As a financial guaranty insurance corporation
licensed to do business in the State of New York, the Insurer is subject to
Article 69 of the New York Insurance Law which, among other things, limits the
business of each such insurer to financial guaranty insurance and related lines,
requires that each such insurer maintain a minimum surplus to policyholders,
establishes contingency, loss and unearned premium reserve requirements for each
such insurer, and limits the size of individual transactions ("Single Risks")
and the volume of transactions ("Aggregate Risks") that may be underwritten by
each such insurer. Other provisions of the New York Insurance Law, applicable to
non-life insurance companies such as the Insurer, regulate, among other things,
permitted investments, payment of dividends, transactions with affiliates,
mergers, consolidations, acquisitions or sales of assets and incurrence of
liability for borrowings.
THE TRUST
HomeGold Home Equity Loan Trust 1999-1 (the "Trust") has been formed under
the Delaware Business Trust Act pursuant to the Trust Agreement dated as of May
1, 1999 (the "Trust Agreement") among Emergent Mortgage Holdings Corporation
(the "Seller") and Wilmington Trust Company, as Owner Trustee (the "Owner
Trustee") for the sole purpose of acquiring the property of
S-19
<PAGE>
the Trust (the "Trust Property"), issuing the HomeGold Home Equity Loan Asset
Backed Securities, Series 1999-1 (the "Securities") and engaging in activities
incidental thereto. The Trust has no prior operating experience. Wilmington
Trust Company has been named as Owner Trustee under the Trust Agreement.
Substantially all of the beneficial ownership interests in the Trust are owned
by Emergent Mortgage Holdings Corporation, in its capacity as Seller. The Trust
Property consists primarily of two groups of closed-end, fixed-rate and
adjustable-rate home equity loans secured by first and/or junior mortgages on
single family residences (which may be attached, detached, two-to-four family
dwelling, a condominium unit, townhouse or a unit in a planned unit development)
including manufactured houses (the "Mortgage Loans").
THE SERVICER AND THE ORIGINATOR
HomeGold, Inc., formerly known as Emergent Mortgage Corp. (the "Servicer"
and the "Originator"), a South Carolina corporation, headquartered in
Greenville, South Carolina, will serve as the Servicer for the Mortgage Loans
pursuant to the Sale and Servicing Agreement dated as of May 1, 1999 (the "Sale
and Servicing Agreement"), among the Trust, Prudential Securities Secured
Financing Corporation, as Depositor (the "Depositor"), the Servicer, Fairbanks
Capital Corp., as Back-up Servicer (the "Back-up Servicer") and First Union
National Bank, as Indenture Trustee (the "Indenture Trustee"). HomeGold, Inc. is
a wholly-owned subsidiary of HomeGold Financial, Inc., formerly known as
"Emergent Group Inc."
The Originator provides mortgage loan products primarily to owners of
single family residences who use the loan proceeds for such purposes as
refinancing, debt consolidation, home purchases and improvements and educational
expenditures. The Originator originates mortgage loan products on a retail basis
through direct mail marketing techniques through its call center in Greenville,
South Carolina and on a wholesale basis through approximately 700 independent
mortgage brokers and mortgage bankers. The Originator's mortgage lending
operations are currently conducted in 44 states.
Prior to this offering, the Originator has completed five asset-backed
securitization transactions for mortgage loans, and former subsidiaries of
HomeGold Financial, Inc. have completed four asset-backed securitization
transactions: one for auto loans and three for commercial loans.
At March 31, 1999, HomeGold, Inc. had approximately $142.7 million in
assets, approximately $144.6 million in liabilities and approximately $(1.9)
million in stockholders' equity. Of such $144.6 million in liabilities,
approximately $130.2 million represented subordinated indebtedness to its
parent, HomeGold Financial, Inc., or subsidiaries of HomeGold Financial, Inc.
Effective May 1, 1999, $20 million of such subordinated indebtedness was
converted into equity, increasing stockholders' equity by approximately that
amount.
S-20
<PAGE>
HOMEGOLD FINANCIAL, INC.
HomeGold Financial, Inc., formerly known as Emergent Group, Inc., and its
subsidiaries (collectively, the "Company") are primarily engaged in the business
of originating, selling, securitizing and servicing first and second residential
mortgage loan products. Prior to November 1998, the Company also engaged in the
business of originating, selling, securitizing and servicing small-business loan
products partially guaranteed by the United States Small Business Administration
("SBA") and small-business loans collateralized by accounts receivable and
inventory and mezzanine loans (collectively, "Small-Business Loans"), and, to a
lesser extent until March 1998, auto loans ("Auto Loans"). The Company makes
substantially all of its loans to non-prime borrowers who have limited access to
credit or who may be considered credit-impaired by conventional lending
standards.
The Company commenced its lending operations in 1991 with the acquisition
of Carolina Investors, Inc. ("CII"), a South Carolina non-prime mortgage lender,
which had been in business since 1963. Since such acquisition, the Company has
significantly expanded its lending operations and through December 31, 1997
experienced a compounded annual growth rate in total loan originations of 84%.
During 1998, loan production dropped 29%. During the years 1998, 1997 and 1996,
the Company originated $787.3 million, $1.3 billion and $438.8 million in loans,
respectively. The loan growth in prior years was accelerated by the
implementation of the Company's retail mortgage loan origination strategy during
1996 and 1997. Of the Company's loan originations for the year ended December
31, 1998, 84% were mortgage loans, 16% were Small Business Loans and less than
1% were Auto Loans. The auto loan division was sold in the first quarter of
1998, while the small-business loan division was sold in fourth quarter 1998,
and the Company no longer makes Small Business Loans or Auto Loans.
The Company's mortgage loan operation is conducted through its two
wholly-owned subsidiary companies, HomeGold, Inc. and CII. At the time of
acquisition, CII had approximately $32 million in mortgage loans (located
primarily in the state of South Carolina) and did not sell any loans in the
secondary market. Since the Company acquired CII, it has expanded its mortgage
operations significantly. In connection with this expansion, the Originator was
formed by the Company to expand its mortgage origination business outside of the
State of South Carolina. The Company has significantly increased its loan
originations, initially through establishing relationships with mortgage bankers
and mortgage brokers through which it originated mortgage loans on a wholesale
basis and, beginning in April 1996, through its retail operations. During 1996,
1997 and 1998, the Company sold $284.8 million, $435.3 million and $623.7
million, respectively, in mortgage loans.
At March 31, 1999, the Company had approximately $217.4 million in assets,
approximately $202.5 million in liabilities (including minority interest) and
approximately $14.9 million in stockholder's equity.
S-21
<PAGE>
THE BACK-UP SERVICER
Fairbanks Capital Corp., a Utah Corporation (the "Back-up Servicer"), will
serve as the Back-up Servicer for the Mortgage Loans. The Insurer is a
shareholder of the Back-up Servicer. See "Description of the Notes--Servicing;
Back-up Servicing Provisions" and "--Servicing and Other Compensation and
Payment of Expenses".
THE MORTGAGE POOLS
General
The mortgage pools backing the Notes (the "Mortgage Pools") will consist of
the Mortgage Loans which are segregated into two groups. The Class A-1 Notes
will be principally secured by one group ("Group I") of Mortgage Loans (the
"Group I Mortgage Loans") and the Class A-2 Notes will be principally secured by
the other group ("Group II") of Mortgage Loans (the "Group II Mortgage Loans").
Payments on the Class A-1 Notes will be made generally from the Available
Distribution Amount for Group I and payments on the Class A-2 Notes will be made
generally from the Available Distribution Amount for Group II. Group I and Group
II are referred to together herein as the "Groups" and each singularly as a
"Group."
The Mortgage Loans are secured by first and/or junior lien mortgages or
deeds of trust or other similar security instruments on single family residences
(which may be attached, detached, two-to-four family units, a condominium,
townhouse or a unit in a planned unit development) and manufactured housing.
Certain of the Mortgage Loans have combined loan-to-value ratios in excess of
100% (the "HLTV Mortgage Loans"). The Mortgage Loans to be included in the
Mortgage Pools were originated or acquired by the Originator in the ordinary
course of business and will be sold by the Originator to the Seller,
subsequently sold by the Seller to the Depositor and subsequently sold by the
Depositor to the Trust and then pledged by the Trust to the Indenture Trustee.
See "--Underwriting Standards; Representations" herein. The Originator will act
as the Servicer for the Mortgage Loans pursuant to the Sale and Servicing
Agreement.
The HLTV Mortgage Loans may present a greater risk of loss than the
Mortgage Loans with loan-to-value ratios less than 100% due to several factors.
Different underwriting criteria are used for HLTV Mortgage Loans because the
mortgagor's creditworthiness is the primary consideration for a HLTV Mortgage
Loan. Thus, some HLTV Mortgage Loans may be of a different credit quality and
less likely to experience delinquency than loans with a lower combined
loan-to-value ratio. However, the properties securing the HLTV Mortgage Loans
are unlikely to provide adequate security for the HLTV Mortgage Loans, so in the
event of serious delinquency, losses thereon may be more severe. Any losses in
connection with such HLTV Mortgage Loans may affect the timing of principal
payments. Also, if the mortgagor for a HLTV Mortgage Loan relocates and sells
the Mortgaged Property or takes on more consumer debt, the mortgagor's ability
to service its debt may be impaired, and the likelihood of delinquencies,
defaults and losses will increase.
A large number of the single-family residences and manufactured housing
secured by the Mortgage Loans (the "Mortgaged Properties") are also encumbered
by junior lien mortgages held by the Originator ("Piggy Back Mortgage Loans").
The Trust will also include certain junior lien Mortgage Loans. In some cases,
these junior lien Mortgage Loans are Piggy Back Mortgage Loans.
S-22
<PAGE>
The statistical information presented in this Prospectus Supplement
describes the Mortgage Loans and the characteristics of such Mortgage Loans as
of May 1, 1999.
Pool Information
Mortgage Loans
Set forth below is certain summary statistical information regarding the
Mortgage Loans expected to be included in the Trust as of May 27, 1999 (the
"Closing Date"). All such information is approximate and is given as of May 1,
1999 (the "Cut-off Date").
Group I Mortgage Loans
There are 679 Group I Mortgage Loans secured by Mortgaged Properties
located in 35 states. With respect to the Group I Mortgage Loans as of the
Cut-off Date: the aggregate Stated Principal Balance (as defined herein) was
$20,351,882.24; the Stated Principal Balances ranged from $1,281.35 to
$447,294.91; the average Stated Principal Balance was $29,973.32; the Mortgage
Rates ranged from 8.000% to 18.428%; 18.74% of the Group I Mortgage Loans had
combined loan-to-value ratios in excess of 100%; the weighted average Mortgage
Rate was 12.005%; 67.27% of the Group I Mortgage Loans are secured by first lien
mortgages; 32.73% of the Group I Mortgage Loans are secured by junior lien
mortgages; 96.39% of the aggregate Stated Principal Balances of the Group I
Mortgage Loans were secured by mortgages on owner-occupied properties; 45.05% of
the aggregate Stated Principal Balances of the Group I Mortgage Loans were fully
amortizing; 54.95% of the aggregate Stated Principal Balances of the Group I
Mortgage Loans were partially amortizing ("Balloon Loans"); the original
loan-to-value ratios ranged from 4.98% to 133.61%; the weighted average original
loan-to-value ratio was 60.72%; the weighted average original combined
loan-to-value ratio was 91.31%; the original terms to stated maturity ranged
from 35 months to 363 months; the weighted average original term to stated
maturity was 198.55 months; the remaining terms to stated maturity ranged from
11 months to 359 months; the weighted average remaining term to stated maturity
was 182.74 months; and no more than 2.20% of the Group I Mortgage Loans are
secured by Mortgaged Properties located in any one postal zip code area.
S-23
<PAGE>
Original Principal Balances of the Group I Mortgage Loans
<TABLE>
<CAPTION>
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Range of Original Principal Balances Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
$ 0.01 to 25,000.00 316 $ 4,688,607.09 23.04%
25,000.01 to 50,000.00 329 11,441,685.15 56.22
50,000.01 to 75,000.00 19 1,133,093.71 5.57
75,000.01 to 100,000.00 5 424,469.18 2.09
150,000.01 to 175,000.00 1 154,517.79 0.76
175,000.01 to 200,000.00 1 199,670.61 0.98
200,000.01 to 250,000.00 3 664,742.88 3.27
250,000.01 to 300,000.00 3 820,596.57 4.03
350,000.01 to 400,000.00 1 377,204.35 1.85
450,000.01 to 500,000.00 1 447,294.91 2.20
- ---------------------------------------------- ---------------------- --------------------- ----------------------
Total................................... 679 $20,351,882.24 100.00%
============================================== ====================== ===================== ======================
<CAPTION>
Amortization for the Group I Mortgage Loans
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Amortization Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
Fully Amortizing 372 $ 9,167,563.59 45.05%
Partially Amortizing 307 11,184,318.65 54.95
- ---------------------------------------------- ---------------------- --------------------- ----------------------
Total................................. 679 $20,351,882.24 100.00%
============================================== ====================== ===================== ======================
<CAPTION>
Next Due Date for the Group I Mortgage Loans
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Next Due Date (month) Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
April 1999 130 $3,683,761.53 18.10%
May 1999 475 14,875,694.08 73.09
June 1999 71 1,756,804.18 8.63
July 1999 2 29,203.92 0.14
August 1999 1 6,418.53 0.03
- ---------------------------------------------- ---------------------- --------------------- ----------------------
Total................................. 679 $20,351,882.24 100.00%
============================================== ====================== ===================== ======================
</TABLE>
S-24
<PAGE>
Current Principal Balances
for the Group I Mortgage Loans
<TABLE>
<CAPTION>
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Range of Original Principal Balances Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
$ 0.01 to 25,000.00 333 $ 5,048,429.86 24.81%
25,000.01 to 50,000.00 311 11,020,356.36 54.15
50,000.01 to 75,000.00 21 1,258,949.00 6.19
75,000.01 to 100,000.00 4 360,119.91 1.77
150,000.01 to 175,000.00 1 154,517.79 0.76
175,000.01 to 200,000.00 1 199,670.61 0.98
200,000.01 to 250,000.00 3 664,742.88 3.27
250,000.01 to 300,000.00 3 820,596.57 4.03
350,000.01 to 400,000.00 1 377,204.35 1.85
400,000.01 to 450,000.00 1 447,294.91 2.20
- ---------------------------------------------- --------------------- ---------------------- ---------------------
Total............................. 679 $ 20,351,882.24 100.00%
============================================== ===================== ====================== =====================
<CAPTION>
Lien Position for the Group I Mortgage Loans
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Lien Position Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
First Lien 359 $13,691,123.90 67.27%
Junior Lien 320 6,660,758.34 32.73
- ---------------------------------------------- ---------------------- --------------------- ----------------------
Total................................. 679 $20,351,882.24 100.00%
============================================== ====================== ===================== ======================
<CAPTION>
Occupancy Status for the Group I Mortgage Loans(1)
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Occupancy Status Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
Owner Occupied 653 $19,617,359.09 96.39%
Non-Owner Occupied 26 734,523.15 3.61
- ---------------------------------------------- ---------------------- --------------------- ----------------------
Total................................... 679 $20,351,882.24 100.00%
============================================== ====================== ===================== ======================
</TABLE>
(1) The occupancy status of a Mortgaged Property is as represented by the
mortgagor in its loan application.
S-25
<PAGE>
Gross Mortgage Interest Rates of the Group I Mortgage Loans
<TABLE>
<CAPTION>
Range of Gross Mortgage Number of Mortgage Aggregate Unpaid Percentage of Cut-Off Date
Interest Rates Loans Principal Balance Aggregate Principal Balance
- ---------------------------------- ------------------- ------------------ ---------------------------
<S> <C> <C> <C>
7.751 to 8.000% 4 $ 135,415.25 0.67%
8.251 to 8.500 2 54,979.75 0.27
8.501 to 8.750 6 196,315.56 0.96
8.751 to 9.000 23 1,177,775.68 5.79
9.001 to 9.250 12 766,378.71 3.77
9.251 to 9.500 34 1,419,208.41 6.97
9.501 to 9.750 22 565,896.06 2.78
9.751 to 10.000 27 1,011,974.32 4.97
10.001 to 10.250 16 580,928.74 2.85
10.251 to 10.500 28 1,592,098.72 7.82
10.501 to 10.750 6 224,042.63 1.10
10.751 to 11.000 26 862,695.38 4.24
11.001 to 11.250 7 252,293.22 1.24
11.251 to 11.500 24 708,301.95 3.48
11.501 to 11.750 11 727,423.51 3.57
11.751 to 12.000 34 978,702.90 4.81
12.001 to 12.250 10 264,805.86 1.30
12.251 to 12.500 31 822,760.34 4.04
12.501 to 12.750 13 402,054.19 1.98
12.751 to 13.000 28 793,013.62 3.90
13.001 to 13.250 7 192,735.49 0.95
13.251 to 13.500 18 499,671.30 2.46
13.501 to 13.750 13 263,792.60 1.30
13.751 to 14.000 79 1,523,023.40 7.48
14.001 to 14.250 8 220,718.99 1.08
14.251 to 14.500 26 478,433.52 2.35
14.501 to 14.750 23 674,300.22 3.31
14.751 to 15.000 34 627,424.30 3.08
15.001 to 15.250 19 502,026.85 2.47
15.251 to 15.500 22 568,670.62 2.79
15.501 to 15.750 7 196,462.53 0.97
15.751 to 16.000 28 418,406.70 2.06
16.001 to 16.250 4 105,614.86 0.52
16.251 to 16.500 8 204,681.60 1.01
16.501 to 16.750 4 78,167.25 0.38
16.751 to 17.000 9 150,203.72 0.74
17.251 to 17.500 2 34,055.77 0.17
17.501 to 18.000 2 21,180.22 0.10
18.001 to 18.500 2 55,247.50 0.27
- ---------------------------------- ------------------- ------------------ ---------------------------
Total...................... 679 $20,351,882.24 100.00%
===================================================================================================================
<CAPTION>
Mortgage Rate Type for the Group I Mortgage Loans
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Mortgage Rate Type Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
Adjustable-Rate 24 $ 513,802.63 2.52%
Fixed-Rate 655 19,838,079.61 97.48
- ---------------------------------------------- ---------------------- --------------------- ----------------------
Total................................. 679 $20,351,882.24 100.00%
============================================== ====================== ===================== ======================
</TABLE>
S-26
<PAGE>
Original Terms of the Group I Mortgage Loans
<TABLE>
<CAPTION>
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Range of Original Terms (months) Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
25 to 36 1 $ 3,910.88 0.02%
37 to 48 2 16,470.96 0.08
49 to 60 5 37,984.98 0.19
61 to 72 8 113,305.94 0.56
73 to 84 10 61,284.47 0.30
85 to 96 9 136,939.90 0.67
97 to 108 5 54,719.17 0.27
109 to 120 60 1,119,698.98 5.50
121 to 132 22 482,430.68 2.37
133 to 144 8 187,467.10 0.92
145 to 156 7 177,407.11 0.87
157 to 168 9 127,653.97 0.63
169 to 180 296 9,854,703.34 48.42
181 to 192 110 3,481,916.58 17.11
193 to 204 1 23,496.27 0.12
217 to 228 1 18,085.05 0.09
229 to 240 49 1,533,192.35 7.53
241 to 252 15 623,515.85 3.06
253 to 264 2 49,640.27 0.24
289 to 300 3 135,679.50 0.67
301 to 312 1 31,909.19 0.16
325 to 336 1 43,995.60 0.22
349 to 360 40 1,415,869.25 6.96
361 to 372 14 620,604.85 3.05
- ---------------------------------------------- ---------------------- --------------------- ----------------------
Total.................................... 679 $20,351,882.24 100.00%
============================================== ====================== ===================== ======================
</TABLE>
S-27
<PAGE>
Original Loan-to-Value Ratios for the Group I Mortgage Loans
<TABLE>
<CAPTION>
Percentage of
Cut-Off Date
Range of Original Number of Mortgage Aggregate Unpaid Aggregate Principal
Loan-To-Value Ratios Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
0.01 to 5.00% 1 $ 3,422.10 0.02%
5.01 to 10.00 13 146,394.84 0.72
10.01 to 15.00 39 527,378.86 2.59
15.01 to 20.00 110 1,733,779.63 8.52
20.01 to 25.00 39 784,742.45 3.86
25.01 to 30.00 31 662,211.88 3.25
30.01 to 35.00 30 868,869.53 4.27
35.01 to 40.00 24 689,283.24 3.39
40.01 to 45.00 24 698,272.60 3.43
45.01 to 50.00 29 765,753.57 3.76
50.01 to 55.00 18 480,259.77 2.36
55.01 to 60.00 22 752,976.48 3.70
60.01 to 65.00 21 585,931.14 2.88
65.01 to 70.00 35 1,105,933.40 5.43
70.01 to 75.00 51 1,785,650.36 8.77
75.01 to 80.00 132 5,844,653.07 28.72
80.01 to 85.00 27 1,568,308.27 7.71
85.01 to 90.00 18 1,011,267.55 4.97
90.01 to 95.00 8 206,778.56 1.02
95.01 to 100.00 2 24,346.40 0.12
100.01 to 105.00 2 41,088.15 0.20
120.01 to 125.00 2 54,880.92 0.27
130.01 to 135.00 1 9,699.47 0.05
============================================== ====================== ===================== ======================
Total.......................... 679 $ 20,351,882.24 100.00%
============================================== ====================== ===================== ======================
</TABLE>
S-28
<PAGE>
Original Combined Loan-to-Value Ratios for the Group I Mortgage Loans(1)
<TABLE>
<CAPTION>
Percentage of
Cut-Off Date
Range of Original Combined Number of Mortgage Aggregate Unpaid Aggregate Principal
Loan-To-Value Ratios Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
10.01 to 15.00% 2 $ 16,086.00 0.08
15.01 to 20.00 1 13,168.92 0.06
20.01 to 25.00 2 25,290.19 0.12
25.01 to 30.00 5 47,131.50 0.23
30.01 to 35.00 3 62,455.84 0.31
35.01 to 40.00 4 62,611.14 0.31
40.01 to 45.00 6 142,779.43 0.70
45.01 to 50.00 12 240,185.89 1.18
50.01 to 55.00 5 85,256.08 0.42
55.01 to 60.00 19 698,038.63 3.43
60.01 to 65.00 17 433,019.80 2.13
65.01 to 70.00 32 802,789.55 3.94
70.01 to 75.00 33 964,355.65 4.74
75.01 to 80.00 82 3,116,243.63 15.31
80.01 to 85.00 32 1,193,931.77 5.87
85.01 to 90.00 47 1,175,863.22 5.78
90.01 to 95.00 45 1,201,692.62 5.90
95.01 to 100.00 217 6,257,775.36 30.75
100.01 to 105.00 19 864,983.59 4.25
105.01 to 110.00 9 245,912.11 1.21
110.01 to 115.00 12 328,893.80 1.62
115.01 to 120.00 12 382,812.26 1.88
120.01 to 125.00 60 1,935,016.95 9.51
130.01 to 135.00 1 9,699.47 0.05
140.01 to 145.00 1 38,596.08 0.19
170.01 to 180.00 1 7,292.76 0.04
============================================== ====================== ===================== ======================
Total.......................... 679 $ 20,351,882.24 100.00%
============================================== ====================== ===================== ======================
</TABLE>
(1) There are 112 first lien loans where the combined loan-to-value ratios
reflect a second lien loan which may or may not be included in the pool. No
representation is made that there are not additional first lien loans on
properties subject to junior liens in favor of persons other than the
Originator.
S-29
<PAGE>
Geographic Distribution of the Group I Mortgage Loans
<TABLE>
<CAPTION>
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
State Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
Arizona 1 $ 38,365.22 0.19%
Arkansas 3 105,417.81 0.52
Colorado 1 15,375.56 0.08
Florida 34 1,260,903.96 6.20
Georgia 32 815,193.51 4.01
Idaho 1 17,363.89 0.09
Illinois 10 267,372.19 1.31
Indiana 9 191,407.52 0.94
Iowa 5 98,007.70 0.48
Kansas 12 288,339.22 1.42
Kentucky 25 366,410.67 1.80
Louisiana 20 874,729.42 4.30
Maine 1 9,530.53 0.05
Maryland 9 471,081.40 2.31
Massachusetts 2 52,345.77 0.26
Michigan 18 435,124.58 2.14
Minnesota 1 31,114.82 0.15
Mississippi 18 467,224.79 2.30
Missouri 15 407,029.85 2.00
Montana 4 92,460.99 0.45
Nebraska 3 68,021.23 0.33
New Jersey 1 24,726.57 0.12
New Mexico 4 79,912.68 0.39
North Carolina 79 2,845,758.56 13.98
Ohio 4 83,630.15 0.41
Oklahoma 2 22,857.63 0.11
Oregon 2 29,367.75 0.14
Pennsylvania 8 174,248.32 0.86
South Carolina 276 7,966,421.54 39.14
Tennessee 21 776,600.46 3.82
Texas 29 1,042,733.58 5.12
Utah 1 23,755.00 0.12
Virginia 18 678,322.92 3.33
Washington 1 27,784.97 0.14
West Virginia 9 202,941.48 1.00
- -------------------------------------------- ------------------- ------------------ -------------------
Total.......................... 679 $ 20,351,882.24 100.00%
============================================== ====================== ===================== ======================
</TABLE>
S-30
<PAGE>
Loan Purpose for the Group I Mortgage Loans
<TABLE>
<CAPTION>
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Loan Purpose Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
Bond For Title 10 $ 216,917.07 1.07%
Purchase Money Mortgage (No Cash Out) 60 1,659,442.48 8.15
Purchase Money Mortgage (Cash Out) 24 771,731.08 3.79
Converted Construction to Permanent 3 39,656.17 0.19
Refinance of Terms (No Cash Out) 51 1,600,773.34 7.87
Refinance of Terms (Cash Out) 175 5,548,410.74 27.26
Debt Consolidation (No Cash Out) 47 1,794,360.33 8.82
Debt Consolidation (Cash Out) 142 3,418,533.80 16.80
Home Improvement (No Cash Out) 48 1,653,086.58 8.12
Home Improvement (Cash Out) 42 936,919.25 4.60
Home Improvement w/Escrow(No Cash Out) 10 292,927.33 1.44
Home Improvement w/Escrow(Cash Out) 10 267,203.79 1.31
MultiPurpose Refinance (No Cash Out) 19 626,961.20 3.08
MultiPurpose Refinance (Cash Out) 37 1,486,093.24 7.30
Lease Purchase (No Cash Out) 1 38,865.84 0.19
- ------------------------------------------------- ---------------------- --------------------- ----------------------
Total.................................. 679 $ 20,351,882.24 100.00%
================================================= ====================== ===================== ======================
<CAPTION>
Property Type for the Group I Mortgage Loans
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Property Type Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
Investor Rental Property 22 $ 690,774.53 3.39%
Mobile/Manufactured Homes 132 4,089,848.41 20.10
Mobile/Manufactured over 5 Acres 3 54,467.30 0.27
Primary Financing Only(1) 84 2,016,893.09 9.91
Raw Land 1 7,487.86 0.04
Residential Property 435 13,459,507.38 66.13
Residential Property over 5 Acres 2 32,903.67 0.16
- ------------------------------------------------- ---------------------- --------------------- ----------------------
Total.................................. 679 $ 20,351,882.24 100.00%
================================================= ====================== ===================== ======================
</TABLE>
(1)Equivalent to Single Family Residences
S-31
<PAGE>
Origination Method for the Group I Mortgage Loans
<TABLE>
<CAPTION>
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Origination Method Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
Retail 286 $ 8,443,570.58 41.49%
Wholesale 393 11,908,311.66 58.51
- ------------------------------------------------- ---------------------- --------------------- ----------------------
Total.................................. 679 $ 20,351,882.24 100.00%
================================================= ====================== ===================== ======================
<CAPTION>
Risk Categories for the Group I Mortgage Loans(1)
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Risk Categories Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
AA 68 $ 2,755,932.83 13.54%
A 175 4,149,525.05 20.39
A- 186 6,568,586.37 32.28
B 109 3,010,921.01 14.79
C 121 3,319,569.08 16.31
D 20 547,347.90 2.69
- ---------------------------------------------- ---------------------- --------------------- ----------------------
Total.................................. 679 $ 20,351,882.24 100.00%
============================================== ====================== ===================== ======================
</TABLE>
(1) Per the Originator's Underwriting Guidelines. See "Underwriting Standards;
Representations" herein.
S-32
<PAGE>
Remaining Months To Stated Maturity for the Group I Mortgage Loans
<TABLE>
<CAPTION>
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Range of Remaining Terms (months) Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
1 to 12 1 $ 1,403.06 0.01%
13 to 24 6 24,072.48 0.12
25 to 36 10 58,842.93 0.29
37 to 48 8 68,779.26 0.34
49 to 60 8 91,845.33 0.45
61 to 72 15 223,871.05 1.10
73 to 84 8 92,322.11 0.45
85 to 96 16 324,978.83 1.60
97 to 108 37 853,237.12 4.19
109 to 120 33 614,056.76 3.02
121 to 132 5 106,640.56 0.52
133 to 144 18 545,302.43 2.68
145 to 156 37 1,225,870.82 6.02
157 to 168 154 5,395,566.40 26.51
169 to 180 201 6,343,033.07 31.17
181 to 192 7 216,021.96 1.06
193 to 204 2 39,050.75 0.19
205 to 216 4 107,250.24 0.53
217 to 228 22 826,669.96 4.06
229 to 240 28 945,008.73 4.64
277 to 288 4 117,858.32 0.58
289 to 300 2 103,062.82 0.51
301 to 312 4 140,319.77 0.69
313 to 324 3 113,552.23 0.56
325 to 336 7 279,114.87 1.37
337 to 348 12 421,450.55 2.07
349 to 360 27 1,072,699.83 5.27
- ---------------------------------------------- ---------------------- --------------------- ----------------------
Total.................................. 679 $ 20,351,882.24 100.00%
============================================== ====================== ===================== ======================
</TABLE>
S-33
<PAGE>
Age of the Group I Mortgage Loans
<TABLE>
<CAPTION>
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Range of Ages (months) Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
1 to 12 345 $ 10,595,744.76 52.06%
13 to 24 204 6,615,091.37 32.50
25 to 36 49 1,667,244.88 8.19
37 to 48 23 539,444.68 2.65
49 to 60 18 371,431.65 1.83
61 to 72 9 133,520.50 0.66
73 to 84 19 275,478.23 1.35
85 to 96 12 153,926.17 0.76
- ------------------------------------------------- ---------------------- --------------------- ----------------------
Total.............................. 679 $ 20,351,882.24 100.00%
================================================= ====================== ===================== ======================
<CAPTION>
Debt-to-Income Ratios for the Group I Mortgage Loans
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Range of Original Debt-to-Income Ratio Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
5.01 to 10.00% 5 $ 132,231.36 0.65%
10.01 to 15.00 23 535,432.92 2.63
15.01 to 20.00 43 992,288.26 4.88
20.01 to 25.00 52 1,395,479.15 6.86
25.01 to 30.00 73 1,838,075.45 9.03
30.01 to 35.00 92 3,025,750.72 14.87
35.01 to 40.00 94 2,702,566.35 13.28
40.01 to 45.00 152 4,491,876.96 22.07
45.01 to 50.00 116 4,517,640.53 22.20
50.01 to 55.00 21 546,343.63 2.68
55.01 to 60.00 3 73,261.15 0.36
60.01 to 65.00 1 22,573.32 0.11
65.01 to 70.00 2 36,270.32 0.18
70.01 to 75.00 1 19,256.00 0.09
85.01 to 90.00 1 22,836.12 0.11
- ------------------------------------------------- ---------------------- --------------------- ----------------------
Total........................... 679 $ 20,351,882.24 100.00%
================================================= ====================== ===================== ======================
</TABLE>
S-34
<PAGE>
Income Documentation Level for the Group I Mortgage Loans
<TABLE>
<CAPTION>
Percentage of
Cut-Off Date
Income Documentation Number of Mortgage Aggregate Unpaid Aggregate Principal
Level Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
Full Documentation 662 $ 19,577,475.29 96.19%
Stated Documentation 10 504,712.69 2.48
Lite Documentation 7 269,694.26 1.33
- ----------------------------------------------------------------------------------------------------------------
Total...................... 679 $ 20,351,882.24 100.00%
================================================================================================================
<CAPTION>
Gross Margins for the Group I Adjustable-Rate Mortgage Loans
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Range of Gross Margins Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
3.001 to 4.000% 2 $ 21,369.67 4.16%
4.001 to 5.000 6 150,334.46 29.26
5.001 to 6.000 4 109,502.00 21.31
6.001 to 7.000 5 350,113.33 25.36
7.001 to 8.000 7 102,288.81 19.91
- ------------------------------------------------- ---------------------- --------------------- ------------------
Total.................................. 24 $ 513,802.63 100.00%
================================================= ====================== ===================== ==================
</TABLE>
S-35
<PAGE>
Life Cap for the Group I Adjustable-Rate Mortgage Loans
<TABLE>
<CAPTION>
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Range of Gross Life Caps Loans Principal Balance Balance
- ------------------------------------------------- --------------------- ------------------ -------------------
<S> <C> <C> <C>
17.001 to 17.500% 16 $ 350,113.33 68.14%
17.501 to 18.000 8 163,689.30 31.86
- ------------------------------------------------- ---------------------- --------------------- ----------------------
Total................................ 24 $ 513,802.63 100.00%
================================================= ====================== ===================== ======================
<CAPTION>
Life Floor for the Group I Adjustable-Rate Mortgage Loans
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Range of Gross Life Floors Loans Principal Balance Balance
- -------------------------------------------- ------------------- -------------------- ---------------------
<S> <C> <C> <C>
10.001 to 10.500% 1 $ 8,547.15 1.66%
10.501 to 11.000 5 89,377.98 17.40
11.001 to 11.500 3 39,391.74 7.67
11.501 to 12.000 9 225,668.69 43.92
12.001 to 12.500 4 111,488.28 21.70
13.001 to 13.500 1 4,332.45 0.84
13.501 to 14.000 1 34,996.34 6.81
- ------------------------------------------------- ---------------------- --------------------- ----------------------
Total.................................. 24 $ 513,802.63 100.00%
================================================= ====================== ===================== ======================
<CAPTION>
Interest Adjustment Frequency for the Group I Adjustable-Rate Mortgage Loans
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Interest Adjustment Frequency Loans Principal Balance Balance
- ------------------------------------------------ ---------------------- ------------------ -------------------
<S> <C> <C> <C>
1 Month 2 $ 35,999.25 7.01%
36 Months 22 477,803.38 92.99
- ------------------------------------------------- ---------------------- --------------------- ----------------------
Total.................................. 24 $ 513,802.63 100.00%
================================================= ====================== ===================== ======================
</TABLE>
S-36
<PAGE>
Next Adjustment Date for the Group I Adjustable-Rate Mortgage Loans
<TABLE>
<CAPTION>
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Next Adjustment Date Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
May 1999 2 $ 35,999.25 7.01%
November 1999 1 16,855.95 3.28
December 1999 1 8,547.15 1.66
May 2000 2 69,655.51 13.56
August 2000 1 2,528.11 0.49
September 2000 1 6,179.22 1.20
October 2000 1 8,322.18 1.62
November 2000 3 75,646.17 14.72
December 2000 3 64,400.40 12.53
January 2001 5 135,367.59 26.35
July 2001 1 29,355.91 5.71
August 2001 1 23,976.54 4.67
October 2001 1 13,324.48 2.59
January 2002 1 23,644.17 4.60
- ------------------------------------------------- ---------------------- --------------------- ----------------------
Total................................ 24 $ 513,802.63 100.00%
================================================= ====================== ===================== ======================
<CAPTION>
Periodic Interest Cap
for the Group I Adjustable-Rate Mortgage Loans
Number of Mortgage Aggregate Unpaid Percentage of Cut-Off Date
Periodic Cap Loans Principal Balance Aggregate Principal Balance
- ----------------------------- ------------------- ----------------- -----------------------------
<S> <C> <C> <C>
2.000% 23 $ 501,628.20 97.63%
7.000 1 12,174.43 2.37
- ------------------------------- -------------------- -------------------------- -------------------------------------
Total.................. 24 $ 513,802.63 100.00%
=============================== ==================== ========================== =====================================
</TABLE>
S-37
<PAGE>
Group II Mortgage Loans
There are 594 Group II Mortgage Loans secured by Mortgaged Properties
located in 34 states and the District of Columbia. With respect to the Group II
Mortgage Loans as of the Cut-off Date: the aggregate Stated Principal Balance
(as defined herein) was $39,277,999.04; the Stated Principal Balances ranged
from $14,406.87 to $206,250.00; the average Stated Principal Balance was
$66,124.58; the Mortgage Rates ranged from 6.100% to 18.990%; 16.21% of the
Group II Mortgage Loans had combined loan-to-value ratios in excess of 100%; the
weighted average Mortgage Rate was 10.649%; 92.80% of the Group II Mortgage
Loans are secured by first lien mortgages; 7.20% of the Group II Mortgage Loans
are secured by junior lien mortgages; 96.00% of the aggregate Stated Principal
Balances of the Group II Mortgage Loans were secured by mortgages on
owner-occupied properties; 43.62% of the aggregate Stated Principal Balances of
the Group II Mortgage Loans were fully amortizing; 56.38% of the aggregate
Stated Principal Balances of the Group II Mortgage Loans were Balloon Loans; the
original loan-to-value ratios ranged from 11.80% to 138.18%, the weighted
average original loan-to-value ratio was 77.38%; the weighted average original
combined loan-to-value ratio was 93.40%; the original terms to stated maturity
ranged from 60 months to 370 months; the weighted average original term to
stated maturity was approximately 237.14 months; the remaining terms to stated
maturity ranged from 33 months to 359 months; the weighted average remaining
term to stated maturity was approximately 222.89 months; no more than 2.05% of
the Group II Mortgage Loans are secured by Mortgaged Properties located in any
one postal zip code area; 100.00% of the Group II adjustable-rate Mortgage Loans
had an interest adjustment frequency of 36 months; and 100.00% of the Group II
adjustable-rate Mortgage Loans had a periodic interest cap of 2.000%.
Original Principal Balances of the Group II Mortgage Loans
<TABLE>
<CAPTION>
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Range of Original Principal Balances Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
$ 25,000.01 to 50,000.00 133 $ 6,151,498.82 15.66%
50,000.01 to 75,000.00 333 19,701,154.19 50.16
75,000.01 to 100,000.00 71 6,099,107.89 15.53
100,000.01 to 150,000.00 47 5,596,429.35 14.25
150,000.01 to 175,000.00 6 955,180.54 2.43
175,000.01 to 200,000.00 3 568,378.25 1.45
200,000.01 to 250,000.00 1 206,250.00 0.53
- ---------------------------------------------- ---------------------- --------------------- ----------------------
Total............................. 594 $ 39,277,999.04 100.00%
============================================== ====================== ===================== ======================
</TABLE>
S-38
<PAGE>
Amortization for the Group II Mortgage Loans
<TABLE>
<CAPTION>
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Amortization Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
Fully Amortizing 263 $ 17,132,018.33 43.62%
Partially Amortizing 331 22,145,980.71 56.38
- ---------------------------------------------- ---------------------- --------------------- ----------------------
Total............................. 594 $ 39,277,999.04 100.00%
============================================== ====================== ===================== ======================
<CAPTION>
Next Due Date for the Group II Mortgage Loans
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Next Due Date (month) Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
April 1999 123 $ 7,914,458.17 20.15%
May 1999 415 27,815,553.83 70.82
June 1999 55 3,409,757.91 8.68
July 1999 1 138,229.13 0.35
- ---------------------------------------------- ---------------------- --------------------- ----------------------
Total............................. 594 $ 39,277,999.04 100.00%
============================================== ====================== ===================== ======================
<CAPTION>
Current Principal Balances for the
Group II Mortgage Loans as of the Cut-Off Date
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Range of Current Principal Balances Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
$ 0.01 to 25,000.00 1 $ 14,406.87 0.04%
25,000.01 to 50,000.00 146 6,786,865.73 17.28
50,000.01 to 75,000.00 318 18,959,936.47 48.27
75,000.01 to 100,000.00 75 6,451,348.56 16.42
100,000.01 to 150,000.00 44 5,335,632.62 13.58
150,000.01 to 175,000.00 6 955,180.54 2.43
175,000.01 to 200,000.00 3 568,378.25 1.45
200,000.01 to 250,000.00 1 206,250.00 0.53
- ---------------------------------------------- ---------------------- --------------------- ----------------------
Total............................. 594 $ 39,277,999.04 100.00%
============================================== ====================== ===================== ======================
</TABLE>
S-39
<PAGE>
Lien Position for the Group II Mortgage Loans
<TABLE>
<CAPTION>
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Lien Position Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
First Lien 541 $ 36,451,466.47 92.80%
Junior Lien 53 2,826,532.57 7.20
- ---------------------------------------------- ---------------------- ----------------- ----------------------
Total.............................. 594 $ 39,277,999.04 100.00%
============================================== ====================== ================= ======================
<CAPTION>
Occupancy Status for the Group II Mortgage Loans(1)
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Occupancy Status Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
Owner Occupied 576 $ 37,708,761.92 96.00%
Non-Owner Occupied 18 1,569,237.12 4.00
- ---------------------------------------------- ---------------------- -------------------- ----------------------
Total................................ 594 $ 39,277,999.04 100.00%
============================================== ====================== ==================== ======================
</TABLE>
(1) The occupancy status of a Mortgaged Property is as represented by the
mortgagor in its loan application.
S-40
<PAGE>
Gross Mortgage Interest Rates of the Group II Mortgage Loans
<TABLE>
<CAPTION>
Percentage of
Cut-Off Date
Range of Gross Number of Mortgage Aggregate Unpaid Aggregate Principal
Mortgage Interest Rates Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
6.001 to 6.500% 1 $ 65,903.63 0.17%
8.251 to 8.500 3 289,735.30 0.74
8.501 to 8.750 26 1,617,073.45 4.12
8.751 to 9.000 46 3,201,108.39 8.15
9.001 to 9.250 37 2,372,687.09 6.04
9.251 to 9.500 78 4,796,934.11 12.21
9.501 to 9.750 38 2,607,982.07 6.64
9.751 to 10.000 67 4,583,518.58 11.67
10.001 to 10.250 28 1,933,570.93 4.92
10.251 to 10.500 33 2,182,474.11 5.56
10.501 to 10.750 19 1,313,776.33 3.34
10.751 to 11.000 36 2,463,709.05 6.27
11.001 to 11.250 15 1,143,102.51 2.91
11.251 to 11.500 23 1,538,787.94 3.92
11.501 to 11.750 11 653,806.92 1.66
11.751 to 12.000 29 2,057,018.53 5.24
12.001 to 12.250 8 639,099.30 1.63
12.251 to 12.500 15 1,200,843.97 3.06
12.501 to 12.750 4 315,123.08 0.80
12.751 to 13.000 11 694,101.98 1.77
13.001 to 13.250 3 290,478.19 0.74
13.251 to 13.500 4 238,176.94 0.61
13.751 to 14.000 8 477,067.83 1.21
14.001 to 14.250 3 144,033.62 0.37
14.251 to 14.500 3 151,961.58 0.39
14.501 to 14.750 8 402,300.71 1.02
14.751 to 15.000 6 313,968.90 0.80
15.001 to 15.250 7 349,548.24 0.89
15.251 to 15.500 8 455,726.63 1.16
15.501 to 15.750 4 208,176.01 0.53
15.751 to 16.000 7 325,871.77 0.83
16.001 to 16.250 2 89,588.50 0.23
16.251 to 16.500 1 60,686.67 0.15
16.751 to 17.000 1 48,508.04 0.12
18.501 to 19.000 1 51,548.14 0.13
- ---------------------------------------------- ---------------------- --------------------- ----------------------
Total.............................. 594 $ 39,277,999.04 100.00%
============================================== ====================== ===================== ======================
</TABLE>
S-41
<PAGE>
Mortgage Rate Type for the Group II Mortgage Loans
<TABLE>
<CAPTION>
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Mortgage Rate Type Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
Adjustable-Rate 18 $ 1,371,685.42 3.49%
Fixed-Rate 576 37,906,313.62 96.51
- ---------------------------------------------- ---------------------- --------------------- ----------------------
Total............................. 594 $ 39,277,999.04 100.00%
============================================== ====================== ===================== ======================
<CAPTION>
Original Term for the Group II Mortgage Loans
Percentage of
Cut-Off Date
Range of Number of Mortgage Aggregate Unpaid Aggregate Principal
Original Terms Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
49 to 60 2 $ 124,030.08 0.32%
73 to 84 1 62,305.77 0.16
97 to 108 1 34,021.66 0.09
109 to 120 7 343,727.66 0.88
121 to 132 8 480,798.15 1.22
133 to 144 3 128,032.35 0.33
145 to 156 2 96,422.28 0.25
157 to 168 2 113,029.22 0.29
169 to 180 240 15,341,200.39 39.06
181 to 192 85 5,485,161.43 13.96
217 to 228 1 135,114.70 0.34
229 to 240 72 4,273,971.97 10.88
241 to 252 20 1,496,344.10 3.81
277 to 288 1 103,143.85 0.26
289 to 300 5 326,989.97 0.83
301 to 312 2 204,650.00 0.52
349 to 360 130 9,687,565.03 24.66
361 to 372 12 841,490.43 2.14
- ---------------------------------------------- ---------------------- --------------------- ----------------------
Total................................ 594 $ 39,277,999.04 100.00%
============================================== ====================== ===================== ======================
</TABLE>
S-42
<PAGE>
Original Loan-to-Value Ratios for the Group II Mortgage Loans
<TABLE>
<CAPTION>
Percentage of
Cut-Off Date
Range of Original Number of Mortgage Aggregate Unpaid Aggregate Principal
Loan-to-Value Ratios Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
10.01 to 15.00% 1 $ 86,611.60 0.22%
25.01 to 30.00 1 44,383.18 0.11
30.01 to 35.00 7 312,725.96 0.80
35.01 to 40.00 9 476,613.43 1.21
40.01 to 45.00 10 518,831.83 1.32
45.01 to 50.00 17 964,769.94 2.46
50.01 to 55.00 13 725,914.98 1.85
55.01 to 60.00 9 534,390.86 1.36
60.01 to 65.00 12 859,859.02 2.19
65.01 to 70.00 26 1,824,659.53 4.65
70.01 to 75.00 73 4,773,271.81 12.15
75.01 to 80.00 288 19,013,257.29 48.41
80.01 to 85.00 56 3,696,080.30 9.41
85.01 to 90.00 45 3,432,742.22 8.74
90.01 to 95.00 10 646,512.07 1.65
95.01 to 100.00 9 750,581.59 1.91
100.01 to 105.00 1 41,654.55 0.11
110.01 to 115.00 1 43,868.38 0.11
115.01 to 120.00 1 63,422.79 0.16
120.01 to 125.00 1 138,229.13 0.35
125.01 to 130.00 3 277,055.69 0.71
135.01 to 140.00 1 52,562.89 0.13
- ---------------------------------------------- ---------------------- --------------------- ----------------------
Total................................ 594 $ 39,277,999.04 100.00%
============================================== ====================== ===================== ======================
</TABLE>
S-43
<PAGE>
Original Combined Loan-to-Value Ratios for the Group II Mortgage Loans(1)
<TABLE>
<CAPTION>
Percentage of
Cut-Off Date
Range of Original Combined Number of Mortgage Aggregate Unpaid Aggregate Principal
Loan-to-Value Ratios Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
10.01 to 15.00% 1 $ 86,611.60 0.22%
30.01 to 35.00 1 14,406.87 0.04
35.01 to 40.00 1 87,669.98 0.22
45.01 to 50.00 4 326,503.97 0.83
50.01 to 55.00 3 188,866.92 0.48
55.01 to 60.00 3 170,269.62 0.43
60.01 to 65.00 9 620,157.41 1.58
65.01 to 70.00 17 1,422,209.02 3.62
70.01 to 75.00 34 2,231,081.98 5.68
75.01 to 80.00 82 5,602,741.17 14.26
80.01 to 85.00 41 2,672,857.23 6.80
85.01 to 90.00 49 3,558,681.30 9.06
90.01 to 95.00 36 2,534,480.64 6.45
95.01 to 100.00 212 13,394,483.12 34.10
100.01 to 105.00 7 420,934.15 1.07
105.01 to 110.00 6 345,139.96 0.88
110.01 to 115.00 3 163,929.80 0.42
115.01 to 120.00 15 1,034,985.79 2.64
120.01 to 125.00 62 3,783,781.62 9.63
125.01 to 130.00 5 389,545.53 0.99
135.01 to 140.00 2 175,605.21 0.45
140.01 to 145.00 1 53,056.15 0.14
- ---------------------------------------------- ---------------------- --------------------- ---------------------
Total............................... 594 $ 39,277,999.04 100.00%
============================================== ====================== ===================== ======================
</TABLE>
(1) There are 292 first lien loans where the combined loan-to-value ratio
reflects a second lien loan which may or may not be included in the pool. No
representation is made that there are not additional first lien loans on
properties subject to junior liens in favor of persons other than the
Originator.
S-44
<PAGE>
Geographic Distribution of the Group II Mortgage Loans
<TABLE>
<CAPTION>
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
State Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
Arkansas 1 $ 48,644.01 0.12%
Colorado 3 200,131.91 0.51
Delaware 1 78,066.49 0.20
District of Columbia 1 128,884.65 0.33
Florida 18 1,295,355.66 3.30
Georgia 12 809,673.47 2.06
Idaho 1 45,000.00 0.11
Illinois 9 675,320.19 1.72
Indiana 11 635,490.08 1.62
Iowa 5 254,938.07 0.65
Kansas 5 328,793.51 0.84
Kentucky 1 129,275.25 0.33
Louisiana 11 722,147.12 1.84
Maine 1 47,128.16 0.12
Maryland 3 222,675.05 0.57
Michigan 11 741,213.58 1.89
Mississippi 10 645,174.33 1.64
Missouri 7 511,853.08 1.30
Montana 1 46,048.86 0.12
Nebraska 1 53,024.43 0.13
New Hampshire 1 108,729.93 0.28
New Jersey 1 206,250.00 0.53
New Mexico 3 253,766.62 0.65
North Carolina 41 3,085,404.23 7.86
Ohio 3 150,278.04 0.38
Oklahoma 4 192,182.37 0.49
Pennsylvania 8 535,540.42 1.36
South Carolina 362 23,678,244.24 60.28
South Dakota 1 56,052.49 0.14
Tennessee 17 1,135,895.49 2.89
Texas 16 918,893.54 2.34
Virginia 14 799,074.12 2.03
Washington 1 47,319.14 0.12
West Virginia 8 433,657.18 1.10
Wyoming 1 57,873.33 0.15
- ---------------------------------------------- ---------------------- --------------------- ----------------------
Total............................... 594 $ 39,277,999.04 100.00%
============================================== ====================== ===================== ======================
</TABLE>
S-45
<PAGE>
Loan Purpose for the Group II Mortgage Loans
<TABLE>
<CAPTION>
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Loan Purpose Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
Bond for Title 2 $ 96,934.16 0.25%
Purchase Money Mortgage (No Cash Out) 55 3,823,899.49 9.74
Purchase Money Mortgage (Cash Out) 19 1,377,407.42 3.51
Converted Construction to Permanent 21 1,911,230.33 4.87
Refinance of Terms (No Cash Out) 94 6,022,576.67 15.33
Refinance of Terms (Cash Out) 154 10,719,280.90 27.29
Debt Consolidation (No Cash Out) 47 2,940,095.65 7.49
Debt Consolidation (Cash Out) 71 4,142,165.98 10.55
Home Improvement (No Cash Out) 50 2,719,502.32 6.92
Home Improvement (Cash Out) 19 1,225,747.09 3.12
Home Improvement w/Escrow (No Cash Out) 9 587,486.73 1.50
Home Improvement w/Escrow (Cash Out) 6 582,205.43 1.48
MultiPurpose Refinance (No Cash Out) 17 1,046,215.94 2.66
Multi Purpose Refinance (Cash Out) 26 1,838,194.75 4.68
Lease Purchase (No Cash Out) 2 134,797.93 0.34
Lease Purchase (Cash Out) 1 51,435.99 0.13
Purchase w/Escrow (No Cash Out) 1 58,822.26 0.15
- ---------------------------------------------------- --------------------- ------------------- --------------------
Total.................................. 594 $ 39,277,999.04 100.00%
==================================================== ===================== =================== ====================
<CAPTION>
Property Type for the Group II Mortgage Loans
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Property Type Loans Principal Balance Balance
- -------------------------------------------- ------------------- ----------------- -------------------
<S> <C> <C> <C>
Investor Rental Property 13 $ 1,222,322.58 3.11%
Mobile/Manufactured Homes 155 8,951,920.74 22.79
Mobile/Manufactured over 5 Acres 18 1,118,525.06 2.85
Primary Financing Only(1) 29 1,508,224.63 3.84
Residential Property 373 25,862,484.37 65.84
Residential Property over 5 Acres 6 614,521.66 1.56
- ------------------------------------------------- ---------------------- ---------------- ----------------------
Total................................ 594 $ 39,277,999.04 100.00%
================================================= ====================== ================ ======================
</TABLE>
(1) Equivalent to Single Family Residences
S-46
<PAGE>
Origination Method for the Group II Mortgage Loans
<TABLE>
<CAPTION>
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Origination Method Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
Retail 195 $ 12,196,905.28 31.05%
Wholesale 399 27,081,093.76 68.95
- ------------------------------------------------- ---------------------- --------------------- ----------------------
Total.............................. 594 $ 39,277,999.04 100.00%
================================================= ====================== ===================== ======================
<CAPTION>
Risk Categories for the Group II Mortgage Loans(1)
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Risk Categories Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
AA 147 $ 10,003,732.90 25.47%
A 59 3,287,102.03 8.37
A- 222 14,889,101.89 37.91
B 82 5,669,167.15 14.43
C 75 4,954,853.14 12.61
D 9 474,041.93 1.21
- ---------------------------------------------- ---------------------- --------------------- ----------------------
Total.............................. 594 $ 39,277,999.04 100.00%
============================================== ====================== ===================== ======================
</TABLE>
(1) Per the Originator's Underwriting Guidelines. See "Underwriting Standards;
Representations" herein.
S-47
<PAGE>
Remaining Months To Stated Maturity for the
Group II Mortgage Loans
<TABLE>
<CAPTION>
Percentage of
Cut-Off Date
Range of Number of Mortgage Aggregate Unpaid Aggregate Principal
Remaining Terms (months) Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
25 to 36 1 $ 65,026.81 0.17%
49 to 60 1 59,003.27 0.15
73 to 84 2 96,327.43 0.25
85 to 96 3 118,773.43 0.30
97 to 108 4 227,577.27 0.58
109 to 120 9 485,648.67 1.24
121 to 132 8 483,271.51 1.23
133 to 144 10 578,077.91 1.47
145 to 156 24 1,256,717.95 3.20
157 to 168 117 7,157,087.71 18.22
169 to 180 173 11,731,287.91 29.87
181 to 192 1 65,062.19 0.17
193 to 204 2 195,900.12 0.50
205 to 216 12 781,486.83 1.99
217 to 228 21 1,129,504.88 2.88
229 to 240 57 3,786,549.72 9.64
265 to 276 4 294,867.99 0.75
277 to 288 1 138,229.13 0.35
289 to 300 7 495,622.21 1.26
301 to 312 11 893,918.76 2.28
313 to 324 9 736,983.45 1.88
325 to 336 7 431,265.14 1.10
337 to 348 34 2,309,432.99 5.88
349 to 360 76 5,760,375.76 14.67
- ---------------------------------------------- ---------------------- --------------------- ----------------------
Total.............................. 594 $ 39,277,999.04 100.00%
============================================== ====================== ===================== ======================
<CAPTION>
Age of Loan for the Group II Mortgage Loans
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Range of Ages (months) Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
0 1 $ 120,150.00 0.31%
1 to 12 339 23,482,124.09 59.78
13 to 24 168 10,032,790.70 25.54
25 to 36 41 2,425,849.52 6.18
37 to 48 21 1,397,219.65 3.56
49 to 60 16 1,180,685.36 3.01
61 to 72 5 340,822.71 0.87
73 to 84 2 204,132.76 0.52
85 to 96 1 94,224.25 0.24
- ------------------------------------------------- ---------------------- --------------------- ----------------------
Total............................... 594 $ 39,277,999.04 100.00%
================================================= ====================== ===================== ======================
</TABLE>
S-48
<PAGE>
Debt-to-Income Ratios for the Group II Mortgage Loans
<TABLE>
<CAPTION>
Percentage of
Cut-Off Date
Range of Number of Mortgage Aggregate Unpaid Aggregate Principal
Original Debt-to-Income Ratios Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
10.01 to 15.00% 2 $ 111,567.79 0.28%
15.01 to 20.00 16 1,031,631.49 2.63
20.01 to 25.00 33 2,134,509.24 5.43
25.01 to 30.00 54 3,278,860.16 8.35
30.01 to 35.00 75 4,738,808.58 12.06
35.01 to 40.00 109 6,993,775.16 17.81
40.01 to 45.00 161 10,541,656.92 26.84
45.01 to 50.00 118 8,505,930.96 21.66
50.01 to 55.00 20 1,591,744.62 4.05
60.01 to 65.00 3 162,305.09 0.41
65.01 to 70.00 2 98,323.40 0.25
90.01 to 95.00 1 88,885.63 0.23
- ------------------------------------------------- ---------------------- --------------------- ----------------------
Total................................... 594 $ 39,277,999.04 100.00%
================================================= ====================== ===================== ======================
<CAPTION>
Income Documentation Level for the Group II Mortgage Loans
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Income Documentation Level Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
Full Documentation 584 $ 38,224,194.17 97.32%
Stated Documentation 5 455,463.04 1.16
Lite Documentation 5 598,341.83 1.52
- ------------------------------------------------ ---------------------- ---------------------- ----------------------
Total................................. 594 $ 39,277,999.04 100.00%
================================================ ====================== ====================== ======================
</TABLE>
S-49
<PAGE>
Gross Margin for the Group II Adjustable-Rate Mortgage Loans
<TABLE>
<CAPTION>
Percentage of
Cut-Off Date
Range of Number of Mortgage Aggregate Unpaid Aggregate Principal
Gross Margins Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
0.01 to 1.00% 1 $ 65,903.63 4.80%
3.01 to 4.00 2 119,923.95 8.74
4.01 to 5.00 1 75,814.62 5.53
5.01 to 6.00 4 350,084.42 25.52
6.01 to 7.00 6 387,217.75 28.23
7.01 to 8.00 2 232,453.38 16.95
8.01 to 9.00 2 140,287.67 10.23
- ------------------------------------------------- ---------------------- --------------------- ----------------------
Total.................................. 18 $ 1,371,685.42 100.00%
================================================= ====================== ===================== ======================
<CAPTION>
Life Cap for the Group II Adjustable-Rate Mortgage Loans
Percentage of
Cut-Off Date
Range of Number of Mortgage Aggregate Unpaid Aggregate Principal
Gross Life Caps Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
9.501 to 10.000% 1 $ 65,903.63 4.80%
17.001 to 17.500 14 984,442.78 71.77
17.501 to 18.000 3 321,339.01 23.43
- ------------------------------------------------- ---------------- ------------------- ----------------------
Total............................... 18 $ 1,371,685.42 100.00%
================================================= ================ =================== ======================
<CAPTION>
Life Floors for the Group II Adjustable-Rate Mortgage Loans
Percentage of
Cut-Off Date
Number of Mortgage Aggregate Unpaid Aggregate Principal
Range of Gross Life Floors Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
0.501 to 1.000% 1 $ 65,903.63 4.80%
10.001 to 10.500 1 51,859.07 3.78
10.501 to 11.000 3 306,835.33 22.37
11.001 to 11.500 2 112,868.55 8.23
11.501 to 12.000 6 508,467.60 37.07
12.001 to 12.500 1 75,304.49 5.49
12.501 to 13.000 2 105,746.24 7.71
13.001 to 13.500 2 144,700.51 10.55
- ------------------------------------------------- ------------------ --------------------- ----------------------
Total............................... 18 $ 1,371,685.42 100.00%
================================================= ================== ===================== ======================
</TABLE>
S-50
<PAGE>
Next Adjustment Date for the Group II Adjustable-Rate Mortgage Loans
<TABLE>
<CAPTION>
Percentage of
Cut-Off Date
Range of Number of Mortgage Aggregate Unpaid Aggregate Principal
Gross Life Caps Loans Principal Balance Balance
- -------------------------------------------- ------------------- ------------------ -------------------
<S> <C> <C> <C>
August 1999 1 $ 51,859.07 3.78%
April 2000 1 59,440.64 4.33
May 2000 1 186,911.38 13.63
July 2000 1 75,304.49 5.49
August 2000 2 110,153.12 8.03
September 2000 3 158,482.79 11.55
October 2000 1 43,868.38 3.20
November 2000 3 204,433.08 14.90
December 2000 1 93,989.83 6.85
February 2001 1 94,224.25 6.87
April 2001 1 65,903.63 4.80
March 2002 1 138,229.13 10.08
April 2002 1 88,885.63 6.48
- ------------------------------------------------- ------------------ --------------------- ----------------------
Total................................... 18 $ 1,371,685.42 100.00%
================================================= ================== ===================== ======================
</TABLE>
S-51
<PAGE>
Underwriting Standards; Representations
The Mortgage Loans will be sold by the Originator to the Seller, by the
Seller to the Depositor, by the Depositor to the Trust and then pledged by the
Trust to the Indenture Trustee to secure the related Class of Notes. All of the
Mortgage Loans were or will be originated by the Originator or acquired by the
Originator from mortgage bankers or brokers generally in accordance with the
underwriting criteria described herein.
The following description of the Originator's loan origination
processes and underwriting standards is as of the present time. However, those
processes and standards have changed over time, and older loans included in the
Trust may have been originated under different standards. For example, prior to
1996 loans in the amount of $15,000 or less may not have required a formal
appraisal or title insurance on the collateral property. The number of late
payments permitted within a specific credit grade, and the treatment of other
credit-related factors (such as collection history) may have been changed. On
loans where a credit score (such as FICO or Beacon) is a factor (including all
HLTV Mortgage Loans), the minimum permissible score has increased over time. In
addition, portions of the credit files on older loans may have been lost or
destroyed, so those files may not be as complete as newer ones. Loans originated
prior to 1995 were originated by the Originator's affiliate CII, and
subsequently transferred to the Originator.
Substantially all of the mortgage loans are made to non-prime
borrowers. These borrowers generally have limited access to credit, or are
considered credit-impaired by conventional lenders such as thrift institutions
and commercial banks. These conventional lending sources generally impose
stringent and inflexible loan underwriting guidelines and generally require a
longer period of time, as compared to the Originator, to approve and fund loans.
Loan applications of non-prime borrowers are generally characterized by one or
more of the following: (1) limited or unfavorable credit history, including
bankruptcy, (2) problems with employment history, (3) insufficient debt
coverage, (4) self-employment or (5) inadequate collateral.
The Originator's underwriting standards are primarily intended to
assess the ability and willingness of the borrower to repay the debt and to
evaluate the adequacy of the mortgaged property as collateral for the mortgage
loan. The Originator considers, among other things, a mortgagor's credit
history, repayment ability and debt service to income ratio ("debt-to-income
ratio"), as well as the value, type and use of the mortgaged property. The
Mortgage Loans generally bear higher rates of interest than mortgage loans that
are originated in accordance with FNMA and FHLMC standards, and may experience
rates of delinquency and foreclosure that are higher, and that may be
substantially higher, than those experienced by portfolios of mortgage loans
underwritten in accordance with such FNMA or FHLMC standards.
Creditworthiness is assessed through a variety of means, including
calculating debt-to-income ratios, examining the applicant's credit history
through credit reporting bureaus, verifying an applicant's employment status and
income, and checking the applicant's payment history with respect to the
first-lien mortgage, if any, on the property. The Originator uses several
procedures to verify information obtained from an applicant. The applicant's
outstanding balance and payment history on any senior mortgage is verified by
calling the senior mortgage lender. In order to verify an applicant's employment
status and income, the Originator generally obtains such verification from the
applicant's employer and, in the case of self-employed borrowers, the Originator
requires a copy of the borrower's tax return.
S-52
<PAGE>
Approximately 65.39% of the Mortgage Loans originated by the Originator
are based on loan application packages submitted through mortgage brokerage
companies with whom the Originator has a relationship ("Wholesale Mortgage
Loans"). These brokers and/or companies must meet minimum standards based on an
analysis of information submitted with an application for approval, including
resumes of the principals, financial statements, valid real estate license,
satisfactory credit report (brokers with open tax liens of $1,000 or more are
not eligible for approval unless an established payment plan is in place). Once
approved, mortgage brokerage companies are eligible to submit loan application
packages in compliance with the terms of a signed broker agreement. Wholesale
Mortgage Loans are originated and underwritten by the Originator in Greenville,
South Carolina with a focus on seven sales areas: Atlantic, Southeast,
Northeast, Central, Great Lakes, Rocky Mountain and Pacific. Wholesale Mortgage
Loans are initially reviewed by a conditional underwriter for conditional
approval. If conditionally approved, the loan is reviewed prior to closing by a
final, more senior underwriter.
Approximately 34.61% of the Mortgage Loans were originated by the
Originator directly ("Retail Mortgage Loans"). Retail Mortgage Loans were
underwritten based on the Originator's underwriting guidelines by the Originator
from the following locations: Indianapolis, Indiana; Baton Rouge, Louisiana;
Phoenix, Arizona; Greenville, South Carolina; and Houston, Texas. All Retail
Mortgage Loans are originated at the various retail centers. Loans originated in
the Indianapolis, Phoenix, Houston and Greenville centers were also underwritten
and processed through those centers. Retail Mortgage Loans originated in Baton
Rouge were processed and underwritten in the Baton Rouge location. The offices
in Houston, Phoenix and Indianapolis were closed in November 1998, and the Baton
Rouge office was sold in July 1998. Subsequent to those dates all loans were
originated, underwritten and processed in the Originator's Greenville, South
Carolina office. All offices followed the same underwriting criteria. Retail
Mortgage Loans are initially reviewed by a loan officer to determine whether the
loan meets the underwriting guidelines. If so, an underwriter will review the
file and approve or disapprove the loan. If the loan is not approved, the loan
officer reviews the loan a second time to see if it can be reworked, in which
case it will be reviewed by an underwriter again. Generally, the underwriting
department completes its review of Retail Mortgage Loans within one day after
procurement of all necessary loan documentation.
On a case-by-case basis, the Originator may determine that, based upon
compensating factors, a prospective mortgagor not strictly qualifying under the
underwriting risk category guidelines described below warrants an underwriting
exception. Compensating factors may include, but are not limited to, low
loan-to-value ratio and/or a large down payment, proven ability to handle high
debt-to-income, low debt-to-income ratio, large cash flow, significant verified
savings, history of defaults outweighed by good recent credit history, stable
employment, excellent mortgage history, a large reduction in monthly outflows
and time in residence at the applicant's current address. It is probable that a
number of the Mortgage Loans included in the mortgage pool contain one or more
of such underwriting exceptions.
The Originator's underwriters verify the income of each applicant from
various sources in the following manner: salaried and hourly borrowers and those
borrowers on commission, whether at a full time or part time job, are required
to submit W-2 forms for the past two years of employment and pay stubs from
within the past 30 days; rental income must be shown from two years of tax
returns; pension income must be verified from a check or direct deposit slip, a
W-2 form or a letter from the pension administrator; bonus income must be
demonstrated over two years of W-2 forms and by a statement from the employer as
to the likelihood of future bonuses; alimony and child support must
S-53
<PAGE>
be documented by a court order and proof of receipt of payment; and
self-employed individuals must submit two years of tax returns with all
schedules attached.
The applicant must have a sufficiently established credit history to
qualify for the appropriate credit grade (as described below). This credit
history is substantiated by a report prepared by an independent credit report
agency. The report typically considers the applicant's entire credit history and
contains information relating to such matters as credit history with local and
national merchants and lenders, installment debt payments and any record of
defaults, bankruptcy, repossession, suits or judgments. The applicant must
generally provide a letter explaining all late payments on mortgage debt and
other consumer (non-mortgage) debt within the last two years, as well as
detailing all credit inquires made within the last 90 days.
The Originator originates loans secured by single-family residences
(which may be detached, attached two-to-four unit dwelling, a condominium unit,
townhouse or a unit in a planned unit development) and manufactured housing. The
Originator's guidelines are applied in accordance with a procedure which
complies with applicable federal and state laws and regulations and generally
requires an appraisal of the mortgaged property which conforms to FNMA, USPAP,
and FIRREA standards. Appraisals may only be provided by independent appraisers
approved by the Originator who meet any necessary licensing standards.
An independent appraisal is generally required on all loans. Loans in
excess of $350,000 generally require two independent appraisals. Each appraisal
includes a market data analysis based on recent sales of comparable homes in the
area and, where deemed appropriate, replacement cost analysis based on the
current cost of constructing a similar home. The review appraisal may be a desk,
field, or drive-by review of the mortgaged property.
The Originator requires title insurance on all mortgage loans, except
that on certain older loans having an original balance of less than $15,000 no
title insurance was required. The Originator also requires that fire and
extended coverage casualty insurance be maintained on the mortgaged property in
an amount at least equal to the principal balance of the related residential
loan or the replacement costs of the property, whichever is less. None of the
Mortgage Loans will be covered by a primary mortgage insurance policy.
A quality control department performs a quality control review of each
loan prior to closing, and another review subsequent to closing. However, this
process was not in place at the time of origination of all of the loans in the
Trust.
Under the mortgage loan programs, various risk categories are used to
grade the likelihood that the applicant will satisfy the repayment conditions of
the loan. These risk categories establish the maximum permitted loan-to-value
ratio and loan amount, given the occupancy status of the mortgaged property and
the applicant's credit history and debt ratio. In general, higher credit risk
mortgage loans are graded in categories which reflect higher debt ratios and
more (or more recent) major derogatory credit items such as outstanding
judgments or prior bankruptcies; however, as compensating factors, these loan
programs establish lower maximum loan-to-value ratios and maximum loan amounts
for loans graded in such categories.
The Originator's guidelines have the following categories and criteria
for grading the potential likelihood that an applicant will satisfy the
repayment obligations of a mortgage loan, however, on a case-by-case basis, the
Originator may determine that, based upon compensating
S-54
<PAGE>
factors, a prospective mortgagor not strictly qualifying under such
underwriting risk category guidelines warrants an underwriting exception:
S-55
<PAGE>
Summary of HomeGold Underwriting Guidelines
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
AA 100% LTV
Credit Mortgage 1st
History AA A A- B C D N/O/O Only Mortgage
- --------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12 Month 0x30 1x30 2x30 3x30 4x340, 1x60 Up to 119 See req. 0x30 See req.
Mortgage days per grade per Grade
History delinquent
- --------------------------------------------------------------------------------------------------------------------------------
12 Month 2x30 3x30 3x30, 1x60 5x30, 2x60 4x60, 1x90 No Review See req. N/A 2x30
Consumer per grade (Unless
Debt History greater
than 650
score)
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Credit N/A N/A N/A N/A N/A N/A N/A N/A 580
Score (FICO)
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Maximum 45% 45%* 45%* 45%* 50%** 50%** Per Grade 45% 45%***
Debt to
Income Ratio
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------
Piggy-
back 125% CLTV
Piggyback greater Loans
Credit to than Pre-Approval Personal
History $15,000 $15,000 Required Home Loan
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12 Month 12 months: 1x30 0x30 1x30
Mortgage 0x30;
History 13-24
month: 2x30
- -------------------------------------------------------------------------
12 Month 12 months: 2x30 N/A 2x30
Consumer 3x30; (Unless (Unless
Debt History 13-24 >650 >650
month: score) score)
5x30, 1x60
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Credit 580 580 640 640
Score (FICO)
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Maximum 45% 45%*** 45% 45%***
Debt to
Income Ratio
- -------------------------------------------------------------------------
</TABLE>
* to 50% if $750 disposable income 1st Person & $300 each additional person.
** to 55% if $750 disposable income 1st Person & $300 each additional person.
*** to 50% if gross income $100,000+.
<TABLE>
<CAPTION>
Maximum Loan Amounts
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Full Doc 1st $350k* $350k* $350k* $350k* $250k $150k $350k* $350k* $350k
- ---------------------------------------------------------------------------------------------------------------------------------
Lite Doc 1st $350k* $350k* $350k* $350k $150k N/A N/A $350k* N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Stated 1st $350k $350k $350k $250k $100k N/A N/A $350k N/A
Income
- ---------------------------------------------------------------------------------------------------------------------------------
Full Doc 2nd $250k $250k $250k $250k $100k N/A N/A $250k N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Lite Doc 2nd $250k $150k $150k $150k N/A N/A N/A $250k N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Stated 2nd $150k $150k $150k $100k N/A N/A N/A $150k N/A
Income
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Maximum Loan Amounts
- --------------------------------------------------------
<S> <C> <C> <C> <C>
Full Doc N/A N/A $75k N/A
- --------------------------------------------------------
Lite Doc N/A N/A N/A N/A
- --------------------------------------------------------
Stated N/A N/A N/A N/A
Income
- --------------------------------------------------------
Full Doc $15k $60k $75k $25k
- --------------------------------------------------------
Lite Doc N/A N/A N/A N/A
- --------------------------------------------------------
Stated N/A N/A N/A N/A
Income
- --------------------------------------------------------
</TABLE>
*Loans up to $500,000 considered subject to special requirements. Maximum
combined loan (1st and 2nd) $500,000.
<TABLE>
<CAPTION>
Maximum Cash Out
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Full Doc $50k $50k $50k $50k $10k/10% $1,000 $20k $50k $50k
- -----------------------------------------------------------------------------------------------------------------------------------
Lite Doc $50k $50k $50k $50k N/A N/A N/A $50k N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Stated $50k $50k $50k $50k N/A N/A N/A $50k N/A
Income
- -----------------------------------------------------------------------------------------------------------------------------------
Prior 3yr. 3yr. 3yr. 2yr. 1yr. None Per Grade 3yr. 3yr.
Bankruptcy Discharge Discharge Discharge Discharge: Discharge: Active Discharge Discharge
w/re-estb. w/re-estb. w/re-estb. 1x30 on 0x30 on Ch. 13 w/re-estb. w/re-estb.
AA credit AA credit AA credit mtge. mtge. last buyout AA credit AA credit
last 12 12 months case by
months case.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Full Doc $15k $50k $30k $25k
- -----------------------------------------------------------------------
Lite Doc N/A N/A N/A N/A
- -----------------------------------------------------------------------
Stated N/A N/A N/A N/A
Income
- -----------------------------------------------------------------------
Prior None 3yr. 7yr. 3yr.
Bankruptcy Discharge Discharge Discharge
w/re-estb. w/re-estb. w/re-estb.
AA credit AA credit AA credit
- -----------------------------------------------------------------------
</TABLE>
Effective as of May 4, 1999
<PAGE>
The Originator will make certain representations and warranties with
respect to the Mortgage Loans as of the Closing Date. The Originator will be
obligated to repurchase Mortgage Loans in respect of which a material breach of
those representations and warranties has occurred (other than those breaches
which have been cured).
Servicing
The Mortgage Loans will be serviced by HomeGold, Inc., as Servicer (the
"Servicer"). The information set forth in the following paragraphs has been
provided by the Servicer and the Company.
HomeGold, Inc. was incorporated in June 1995, commenced its regular
lending program in September 1995 and began funding such mortgage loans
indirectly in the same month. The principal business of the Servicer
historically has been the origination and sale of non-conforming mortgage loans
on a servicing released basis. In 1997, the Servicer began accumulating mortgage
loans for sale on a servicing retained basis, although during most of 1998, most
produced loans were sold on a servicing released basis. The Company has been
servicing mortgage loans through affiliates of the Servicer in its Mortgage Loan
Division since 1991.
HomeGold, Inc. maintains a centralized portfolio management department
located in Greenville, South Carolina which services the Mortgage Loans that are
not sold, as well as securitized loans. Servicing includes depositing cash
received and posting payments to account for principal and interest, remitting
funds to the Trustee, imaging documents, collection activities on past due
accounts, management of loss mitigation activities and foreclosure and sale of
properties, ensuring that insurance is in place, monitoring payment of real
estate property taxes, customer service and retention activities and warehouse
funding management.
HomeGold, Inc. increased its servicing capabilities and staffing
significantly during 1997 and 1996 in anticipation of increased origination
growth and increased requirements resulting from future loan securitizations. A
centralized quality control department reviews a substantial portion of the
mortgage loans subsequent to funding to maintain consistency and compliance with
the Originator's documentation and underwriting standards. As a result of only
completing one securitization in 1998 and selling the majority of loans
originated on a servicing released basis, the servicing portfolio has declined
from $768.6 million at December 31, 1997, to $550.3 million at December 31,
1998. The Originator's strategy is to match staffing levels with servicing
volume. Accordingly, staffing levels declined in 1998.
Collection efforts generally begin when a mortgage loan is over eight
days past due, unless the account has previous unpaid late fees, in which case
collection efforts generally begin when an account is over one day past due. At
that time, HomeGold, Inc. generally contacts the borrower by telephone to
determine the reason for the delinquency and attempts to bring the account
current. After an account becomes 15 days past due, a reminder letter is
typically sent to the borrower, and subsequent letters are generally sent at 30
days past due, 41 days past due, and 55 days past due. In general, at 41 days
past due, a right-to-cure letter is sent. After 90 days, a five day demand
letter is sent and the account is turned over to an attorney. In addition to
written notices, HomeGold, Inc. attempts to maintain telephone
S-57
<PAGE>
contact with the borrower at various times throughout the delinquency period. If
the status of the account continues to deteriorate, HomeGold, Inc. undertakes an
analysis to determine the appropriate action. HomeGold, Inc.'s loss mitigation
unit works on a dual track along with the foreclosure unit to try to save the
borrowers from a foreclosure action, while at the same time, trying to keep the
foreclosure timelines as short as possible. In limited circumstances, when a
borrower is experiencing difficulty in making timely payments, HomeGold, Inc.
may temporarily adjust the borrower's payment schedule. The determination of how
to work out a delinquent loan is based upon a number of factors, including the
borrower's payment history and the reason for the current inability to make
timely payments.
When a loan is 90 days past due in accordance with its original terms,
it is generally placed on non-accrual status and foreclosure proceedings are
generally initiated. In connection with such foreclosure, the loan and the facts
surrounding its delinquency are reviewed, and the underlying property may be
reappraised. Regulations and practices regarding foreclosures and the rights of
the mortgagor in default vary greatly from state to state.
The following tables set forth, as of December 31, 1995, 1996, 1997,
1998 and March 31, 1999, certain information relating to the delinquency
experience (including imminent foreclosures, foreclosures in progress and
bankruptcies) of one-to-four family residential mortgage loans included in the
Company's entire mortgage loan serviced portfolio (which portfolio includes
mortgage loans originated under the Servicer's guidelines) at the end of the
indicated periods. The indicated periods of delinquency are based on the number
of scheduled payments past due on a contractual basis. No mortgage loan is
considered delinquent for these purposes unless it is at least one month past
due on a contractual basis.
<TABLE>
<CAPTION>
Delinquencies and Foreclosures
(Dollars in Thousands)
------------------------------------------------------------------------------------------
At December 31, At December 31, At December 31, At December 31, At March 31,
1995 1996 1997(2) 1998(2) 1999(2)
------------------------------------------------------------------------------------------
By Percent By Percent By Percent By Percent By Percent
Dollar by Dollar by Dollar by Dollar by Dollar by
Amount Dollar Amount Dollar Amount Dollar Amount Dollar Amount Dollar
Amount Amount Amount Amount Amount
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Serviced
Portfolio(1)........ $88,165 100.00% $146,231 100.00% $700,248 100.00% $550,304 100.00% $505,232 100.00%
Period of Delinquency
30-59 days.......... 6,833 7.75 4,450 3.04 25,424 3.63 28,174 5.12 21,513 4.26
60-89 days.......... 1,588 1.80 1,530 1.05 9,383 1.34 8,647 1.57 6,317 1.25
90 days or more..... 4,299 4.88 4,633 3.17 21,233 3.03 38,109 6.93 32,892 6.51
------- ------- ------- ------ ------- ------- ------- ------ ------- ------
Total Delinquent Loans $12,720 14.43% $10,613 7.26% $56,040 8.00% $74,930 13.62% $60,722 12.02%
------------------------------------------------------------------------------------------
</TABLE>
- -----------------------------
(1) Excludes loans serviced for others for which no credit risk has been
retained.
(2) Beginning in 1997, the Servicer is calculating delinquencies based on the
number of payments past due in accordance with industry standards, compared
with the actual number of days used previously.
S-58
<PAGE>
<TABLE>
<CAPTION>
Other Real Estate Owned
(Dollars in Thousands)
--------------------------------------------------------------------------------------
At December At December 31, At December At December 31, At March 31,
31, 1995 1996 31, 1997 1998 1999
--------------------------------------------------------------------------------------
By Dollar By Dollar By Dollar By Dollar By Dollar
Amount Amount Amount Amount Amount
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Serviced $ 88,165 $ 146,231 $ 700,248 $ 550,304 $ 505,232
Portfolio(1)..........
OREO (Acq. through $ 3,049 $ 2,959 $ 2,522 $ 5,881 $ 3,200
Foreclosure)(2).......
OREO to Total Serviced 3.46% 2.02% 0.36% 1.07% 0.63%
Portfolio(3)..........
---------------------------------------------------------------------------------------
</TABLE>
- ------------------------------------
(1) Excludes loans serviced for others for which no credit risk has been
retained.
(2) For the purposes of this table, Foreclosed Loans means the lesser of (i)
the principal balance or (ii) the appraised value minus selling costs of
mortgage loans secured by mortgaged properties the title of which has been
acquired by HomeGold Financial, Inc. or a subsidiary thereof, by investors
or by an insurer following foreclosure or delivery of a deed in lieu of
foreclosure.
(3) The OREO to Total Serviced Portfolio Ratio is equal to the lower of (i)
aggregate principal balance of Foreclosed Loans or (ii) appraised value
less selling costs of the mortgaged properties divided by the aggregate
principal balance of mortgage loans in the Total Serviced Portfolio at the
end of the indicated period.
<TABLE>
<CAPTION>
Loan Loss Experience on Servicing Portfolio
(Dollars in Thousands)
Three months
Year Ending December 31 ending
--------------------------------------------------------------- ----------------
1995 1996 1997 1998 March 31, 1999
--------------------------------------------------------------- ----------------
<S> <C> <C> <C> <C> <C>
Average Serviced Portfolio(1) $ 74,158 $ 97,281 $ 411,549 $ 743,362 $ 525,803
Net Charge Offs $ 771 $ 792 $ 1,305 $ 6,842 $ 589
Net Charge Offs as a 1.04% 0.81% 0.32% 0.92% 0.44%(2)
Percentage of Average
Serviced Portfolio(1)
</TABLE>
- -----------------------------------------------------------------------
(1) "Average Serviced Portfolio" on the date stated above is the average
principal balances of the total mortgage loans serviced during the period
indicated. "Average Serviced Portfolio" excludes loans serviced for others
for which no credit risk has been retained. Averages for 1995 and 1996 are
computed using beginning and ending balances for the period presented.
Beginning in 1998, averages are computed using daily balances.
(2) Annualized.
It is unlikely that the delinquency experience of the Mortgage Loans
comprising the Mortgage Pool will correspond to the delinquency experience of
HomeGold Inc.'s mortgage portfolio set forth in the foregoing tables. The
statistics shown above represent the delinquency experience for HomeGold Inc.'s
mortgage servicing portfolio (which may differ substantially from the Mortgage
Pool with respect to credit underwriting standards and other factors) only for
the periods presented, whereas the aggregate delinquency experience on the
Mortgage Loans comprising the Mortgage Pool will depend on the results obtained
over the life of the Mortgage Pool.
Since substantially all of HomeGold Inc.'s loans are to non-prime
borrowers who have limited access to credit or who may be considered
credit-impaired by conventional lending standards, the percentage of loans past
due is expected to be higher than a financial
S-59
<PAGE>
institution that provides loans to prime borrowers. During 1996 and 1997
HomeGold Inc's significantly increased the size of the mortgage loan servicing
portfolio. During 1998 the size of the portfolio was reduced. This resulted in
the current production being sold, leaving a significantly higher percentage of
seasoned loans in the portfolio and a higher percentage of past due loans, a
higher loss rate and an increase in real estate owned at December 31, 1998.
There can be no assurance that the Mortgage Loans comprising the
Mortgage Pool will perform consistently with the delinquency or foreclosure
experience described herein. It should be noted that if the residential real
estate market should experience an overall decline in property values, the
actual rates of delinquencies and foreclosures, and the severity of any losses,
could be higher than those previously experienced by the Company. In addition,
adverse economic conditions may affect the timely payment by Mortgagors of
scheduled payments of principal and interest on the Mortgage Loans and,
accordingly, the actual rates of delinquencies and foreclosures with respect to
the Mortgage Pool.
YIELD ON THE NOTES
Certain Shortfalls in Collections of Interest
When a principal prepayment in full is made on a Mortgage Loan, the
mortgagor is charged interest only for the period from the due date of the
preceding monthly payment up to the date of such prepayment, instead of for a
full month. When a partial principal prepayment is made on a Mortgage Loan, the
mortgagor is not charged interest on the amount of such prepayment for the month
in which such prepayment is made. Regarding those interest shortfalls
attributable to full and partial prepayments by the mortgagors on the Mortgage
Loans, the Servicer will be obligated to pay from its own funds such shortfalls,
but only to the extent of its "Servicing Fee" (the net amount of such
shortfalls, the "Prepayment Interest Shortfalls"). In addition, the application
of the Soldiers' and Sailors' Civil Relief Act of 1940, as amended (the "Relief
Act"), to any Mortgage Loan will adversely affect, for an indeterminate period
of time, the ability of the Servicer to collect full amounts of interest on such
Mortgage Loan. The effect of any shortfalls resulting from Prepayment Interest
Shortfalls or from the application of the Relief Act ("Relief Act Shortfalls")
will be to reduce the aggregate amount of interest collected that is available
for distribution to Noteholders. The Policy does not cover Prepayment Interest
Shortfalls or Relief Act Shortfalls. See "Certain Legal Aspects of the Mortgage
Loans and Contracts--Soldiers' and Sailors' Civil Relief Act" in the Prospectus.
Any such shortfalls may cause a deferral of the payment of a portion of the
accrued interest on the Notes as provided herein under "Description of the
Notes--Interest Payments" and "--Overcollateralization and
Crosscollateralization Provisions."
General Prepayment Considerations
The rate of principal payments on each Class of Notes, the aggregate
amount of distributions on each Class of the Notes and the yield to maturity of
each Class of the Notes will be related to the rate and timing of payments of
principal on the Mortgage Loans in the related Group. The rate of principal
payments on the Mortgage Loans will in turn be affected
S-60
<PAGE>
by the rate of principal prepayments thereon (including for this purpose
payments resulting from refinancings, liquidations of the Mortgage Loans due to
defaults, casualties, condemnations and repurchases, whether optional or
required, by the Depositor, or the Seller, as the case may be). The Mortgage
Loans may be prepaid by the mortgagors at any time, generally without penalty.
Prepayments, liquidations and repurchases of the Mortgage Loans in the
related Group will result in distributions in respect of principal to the
holders of the applicable Class of Notes then entitled to receive such
distributions that otherwise would have been distributed over the remaining
terms of the Mortgage Loans. Since the rates of payment of principal on the
Mortgage Loans will depend on future events and a variety of factors (as
described more fully herein and in the Prospectus under "Prepayment and Yield
Considerations"), no assurance can be given as to such rate or the rate of
principal prepayments. The extent to which the yield to maturity of each Class
of Notes may vary from the anticipated yield will depend upon the degree to
which such Notes are purchased at a discount or premium and the degree to which
the timing of payments thereon is sensitive to prepayments on the related Group
of Mortgage Loans. Further, in the case of Class A Notes purchased at a
discount, an investor should consider the risk that a slower than anticipated
rate of principal payments on the related Mortgage Loans could result in an
actual yield to such investor that is lower than the anticipated yield and, in
the case of Class A Notes purchased at a premium, an investor should consider
the risk that a faster than anticipated rate of principal payments could result
in an actual yield to such investor that is lower than the anticipated yield. In
general, the earlier a prepayment of principal on the Mortgage Loans in the
related Group, the greater will be the effect on the yield to maturity of an
investor in the applicable Class of Notes. As a result, the effect on an
investor's yield of principal payments occurring on the Mortgage Loans in the
related Group at a rate higher (or lower) than the rate anticipated by the
investor during the period immediately following the issuance of the applicable
Class of Notes would not be fully offset by a subsequent like reduction (or
increase) in the rate of principal payments.
It is highly unlikely that the Mortgage Loans will prepay at any
constant rate until maturity or that all of the Mortgage Loans will prepay at
the same rate. Moreover, the timing of prepayments on the Mortgage Loans in the
related Group may significantly affect the actual yield to maturity on the
applicable Class of Notes, even if the average rate of principal payments
experienced over time is consistent with an investor's expectation.
The rate of payments (including prepayments) on pools of mortgage loans
is influenced by a variety of economic, geographic, social and other factors. If
prevailing mortgage rates fall significantly below the Mortgage Rates on the
Mortgage Loans, the rate of prepayment (and refinancing) would be expected to
increase. Conversely, if prevailing mortgage rates rise significantly above the
Mortgage Rates on the Mortgage Loans, the rate of prepayment on the Mortgage
Loans would be expected to decrease. Other factors affecting prepayment of
mortgage loans include changes in mortgagors' housing needs, job transfers,
unemployment, mortgagors' net equity in the mortgaged properties and servicing
decisions. There can be no certainty as to the rate of prepayments on the
Mortgage Loans during any period or over the life of each Class of Notes. See
"Prepayment and Yield Considerations" in the Prospectus.
S-61
<PAGE>
In general, defaults on mortgage loans are expected to occur with
greater frequency in the early years. In addition, default rates generally are
higher for mortgage loans used to refinance an existing mortgage loan compared
to default rates on purchase-money mortgage loans. In the event of a mortgagor's
default on a Mortgage Loan, other than as provided by the overcollateralization
provisions of the Trust or by the Policy as described herein, there can be no
assurance that recourse will be available beyond the specific Mortgaged Property
pledged as security for repayment. See "The Mortgage Pool--Underwriting
Standards; Representations" herein.
Purchase of Delinquent Loans
The Servicer, at its option, may purchase from the Trust any Mortgage
Loan that is 90 days or more delinquent which the Servicer determines in good
faith will otherwise be subject to foreclosure proceedings, provided that the
aggregate Stated Principal Balance of the Mortgage Loans so purchased may not,
without the consent of the Insurer, exceed 3% of the aggregate Stated Principal
Balance of the Mortgage Loans as of the Cut-off Date. Such purchases may affect
the yield on the Notes.
Overcollateralization
The cash flow provisions of the Indenture are intended to create
overcollateralization and crosscollateralization as more fully described in
"Description of the Notes--Overcollateralization and Crosscollateralization
Provisions" herein. As a result of these provisions, which result in accelerated
principal payments being made in some periods and decelerated principal payments
made in other periods, it may be more difficult to predict the weighted average
life and yield to maturity of each Class of Notes than if the Indenture did not
include such provisions.
Weighted Average Lives
The weighted average life of each Class of Notes is determined by (a)
multiplying the amount of each principal payment in respect of such Class by the
number of years from the Closing Date to the related Payment Date; (b) adding
the results; and (c) dividing the sum by the Initial Note Principal Balance of
that Class. The weighted average life of each Class of Notes will be influenced
by the rate at which principal on the Mortgage Loans in the related group is
paid, which may be in the form of scheduled payments or prepayments (including
prepayments of principal by the borrower as well as amounts received by virtue
of condemnation, insurance or foreclosure with respect to the Mortgage Loans),
and the timing thereof, together with the effect of the overcollateralization
feature.
Prepayments on mortgage loans are commonly measured relative to a
prepayment standard or model. The model used in this Prospectus Supplement
("Home Equity Prepayment" or "HEP") assumes that the pool of loans prepays in
the first month at a constant annual prepayment rate of 2.4% and increases by an
additional 2.4% each month thereafter until the tenth month, where it remains at
a constant annual prepayment rate equal to 24% (the "Prepayment Assumption").
HEP represents an assumed annualized rate of
S-62
<PAGE>
prepayment relative to the then outstanding principal balance on a pool of new
mortgage loans. Neither the prepayment model used herein nor any other
prepayment model or assumption purports to be an historical description of
prepayment experience or a prediction of the anticipated rate of prepayment of
any pool of mortgage loans, including the Mortgage Loans included in the
Mortgage Pool.
The tables below indicate the percentage of the initial Note Principal
Balance for each Class of Notes that would be outstanding after each of the
dates shown at various percentage HEPs and the corresponding weighted average
lives of the applicable Class of Notes. The table is based on the following
assumptions (the "Modeling Assumptions"): (i) the Mortgage Pool consists of
Mortgage Loans with the characteristics set forth in the table below, (ii)
distributions on such Notes are received, in cash, on the 15th day of each
month, commencing in June 1999, (iii) the Mortgage Loans prepay at the
percentage HEP indicated, (iv) the applicable Class of Notes is redeemed on the
date on which the Servicer may exercise its option to redeem the Notes, (v) no
defaults or delinquencies occur in the payment by mortgagors of principal and
interest on the Mortgage Loans and no shortfalls due to the application of the
Relief Act are incurred, (vi) none of the Depositor, the Originator, the Seller,
the Certificateholder, the Insurer, the Servicer or any other person purchases
from the Trust any Mortgage Loan pursuant to any obligation or option under the
Sale and Servicing Agreement, (vii) scheduled monthly payments on the Mortgage
Loans are received on the first day of each month commencing in May 1999, and
are computed prior to giving effect to any prepayments received in the prior
month, (viii) prepayments representing payment in full of individual Mortgage
Loans are received on the last day of each month, and include 30 days' interest
thereon, (ix) the scheduled monthly payment for each Mortgage Loan is calculated
based on its principal balance, Mortgage Rate, original amortization term and
remaining amortization term such that the Mortgage Loan will amortize in amounts
sufficient to repay the remaining principal balance of such Mortgage Loan by its
remaining amortization term, (x) the adjustable-rate Mortgage Loans are based on
a 3-year Constant Maturity Treasury Index which is assumed to remain constant at
5.21% per annum, and (xi) the Notes are purchased on May 27, 1999.
Characteristics
Group I Mortgage Loans
<TABLE>
<CAPTION>
Original Remaining Remaining
Amortization Amortization Term of Gross
Pool Mortage Principal Net Coupon Term Term Maturity Margin Net Life Net Life
Number Type Balance ($) Rate (%) (months) (months) (months) Rate (%) Cap (%) Floor (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 ARM 513,802,63 12.001 247 187 187 5.775 17.152 11.507
2 Fixed 12,265,158.47 12.333 198 182 182
3 Fixed 3,428,605.43 9.554 360 348 168
4 Fixed 2,837,358.36 11.177 221 210 210
5 Fixed 1,306,957.35 9.366 360 349 169
<CAPTION>
Periodic Reset
Pool Interest Months to Frequency
Number Cap (%) First Reset (months)
<S> <C> <C> <C>
1 2.118 19 34
2
3
4
5
</TABLE>
Group II Mortgage Loans
<TABLE>
<CAPTION>
Original Remaining Remaining
Amortization Amortization Term of Gross
Pool Mortage Principal Net Coupon Term Term Maturity Margin Net Life Net Life
Number Type Balance ($) Rate (%) (months) (months) (months) Rate (%) Cap (%) Floor (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 ARM 1,371,685.42 11.658 327 267 267 5.972 16.750 10.876
2 Fixed 20,247,146.27 10.677 255 240 240
3 Fixed 7,588,721.55 9.600 360 350 169
4 Fixed 4,978,429.97 9.410 287 279 279
5 Fixed 5,092,015.83 9.188 360 350 170
<CAPTION>
Periodic Reset
Pool Interest Months to Frequency
Number Cap (%) First Reset (Months)
<S> <C> <C> <C>
1 2.000 20 36
2
3
4
5
</TABLE>
S-63
<PAGE>
There will be discrepancies between the characteristics of the actual
Mortgage Loans and the characteristics assumed in preparing the tables. Any such
discrepancy may have an effect upon the percentages of the initial Note
Principal Balance for each Class of Notes outstanding (and the weighted average
life) of the applicable Class of Notes set forth in the tables. In addition,
since the actual Mortgage Loans in each Group will have characteristics that
differ from those assumed in preparing the tables with respect to the related
Class of Notes set forth below, the Class A Notes may mature earlier or later
than indicated by the table. Based on the foregoing assumptions, the tables
indicate the weighted average life of the applicable Class of Notes and sets
forth the percentages of the initial Note Principal Balance for each Class of
Notes that would be outstanding after each of the Payment Dates shown, at
various percentage HEPs. Variations in the prepayment experience and the balance
of the related Mortgage Loans that prepay may increase or decrease the
percentages of initial Note Principal Balances for the applicable Class of Notes
(and weighted average lives) shown in the following tables. Such variations may
occur even if the average prepayment experience of all such Mortgage Loans
equals any of the specified percentage HEPs.
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<PAGE>
Percent of Initial Note Principal Balance Outstanding at the Following
Percentage HEPs
CLASS A-1
<TABLE>
<CAPTION>
0.00% 16.00% 20.00% 22.00% 24.00% 26.00% 30.00% 35.00%
Payment Date
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Balance 100 100 100 100 100 100 100 100
May 15, 2000 94 76 72 70 68 65 61 56
May 15, 2001 91 60 53 50 46 43 37 30
May 15, 2002 89 46 39 36 33 31 26 21
May 15, 2003 86 37 30 27 24 22 18 13
May 15, 2004 82 30 23 20 18 16 12 0
May 15, 2005 79 24 18 15 13 11 0 0
May 15, 2006 74 19 14 11 0 0 0 0
May 15, 2007 69 15 10 0 0 0 0 0
May 15, 2008 64 12 0 0 0 0 0 0
May 15, 2009 58 0 0 0 0 0 0 0
May 15, 2010 51 0 0 0 0 0 0 0
May 15, 2011 43 0 0 0 0 0 0 0
May 15, 2012 35 0 0 0 0 0 0 0
May 15, 2013 17 0 0 0 0 0 0 0
May 15, 2014 0 0 0 0 0 0 0 0
May 15, 2015 0 0 0 0 0 0 0 0
May 15, 2016 0 0 0 0 0 0 0 0
May 15, 2017 0 0 0 0 0 0 0 0
May 15, 2018 0 0 0 0 0 0 0 0
May 15, 2019 0 0 0 0 0 0 0 0
May 15, 2020 0 0 0 0 0 0 0 0
May 15, 2021 0 0 0 0 0 0 0 0
May 15, 2022 0 0 0 0 0 0 0 0
May 15, 2023 0 0 0 0 0 0 0 0
May 15, 2024 0 0 0 0 0 0 0 0
May 15, 2025 0 0 0 0 0 0 0 0
May 15, 2026 0 0 0 0 0 0 0 0
May 15, 2027 0 0 0 0 0 0 0 0
May 15, 2028 0 0 0 0 0 0 0 0
May 15, 2029 0 0 0 0 0 0 0 0
Weighted Avg Life (1) 9.8 3.7 3.0 2.8 2.5 2.3 2.0 1.7
</TABLE>
- ----------
(1) The weighted average life of the Class A-1 Notes determined by (a)
multiplying the amount of each principal payment by the number of years
from the Closing Date to the related Payment Date; (b) adding the results;
and (c) dividing the sum by the Initial Class A-1 Note Principal Balance.
S-65
<PAGE>
Percent of Initial Note Principal Balance Outstanding at the Following
Percentage HEPs
CLASS A-2
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Payment Date 0.00% 16.00% 20.00% 22.00% 24.00% 26.00% 30.00% 35.00%
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Balance 100 100 100 100 100 100 100 100
May 15, 2000 95 77 73 71 69 67 62 57
May 15, 2001 93 61 54 51 47 44 38 31
May 15, 2002 91 48 40 37 34 31 27 21
May 15, 2003 90 38 31 28 25 23 18 14
May 15, 2004 88 31 25 22 19 17 13 0
May 15, 2005 86 26 19 17 14 12 0 0
May 15, 2006 83 21 15 13 11 0 0 0
May 15, 2007 81 17 12 0 0 0 0 0
May 15, 2008 78 14 0 0 0 0 0 0
May 15, 2009 75 11 0 0 0 0 0 0
May 15, 2010 71 0 0 0 0 0 0 0
May 15, 2011 67 0 0 0 0 0 0 0
May 15, 2012 62 0 0 0 0 0 0 0
May 15, 2013 57 0 0 0 0 0 0 0
May 15, 2014 28 0 0 0 0 0 0 0
May 15, 2015 24 0 0 0 0 0 0 0
May 15, 2016 20 0 0 0 0 0 0 0
May 15, 2017 15 0 0 0 0 0 0 0
May 15, 2018 0 0 0 0 0 0 0 0
May 15, 2019 0 0 0 0 0 0 0 0
May 15, 2020 0 0 0 0 0 0 0 0
May 15, 2021 0 0 0 0 0 0 0 0
May 15, 2022 0 0 0 0 0 0 0 0
May 15, 2023 0 0 0 0 0 0 0 0
May 15, 2024 0 0 0 0 0 0 0 0
May 15, 2025 0 0 0 0 0 0 0 0
May 15, 2026 0 0 0 0 0 0 0 0
May 15, 2027 0 0 0 0 0 0 0 0
May 15, 2028 0 0 0 0 0 0 0 0
May 15, 2029 0 0 0 0 0 0 0 0
Weighted Avg Life (1) 12.5 4.0 3.2 2.9 2.6 2.4 2.1 1.7
Life(1)
</TABLE>
- ----------
(1) The weighted average life of the Class A-2 Notes is determined by
(a) multiplying the amount of each Principal payment by the number of years from
the Closing Date to the related Payment Date; (b) adding the results; and (c)
dividing the sum by the Initial Class A-2 Note Principal Balance.
S-66
<PAGE>
There is no assurance that prepayments of the Mortgage Loans will
conform to any of the levels of the Prepayment Assumption indicated in the
tables above, or to any other level, or that the actual weighted average life of
each Class of Notes will conform to any of the weighted average lives set forth
in the tables above. Furthermore, the information contained in the tables with
respect to the weighted average life of each Class of Notes is not necessarily
indicative of the weighted average life that might be calculated or projected
under different or varying prepayment assumptions.
The characteristics of the Mortgage Loans will differ from those
assumed in preparing the tables above. In addition, it is unlikely that any
Mortgage Loan will prepay at any constant percentage until maturity or that all
of the Mortgage Loans will prepay at the same rate. The timing of changes in the
rate of prepayments may significantly affect the actual yield to maturity to
investors, even if the average rate of principal prepayments is consistent with
the expectations of investors.
DESCRIPTION OF THE NOTES
The Notes will be issued, and will be secured by the Trust Property and
entitled to the benefits of the Policy, pursuant to the Indenture, a form of
which is filed as an exhibit to the Registration Statement. A Current Report on
Form 8-K relating to the Notes containing a copy of the Indenture and the Sale
and Servicing Agreement as executed will be filed by the Depositor with the
Securities and Exchange Commission within fifteen days of initial issuance of
the Notes. The Originator will provide to a prospective or actual Noteholder
without charge, on written request, a copy (without exhibits) of the Indenture
and Sale and Servicing Agreement. Requests should be addressed to HomeGold,
Inc., 3901 Pelham Road, Greenville, South Carolina 29615, Attn: Laird Minor. The
following summaries describe certain provisions of the Indenture and the Sale
and Servicing Agreement. 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 Indenture and the Sale and Servicing Agreement. Reference is
made to the Prospectus for important information in addition to that set forth
herein regarding the Trust Property, the terms and conditions of the Sale and
Servicing Agreement and the Indenture and the Class A Notes.
General
The Notes will consist of two classes of Notes, designated as (i) the
Class A-1 Notes and (ii) the Class A-2 Notes (together, the "Class A Notes" or
the "Notes"). The holders of the Class A-1 Notes are referred to herein as the
"Class A-1 Noteholders" and the holders of the Class A-2 Notes are referred to
herein as the "Class A-2 Noteholders."
The Class A-1 Notes will have an initial principal balance of
$18,418,000 (the "Initial Class A-1 Note Principal Balance") and the Class A-2
Notes will have an initial principal balance of $35,546,000 (the "Initial Class
A-2 Note Principal Balance").
The "Class A-1 Note Principal Balance" as of any date of determination
is equal to the Initial Class A-1 Note Principal Balance, reduced by the
aggregate of all amounts allocable to principal previously distributed with
respect to the Class A-1 Notes. The "Class
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<PAGE>
A-2 Note Principal Balance" as of any date of determination is equal to the
Initial Class A-2 Note Principal Balance, reduced by the aggregate of all
amounts allocable to principal previously distributed with respect to the Class
A-2 Notes.
The Class A-1 Notes will be principally secured by the Group I Mortgage
Loans, and the Class A-2 Notes will be principally secured by the Group II
Mortgage Loans. Payments on the Class A-1 Notes will be made generally from the
Available Distribution Amount for Group I, and payments on the Class A-2 Notes
will be made generally from the Available Distribution Amount for Group II. The
Trust will also issue a Certificate, representing a beneficial ownership
interest in the Trust, pursuant to the Trust Agreement. Only the Class A Notes
are offered hereby. The Certificate, which is not being offered hereby, may be
sold at any time on or after the Closing Date in accordance with the Trust
Agreement.
The Notes are limited recourse debt obligations of the Trust payable
solely from the Trust Property and the Policy. The Trust Property will consist
primarily of the Mortgage Loans. Pursuant to the Indenture, the Trust will grant
to the Indenture Trustee a first priority perfected security interest in the
Trust Property to secure the Trust's obligations under the Indenture and the
Notes.
The "Final Maturity Date" of the Class A-1 Notes is July 15, 2029 and
the Final Maturity Date of the Class A-2 Notes is August 15, 2029. Such dates
are the dates three months following the dates on which the related Note Balance
would be reduced to zero, assuming, among other things, that (i) no Prepayments
are received on any of the Mortgage Loans, (ii) distributions of principal and
interest on each of the Mortgage Loans is timely received, (iii) excess interest
will not be used to make accelerated payments of principal to the Holders of the
applicable Class of Notes and (iv) the Mortgage Loans have the applicable
characteristics set forth in the "Weighted Average Lives" section herein.
All payments to Holders of the Class A Notes, other than the final
payment on the Class A Notes, will be made by or on behalf of the Indenture
Trustee to the persons in whose names such Class A Notes are registered on the
close of business on the last business day of the month preceding the month in
which each Payment Date occurs (each, a "Record Date"). Payments on Notes held
in book-entry form will be made by wire transfer in immediately available funds
to the Clearing Agency (as defined below) or its nominee. Payments on Notes held
in certificated form by their beneficial owners will be made either (i) by check
mailed to the address of each such Noteholder as it appears in the note register
or (ii) upon written request to the Indenture Trustee at least five business
days prior to the relevant Record Date by any Holder of Class A Notes having an
aggregate initial Note Principal Balance that is in excess of $5,000,000 by wire
transfer in immediately available funds to the account of such Noteholder
specified in the request, provided that the Indenture Trustee may deduct a
reasonable wire transfer fee from any payment made by wire transfer. The final
payment on the Class A Notes will be made in like manner, but only upon
presentment and surrender of such Class A Notes at the corporate trust office of
the Indenture Trustee or such other location specified in the notice to
Noteholders of such final distribution.
S-68
<PAGE>
Book-Entry Registration and Definitive Notes
The Class A Notes will be issued, maintained and transferred on the
book-entry records of the Depository Trust Company ("DTC") and its Participants
in minimum denominations of $1,000 and integral multiples of $1,000 in excess
thereof. Each Class of the Class A Notes will initially be represented by one or
more global notes registered in the name of the nominee of DTC (together with
any successor clearing agency selected by the Depositor, the "Clearing Agency"),
except as provided below. The Depositor has been informed by DTC that DTC's
nominee will be CEDE & Co. ("CEDE"). None of the beneficial owners of the Class
A Notes (the "Note Owners") will be entitled to receive a Note representing such
person's interest, except as set forth below. Unless and until Definitive Notes
are issued under the limited circumstances described herein, all references to
actions by Noteholders with respect to the Class A Notes refer to actions taken
by DTC upon instructions from its Participants (as defined below), and all
references herein to payments, distributions, notices, reports and statements to
Noteholders with respect to the Class A Notes refer to payments, distributions,
notices, reports and statements to DTC or CEDE, as the registered holder of the
Class A Notes, for distribution to Note Owners in accordance with DTC
procedures.
Holders of Notes may hold their Notes through DTC (in the United
States) or CEDEL, S.A. ("CEDEL") or the Euroclear System ("Euroclear") in
Europe. Transfers within DTC, CEDEL or Euroclear, as the case may be, will be in
accordance with the usual rules and operating procedures of the relevant system
(in Europe) if they are participants of such systems, or indirectly through
organizations which are participants in such systems.
CEDEL and Euroclear will hold omnibus positions on behalf of their
participants through customers' securities accounts in CEDEL's and Euroclear's
names on the books of their respective depositaries which, in turn, will hold
such positions in customers' securities accounts in the depositaries' names on
the books of DTC. Citibank, N.A. will act as depositary for CEDEL and The Chase
Manhattan Bank will act as depositary for Euroclear (in such capacities,
individually the "Depositary" and collectively the "Depositaries").
Transfers between Participants (defined below) will occur in accordance
with DTC rules. Transfers between CEDEL Participants and Euroclear Participants
(each as defined below) will occur in accordance with their respective rules and
operating procedures.
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the UCC and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was created
to hold securities for its participating organizations ("Participants") and
facilitate the clearance and settlement of securities transactions between
Participants through electronic book-entry changes in their accounts, thereby
eliminating the need for physical movement of Notes. Participants include
securities brokers and dealers, banks, trust companies and clearing corporations
and may include certain other organizations. Indirect access to the DTC system
also is available to others such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly ("Indirect Participants").
S-69
<PAGE>
Note Owners or prospective owners, as the case may be, that are not
Participants or Indirect Participants but desire to purchase, sell or otherwise
transfer ownership of, or other interests in, the Class A Notes may do so only
through Participants and Indirect Participants. In addition, such Note Owners
will receive all payments of principal and interest on the Class A Notes from
the Indenture Trustee or the applicable paying agent through DTC and its
Participants. Under a book-entry format, Noteholders may receive payments after
the related Payment Date because, while payments are required to be forwarded to
CEDE & Co., as nominee for DTC, on each such date, DTC will forward such
payments to its Participants which thereafter will be required to forward them
to Indirect Participants or Note Owners. The only "Noteholder" (as such term is
used in the Indenture) will be CEDE & Co., as nominee of DTC, and the Note
Owners will not be recognized by the Indenture Trustee as Noteholders under the
Indenture. Note Owners will be permitted to exercise the rights of Note Owners
under the Indenture only indirectly through DTC and its Participants who in turn
will exercise their rights through DTC.
Under the rules, regulations and procedures creating and affecting DTC
and its operations, DTC is required to make book-entry transfers among
Participants on whose behalf it acts with respect to the Notes and is required
to receive and transmit payments of principal of and interest on the Notes.
Participants and Indirect Participants with which Note Owners have accounts with
respect to the Notes similarly are required to make book-entry transfers and
receive and transmit such payments on behalf of their respective Note Owners.
Because DTC can act only on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain other entities, the ability of a
Note Owner to pledge Notes to persons or entities that do not participate in the
DTC system, or otherwise take actions in respect of such Notes, may be limited
due to the lack of a physical Note for such Notes.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
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 its 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 its 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. CEDEL Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities received in
CEDEL 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 or CEDEL Participants on such business day. Cash received in CEDEL or
Euroclear as a result of sales of securities by or through a CEDEL Participant
or Euroclear Participant to a Participant will be received with value on the DTC
S-70
<PAGE>
settlement date but will be available in the relevant CEDEL or Euroclear cash
account only as of the business day following settlement in DTC.
CEDEL is incorporated under the laws of Luxembourg as a professional
depository. CEDEL holds securities for its participating organizations ("CEDEL
Participants") and facilitates the clearance and settlement of securities
transactions between CEDEL Participants through electronic book-entry changes in
accounts of CEDEL Participants, thereby eliminating the need for physical
movement of Notes. Transactions may be settled in CEDEL in any of 28 currencies,
including United States dollars. CEDEL provides to its CEDEL Participants, among
other things, services for safekeeping, administration, clearance and settlement
of internationally traded securities and securities lending and borrowing. CEDEL
interfaces with domestic markets in several countries. As a professional
depository, CEDEL is subject to regulation by the Luxembourg Monetary Institute.
CEDEL 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 CEDEL
is also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a CEDEL
Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of
Euroclear ("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
Notes and any risk from lack of simultaneous transfers of securities and cash.
Transactions may now be settled in any of 32 currencies, including United States
dollars. Euroclear includes 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 which 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
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 securities and cash with 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
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without attribution of specific Notes to specific 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 with respect to Notes held through CEDEL or Euroclear will be
credited to the cash accounts of CEDEL Participants or Euroclear Participants in
accordance with the relevant system's rules and procedures, to the extent
received by its Depositary. Such distributions will be subject to tax reporting
in accordance with relevant United States tax laws and regulations. See "Certain
Federal Income Tax Consequences". CEDEL or the Euroclear Operator, as the case
may be, will take any other action permitted to be taken by a Noteholder under
the Indenture on behalf of a CEDEL Participant or Euroclear Participant only in
accordance with its relevant rules and procedures and subject to its
Depositary's ability to effect such actions on its behalf through DTC.
Although DTC, CEDEL and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Notes among participants of DTC,
CEDEL and Euroclear, they are under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any time.
DTC has advised the Depositor that it will take any action permitted to
be taken by a Noteholder under the Indenture only at the direction of one or
more Participants to whose account with DTC the Notes are credited.
Notes initially issued in book-entry form will be issued as Definitive
Notes only if (i) DTC or the Depositor advises the Indenture Trustee in writing
that DTC is no longer willing or able to properly discharge its responsibilities
as nominee and depository with respect to the Notes and the Servicer is unable
to locate a qualified successor or (ii) the Depositor, at its option, elects to
terminate the book-entry system through DTC or (iii) after the occurrence of an
event of default by the Servicer under the Sale and Servicing Agreement, if
Holders of Class A Notes evidencing not less than 51% of the Note Principal
Balance of the then outstanding Notes advise the Indenture Trustee in writing
that the continuation of a book-entry system through DTC (or a successor
thereto) to the exclusion of any physical Notes being issued to Note Owners is
no longer in the best interests of Note Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Notes for the Notes. Upon surrender by
DTC of the certificate or certificates representing such Notes and instructions
for reregistration, the Indenture Trustee will issue such Notes in the form of
Definitive Notes, and thereafter the Indenture Trustee will recognize the
holders of such Definitive Notes as Noteholders under the Indenture and such
holders of Definitive Notes will deal directly with the Indenture Trustee with
respect to transfers, notices and payments. In the event that Definitive Notes
are issued or DTC ceases to be the clearing agency for the Notes, the Indenture
will provide that the applicable Noteholders will be notified of such event.
Definitive Class A Notes will be transferable and exchangeable at the
corporate trust offices of the Indenture Trustee, located in Charlotte, North
Carolina.
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Trust Property: Assignment of the Mortgage Loans
The Trust Property will consist of (i) all of the Depositor's right,
title and interest in the Mortgage Loans, the related Mortgage Notes, Mortgages
and other related documents, (ii) all payments on or collections in respect of
the Mortgage Loans received on and after the related Cut-off Date, together with
any proceeds thereof, (iii) any Mortgaged Properties acquired on behalf of
Noteholders by foreclosure or by deed in lieu of foreclosure, and any revenues
received thereon, (iv) the rights of the Indenture Trustee under all insurance
policies required to be maintained pursuant to the Sale and Servicing Agreement
and (v) the rights of the Seller under the Purchase Agreement and Assignment
dated May 1, 1999 (the "Purchase and Assignment Agreement") among the
Originator, Parent and Seller.
At the time of issuance of the Notes, the Depositor will transfer to
the Trust all of its right, title and interest in and to the related Mortgage
Loans and other Trust Property. The Trust will, in turn, pledge to the Indenture
Trustee under the Indenture all of the trust's right, title and interest in and
to such Trust Property as collateral for the Class A Notes. The Indenture
Trustee, concurrently with such pledge in respect of the Mortgage Loans will
deliver the Notes on behalf of the Trust. The Sale and Servicing Agreement will
require, in connection with each transfer of Mortgage Loans and other Trust
Property to the Trust, the delivery to the Indenture Trustee with respect to
each Mortgage Loan of (i) the original mortgage note endorsed without recourse
to the Indenture Trustee to reflect the transfer of the Mortgage Loan, (ii) the
original mortgage (or certified copy thereof) with evidence of recording
indicated thereon and (iii) an original assignment of the mortgage in recordable
form to the Indenture Trustee, reflecting the pledge of the Mortgage Loan. Such
assignments of Mortgage Loans are required to be recorded by or on behalf of the
Originator in the appropriate offices for real property records.
Interest Rates
Class A-1 Interest Rate
For each accrual period, interest will accrue on the Class A-1 Notes at
an annual rate of interest equal to 6.87% (for each accrual period ending on or
prior to the date on which the Servicer could exercise its option to redeem the
Class A-1 Notes) or 7.37% (for each accrual period ending after such date).
Class A-2 Interest Rate
For each accrual period, interest will accrue on the Class A-2 Notes at
an annual rate of interest equal to 6.82% (for each accrual period ending on or
prior to the date on which the Servicer could exercise its option to redeem the
Class A-2 Notes) or 7.32% (for each accrual period ending after such date).
Interest Payments
The "Payment Date" is the 15th day of each month or, if such day is not
a business day, on the next succeeding business day, beginning on June 15, 1999.
Payments in respect
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of interest on each Payment Date will be made to the Holders of the Class A-1
Notes in an amount equal to the Class A-1 Interest Distribution Amount and to
the Holders of the Class A-2 Notes in the amount equal to the Class A-2 Interest
Distribution Amount.
The "Class A-1 Interest Distribution Amount" on any Payment Date is
equal to (i) interest accrued during the related Interest Accrual Period (as
defined below) on the Class A-1 Note Principal Balance immediately prior to such
Payment Date at the Class A-1 Interest Rate, reduced by the Shortfall Interest
Deferred Amount for the Class A-1 Notes, if any, for such Payment Date, plus
(ii) to the extent of funds available on such Payment Date for the payment
thereof, the Accrued Shortfall Interest Carry Forward Amount for the Class A-1
Notes, if any, for such Payment Date.
The "Class A-2 Interest Distribution Amount" on any Payment Date is
equal to (i) interest accrued during the related Interest Accrual Period (as
defined below) on the Class A-2 Note Principal Balance immediately prior to such
Payment Date at the Class A-2 Interest Rate, reduced by the Shortfall Interest
Deferred Amount for the Class A-2 Notes, if any, for such Payment Date, plus
(ii) to the extent of funds available on such Payment Date for the payment
thereof, the Accrued Shortfall Interest Carry Forward Amount for the Class A-2
Notes, if any, for such Payment Date.
"Interest Distribution Amount" means the Class A-1 Interest
Distribution Amount or the Class A-2 Interest Distribution Amount, as the case
may be.
The "Accrued Note Interest" with respect to each Payment Date and any
Class of Notes, will be the interest accrued during the related Interest Accrual
Period at the applicable Note Interest Rate for such Class on the Note Principal
Balance of such Class immediately prior to such Payment Date.
The "Shortfall Interest Deferred Amount" for any Payment Date and
either Class of Notes is the amount, if any, of interest accrued during the
related Interest Accrual Period on the Note Principal Balance of the applicable
Class of Notes at the related Interest Rate that is not available for payment on
such Payment Date out of the Available Distribution Amount for such Class due to
Relief Act Shortfalls and, to the extent not funded by the Servicer, Prepayment
Interest Shortfalls. The "Accrued Shortfall Interest Carry Forward Amount" with
respect to either Class on any Payment Date is the amount of the Shortfall
Interest Deferred Amounts for such Class carried over from preceding Payment
Dates together with interest thereon at the related Interest Rate from such
preceding Payment Dates to the current Payment Date. Interest accrued on a Class
during the Interest Accrual Period with respect to any Payment Date, at the
applicable Interest Rate, less the related Shortfall Interest Deferred Amount
for such Payment Date, shall be due and payable on such Payment Date. The
Accrued Shortfall Interest Carry Forward Amount for any Payment Date in respect
of any Class A Note shall be due and payable on such Payment Date (to the extent
sufficient funds are available for the payment thereof) and on the final Payment
Date. The Policy does not cover the Shortfall Interest Deferred Amount or the
Accrued Shortfall Interest Carry Forward Amount. The effect of the foregoing
provisions is that payment of any Accrued Shortfall Interest Carry Forward
Amount may be funded only from any related Net Monthly Excess Cashflow.
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The "Interest Accrual Period" for any Payment Date is the calendar
month immediately preceding the month in which such Payment Date occurs.
Payments of interest will be based on a 360-day year consisting of twelve 30-day
months.
Principal Payments
On each Payment Date, the Holders of each Class of Notes will receive a
payment of principal in an aggregate amount (such aggregate amount, the
"Principal Distribution Amount" for such Class) equal to the sum of:
(i) the Base Principal Distribution Amount for such Class
and Payment Date;
(ii) the Overcollateralization Deficit allocable to that
Class, but only to the extent that it can be funded on such Payment
Date from Net Monthly Excess Cashflow available from both Groups, as
described below, or amounts, if any available from the Reserve Account;
(iii) such Class' pro rata portion of any Remaining
Overcollateralization Deficit on such Payment Date, to the extent
funded by the Insurer as an Insured Payment, and
(iv) the Overcollateralization Increase Amount for such
Class, but only to the extent it can be funded on such Payment Date
from Net Monthly Excess Cashflow available from the related Group.
An amount equal to the Principal Distribution Amount with respect to
each Class of Notes, less any amount to be distributed on such Payment Date as a
prepayment of the applicable Class of Notes, will be paid to the Holders of the
applicable Class of Notes until the Note Principal Balance of the applicable
Class of Notes has been reduced to zero.
The "Base Principal Distribution Amount" for any Payment Date for each
Class of Notes will be the lesser of:
(a) the excess of the Available Distribution Amount for such
Class over the Interest Distribution Amount (other than the Shortfall
Interest Deferred Amount and the Accrued Shortfall Interest Carry
Forward Amount) for such Class on such Payment Date; and
(b) the sum of:
(i) the principal portion of all monthly payments on
the Mortgage Loans in the related Group received during the related
Collection Period;
(ii) the principal portion of all proceeds of the
repurchase of a related Mortgage Loan from the related Group (or, in
the case of a substitution, certain amounts representing a principal
adjustment) as required by the Sale and Servicing Agreement during the
related Collection Period;
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(iii) the principal portion of all other unscheduled
collections, including insurance proceeds, liquidation proceeds and all
full and partial principal prepayments, received during the related
Collection Period, to the extent applied as recoveries of principal on
the Mortgage Loans in the related Group, net of any portion that
represents a recovery of principal for which a Monthly Advance was made
by the Servicer and deposits during the related Collection Period into
the Distribution Account;
(iv) the proceeds received by the Indenture Trustee
upon the exercise by the Servicer of its option to call the related
Class of Notes (to the extent such proceeds relate to principal);
(v) any amount that the Insurer has elected to pay as
principal (including Liquidated Loan Losses) prior to any Remaining
Overcollateralization Deficit;
minus
(vi) the amount of any Overcollateralization
Reduction Amount (defined below) for such Class for such Payment Date.
"Overcollateralization Deficit" means the amount, if any, that the
aggregate Note Principal Balance of both Classes of Notes on a Payment Date,
after payment of the Base Principal Distribution Amount, but before taking into
account any principal payment funded from Net Monthly Excess Cash Flow, the
Reserve Account or any Insured Payment, exceeds the aggregate principal balances
of the Mortgage Loans in both Groups as of the close of business on the last day
of the related Collection Period. For purposes of determining the amount to be
paid on account of the Overcollateralization Deficit to the Holders of each
Class of Notes on the Payment Date, the Overcollateralization Deficit shall be
allocated to each Class pro rata based on the amount by which the Note Principal
Balance of each Class on such Payment Date, after payment of the Base Principal
Distribution Amount but before taking into account any principal payment funded
from Net Monthly Excess Cashflow, the Reserve Account or any Insured Payment,
exceeds the aggregate principal balances of the Mortgage Loans in the related
Group as of the close of business on the last day of the related Collection
Period.
The "Collection Period" with respect to any Payment Date is the
calendar month immediately preceding the month in which such Payment Date
occurs.
As of any Payment Date, "Cumulative Insurance Payments" refers to the
aggregate of any payments made by the Insurer under the Policy to the extent not
previously reimbursed, plus interest thereon for the applicable Class of Notes.
The "Net Monthly Excess Cash Flow" is equal to the Available
Distribution Amount minus the Interest Distribution Amount (other than the
Shortfall Interest Deferred Amount and the Accrued Shortfall Interest
Carryforward Amount) and the Base Principal Distribution Amount.
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In no event will the Principal Distribution Amount for the applicable
Class of Notes with respect to any Payment Date be (x) less than zero or (y)
greater than the then outstanding Note Principal Balance of such Class of Notes.
Flow of Funds
On each Payment Date, the Available Distribution Amount for each Class
will be applied in the following order of priority:
(i) first, to the payment of the Interest Distribution
Amount (other than the Shortfall Interest Deferred
Amount and the Accrued Shortfall Interest Carry
Forward Amount) for the related Class of Notes;
(ii) second, to the payment of the unpaid Interest
Distribution Amount (other than the Shortfall
Interest Deferred Amount and the Accrued Shortfall
Interest Carry Forward Amount) for the other Class of
Notes;
(iii) third, to the Insurer, any amounts due to the Insurer
with respect to the Notes under the terms of the
Insurance Agreement;
(iv) fourth, to the payment of the Base Principal
Distribution Amount for the related Class of Notes;
(v) fifth, to the Holders of the related Class of Notes,
as a payment of such Class' allocable portion of the
Overcollateralization Deficit, if any;
(vi) sixth, to the Holders of the other Class of Notes, as
a payment of such other Class' allocable portion of
the Overcollateralization Deficit, if any, to the
extent the Available Distribution Amount for such
other Class is insufficient to pay such portion;
(vii) seventh, to the Holders of the related Class of
Notes, an amount equal to the Overcollateralization
Increase Amount;
(viii) eighth, to the Reserve Account, to the extent of any
shortfall in the payment of the full amount of the
Overcollateralization Increase Amount for the other
Class of Notes;
(ix) ninth, to the Holders of the Notes, to the extent of
any shortfall in the payment of the full amount of
Accrued Shortfall Interest Carry Forward Amount on a
pro rata basis; and
(x) tenth, to the Trust for distribution to the
Certificateholder or as otherwise provided in the
Indenture.
Amounts deposited into the Reserve Account referenced in clause
"eighth" above may be applied on subsequent Payment Dates to fund the Interest
Distribution Amount (other
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than the Shortfall Interest Deferred Amount and the Accrued Shortfall Interest
Carry Forward Amount), Overcollateralization Deficits or amounts due to the
Insurer, in each case with respect to either Class of Notes, as the Insurer may
direct. Amounts deposited in the Reserve Account shall be released to the Trust
for distribution to the Certificateholder if the Overcollateralization Amount
plus amounts in the Reserve Account exceed the Specified Overcollateralization
Amount.
The "Available Distribution Amount" for each Class of Notes for any
Payment Date is equal to the sum, net of amounts reimbursable or payable
therefrom to the Servicer, the Back-up Servicer, the Indenture Trustee or the
Owner Trustee, of (i) the aggregate amount of monthly payments on the related
Mortgage Loans in the related Group received by the Indenture Trustee during the
related Collection Period, after deduction of the Servicing Fee, the Back-up
Servicing Fee, the Indenture Trustee fee, the Owner Trustee fee and the premium
payable with respect to the Policy, (ii) certain unscheduled payments in respect
of the related Mortgage Loans in the related Group, including prepayments,
insurance proceeds, liquidation proceeds, proceeds from repurchases of and
substitutions for such Mortgage Loans in the related Group occurring during the
preceding calendar month, (iii) all Monthly Advances with respect to the related
Mortgage Loans in the related Group received by the Indenture Trustee for such
Payment Date and (iv) Prepayment Interest Shortfalls with respect to the related
Group for such Payment Date to the extent of the Servicing Fee with respect to
the related Group for such Payment Date.
Overcollateralization and Crosscollateralization Provisions
Overcollateralization Resulting from Cash Flow Structure. As further
described below, a portion of the Net Monthly Excess Cashflow with respect to a
Class of Notes will be applied on each Payment Date as an accelerated payment of
principal on that Class, but only to the limited extent hereafter described. The
application of Net Monthly Excess Cashflow as a payment of principal has the
effect of accelerating the amortization of a class of Notes relative to the
amortization of the related Group of Mortgage Loans, thus building up
overcollateralization (the excess of the related Group of Mortgage Loan's
principal balance over the related Note Principal Balance).
With respect to any Payment Date and either Class of Notes, the excess,
if any, of the aggregate principal balances of the Mortgage Loans in the Group
of Mortgage Loans related to that Class as of the close of business on the last
day of the related Collection Period over (y) the aggregate Note Principal
Balance of that Class of Notes as of such Payment Date (and following the making
of all distributions on such Payment Date (other than with respect to any
Overcollateralization Increase Amount for such Payment Date) is the
"Overcollateralization Amount" for that Class as of such Payment Date. The
Indenture requires that, Net Monthly Excess Cashflow with respect to one Class
that is not subject to prior application as described under "Flow of Funds"
above will be applied as an accelerated payment of principal on the related
class of Notes until the Overcollateralization Amount has increased to the level
required by the Indenture. After such time, if it is necessary to re-establish
the required level of overcollateralization, such Net Monthly Excess Cashflow
will again be applied as an accelerated payment of principal on the related
class of Notes. Notwithstanding the foregoing, in the event certain tests set
forth in the Indenture are violated, all available Net Monthly Excess Cashflow
from each Group of Mortgage Loans
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will be used as a payment of principal to accelerate the amortization of the
related class of Notes. Any amount of Net Monthly Excess Cashflow actually
applied as an accelerated payment of principal is an "Overcollateralization
Increase Amount." The required level of the Overcollateralization Amount with
respect to a Payment Date and either Class of Notes is the "Specified
Overcollateralization Amount" with respect to such Class and Payment Date.
In the event that the required level of the Specified
Overcollateralization Amount with respect to a Class of Notes is permitted to
decrease or "step down" on a Payment Date in the future, the Indenture provides
that a portion of the principal which would otherwise be distributed to the
holders of the related Class of Notes on such Payment Date shall instead be
deducted from the Principal Distribution Amount for that Class. This has the
effect of decelerating the amortization of that Class of Notes relative to the
amortization of the related Group of Mortgage Loans, and of reducing the
Overcollateralization Amount. With respect to each Group of Mortgage Loans and a
Payment Date, the difference, if any, between (a) the Overcollateralization
Amount that would apply on such Payment Date after taking into account all
distributions to be made on such Payment Date (except for any distributions of
related Overcollateralization Reduction Amounts as described in this sentence)
and (b) the Specified Overcollateralization Amount is the "Excess
Overcollateralization Amount" with respect to such Class of Notes and such
Payment Date. If, on any Payment Date, the Excess Overcollateralization Amount
is, or, after taking into account all other distributions to be made on such
Payment Date would be, greater than zero (i.e., the Overcollateralization Amount
is or would be greater than the related Specified Overcollateralization Amount),
then any amounts relating to principal which would otherwise be distributed to
the holders of the related Class of Notes on such Payment Date shall instead be
deducted from the Principal Distribution Amount for that Class, in an amount
equal to the lesser of (x) the Excess Overcollateralization Amount and (y) the
Base Principal Distribution Amount with respect to the related Class of Notes on
such Payment Date; such amount being the "Overcollateralization Reduction
Amount" with respect to such Class of Notes for such Payment Date.
The Indenture provides that, on any Payment Date, all amounts collected
on account of principal (other than any such amount applied to the payment of an
Overcollateralization Reduction Amount) with respect to each Group of Mortgage
Loans during the related Collection Period will be distributed to the holders of
the related Class of Notes on such Payment Date. If any Mortgage Loan became a
Liquidated Mortgage Loan (as defined in the Indenture) during such prior
Collection Period, the Net Liquidation Proceeds (as defined in the Indenture)
related thereto and allocated to principal may be less than the principal
balance of the related Mortgage Loan; the amount of any such insufficiency is a
"Liquidated Loan Loss." In addition, the Indenture provides that the principal
balance of any Mortgage Loan which becomes a Liquidated Mortgage Loan shall then
equal zero. The Indenture does not contain any rule which requires that the
amount of any Liquidated Loan Loss be distributed to the holders of the related
class of Notes on the Payment Date which immediately follows the event of loss;
i.e., the Indenture does not require the current recovery of losses. However,
the occurrence of a Liquidated Loan Loss will reduce the Overcollateralization
Amount with respect to such Group of Mortgage Loans, which, to the extent that
such reduction causes the Overcollateralization Amount to be less than the
Specified Overcollateralization Amount applicable to the related Payment Date,
will require the payment of an Overcollateralization Increase Amount on such
Payment Date (or, if insufficient funds are available on such
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Payment Date, on subsequent Payment Dates, until the Overcollateralization
Amount equals the related Specified Overcollateralization Amount). The effect of
the foregoing is to allocate losses to the holder of the Certificate by
reducing, or eliminating entirely, payments of Net Monthly Excess Cashflow and
Overcollateralization Reduction Amounts which such holders would otherwise
receive.
Overcollateralization and the Insurance Policy. The Indenture requires
the Indenture Trustee to make a claim for an Insured Payment under the Policy
not later than the third business day prior to any Payment Date as to which the
Indenture Trustee has determined that an Overcollateralization Deficit will
occur for the purpose of applying the proceeds of such Insured Payment as a
payment of principal to the holders of the related Class of Notes on such
Payment Date. The Insurer has the option on any Payment Date to make a payment
of principal, including in respect of Liquidated Loan Losses, up to the amount
that would have been payable to the holders of the Notes if sufficient funds
were available thereof. Additionally, under the terms of the Indenture, the
Insurer will have the option to cause Net Monthly Excess Cashflow to be applied
as accelerated payments of principal without regard to any limitation upon the
occurrence of certain trigger events, or in the event of an "event of default"
under the Insurance Agreement. However, investors in the Notes should realize
that, under certain loss or delinquency scenarios, they may temporarily receive
no distributions of principal.
Cross-collateralization Provisions
On each Payment Date, the Net Monthly Excess Cashflow, if any available
from one Class of Notes, will be paid to the holders of the other Class of Notes
as described under "--Flow of Funds" above.
The cross-collateralization provisions of the transaction are limited
to the payment of certain credit losses, certain interest shortfalls and any
amounts due the Insurer. Net Monthly Excess Cashflow available from one Class
will not be used to build overcollateralization with respect to the other Class.
However, Net Monthly Excess Cashflow available from one Class will be deposited
to the reserve account (the "Reserve Account") held by the Indenture Trustee to
the extent that the other Class cannot fund the full amount of its Specified
Overcollateralization Amount from its own Net Monthly Excess Cashflow.
Amounts deposited into the Reserve Accounts referred to in clause
"eighth" under "--Flow of Funds" above may be applied on subsequent Payment
Dates to fund the Interest Distribution Amount (other than the Shortfall
Interest Deferred Amount and the Accrued Shortfall Interest Carry Forward
Amount), Overcollateralization Deficits or amounts due to the Insurer, in each
case with respect to either Class of Notes, as the Insurer may direct. Amounts
deposited in the Reserve Account shall be released to the Trust for distribution
to the Certificateholder if the Overcollateralization Amount plus amounts in the
Reserve Account exceed the Specified Overcollateralization Amount.
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Optional Clean-up Call
The Servicer may, at its option, call the Class A-1 Notes or the Class
A-2 Notes, separately, on any Payment Date (the first date on which such event
occurs for a Class the "Note Clean-up Call Date" for such Class) on which the
aggregate outstanding principal balance of the related Class of Notes is equal
to or less than 10% of the original aggregate principal balance of such Class by
depositing into the Collection Account an amount equal to the aggregate
outstanding principal balance of each Mortgage Loan in the applicable Group plus
accrued interest at the related mortgage rate, together with any amounts due to
the Servicer or Back-up Servicer at the Servicing Fee and Back-up Servicing Fee
rates, respectively, and any unreimbursed advances, but in no event less than
the outstanding principal balances of such Class on such Payment Date, plus
accrued and unpaid interest thereon and any unpaid amounts due to the Insurer in
respect of such Class (each such call, the "Clean-up Call").
Substitution and Amendment of Mortgage Loans
The Servicer may, at its option (but only with the written consent of
the Insurer), substitute mortgage loans for mortgage loans included in either
Group and amend mortgage loans included in either Group, provided, however, that
the aggregate outstanding principal balance of mortgage loans in either Group
for which substitutions and amendments are so allowed may not exceed 10% of the
initial aggregate principal balance of the mortgage loans in such Group as of
the Cut-off Date.
Purchase of Mortgage Loans
The Servicer, at its option, may purchase Mortgage Loans that are 90
days or more delinquent as described in "Yield on the Notes--Purchase of
Delinquent Loans" herein.
Financial Guaranty Insurance Policy
The following summary of the terms of the Policy does not purport to be
complete and is qualified in its entirety by reference to the Policy. A form of
the Policy may be obtained, upon request, from the Indenture Trustee.
Simultaneously with the issuance of the Class A Notes, the Insurer will
deliver the Policy to the Indenture Trustee for the benefit of the Holders of
the Class A Notes. Under the Policy, the Insurer will irrevocably and
unconditionally guarantee payment on each Payment Date to the Indenture Trustee
for the benefit of the holders of the Class A Notes of Insured Payments with
respect to the Class A Notes for such Payment Date, calculated in accordance
with the original terms of the Class A Notes when issued and without regard to
any amendment or modification of the Class A Notes or the Indenture except
amendments or modifications to which the Insurer has given its prior written
consent. "Insured Payments" shall mean with respect to either Class of Notes as
of any Payment Date (i) any shortfall in amounts available in the Distribution
Account (as defined in the Indenture) to pay the related Interest Distribution
Amount (other than the Shortfall Interest Deferred Amount and the Accrued
Shortfall Interest Carry Forward Amount) for the related Interest Accrual
Period, (ii) such Class' allocable portion of any Overcollateralization Deficit
for such Class of Notes,
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after taking into account the payment of the related Principal Distribution
Amount for each Class (including any portion thereof funded from the Net Monthly
Excess Cashflow, or from amounts, if any, available from the Reserve Account but
excluding the amount of any Insured Payment) as of such Payment Date (the
"Remaining Overcollateralization Deficit") and (iii) without duplication of the
amount specified in clause (ii), the Note Principal Balance of the applicable
Class of Notes to the extent unpaid on the final Payment Date or earlier
termination of the Trust pursuant to the terms of the Trust Agreement; provided,
however, that the Insurer is permitted at its sole option, but not required, to
pay any losses in connection with the liquidation of a Mortgage Loan in
accordance with the Policy. Insured Payments do not cover the Servicer's failure
to make Monthly Advances pursuant to the Sale and Servicing Agreement, except to
the extent that a Remaining Overcollateralization Deficit would otherwise result
therefrom. Nevertheless, the effect of the Policy is to guaranty the timely
payment of interest on and the ultimate principal amount of all classes of the
Class A Notes. The Policy does not cover the Shortfall Interest Deferred Amount
or the Accrued Shortfall Interest Carry Forward Amount.
If any Insured Payment is avoided as a preference payment under
applicable bankruptcy, insolvency, receivership or similar law, the Insurer will
pay such amount out of funds of the Insurer on the later of (a) the date when
due to be paid pursuant to the Order referred to below or (b) the first to occur
of (i) the fourth Business Day (defined below) following Receipt (defined below)
by the Insurer from the Indenture Trustee of (A) a certified copy of the order
of the court or other governmental body which exercised jurisdiction to the
effect that a holder of the applicable Class of Notes is required to return
principal or interest distributed with respect to the applicable Class of Notes
during the Term of the Policy (defined below) because such distributions were
avoidable preferences under applicable bankruptcy law (the "Order"), (B) a
certificate of such Holder of the applicable Class of Notes that the Order has
been entered and is not subject to any stay, and (C) an assignment duly executed
and delivered by such Holder of the applicable Class of Notes, in such form as
is reasonably required by the Insurer and provided to such Holder of the
applicable Class of Notes by the Insurer, irrevocably assigning to the Insurer
all rights and claims of such Holder of the applicable Class of Notes against
the debtor which made such preference payment or otherwise with respect to such
preference payment, or (ii) the date of Receipt by the Insurer from the
Indenture Trustee of the items referred to in clauses (A), (B) and (C) above if,
at least four Business Days prior to such date of Receipt, the Insurer shall
have Received written notice from the Indenture Trustee that such items were to
be delivered on such date and such date was specified in such notice. Such
payment shall be disbursed to the receiver, conservator, debtor-in-possession or
trustee in bankruptcy named in the Order and not to the Indenture Trustee or
Holder of the applicable Class of Notes directly (unless a Holder of the
applicable Class of Notes has previously paid such amount to the receiver,
conservator, debtor-in-possession or trustee in bankruptcy named in the Order,
in which case such payment shall be disbursed to the Indenture Trustee for
distribution to such Noteholder upon proof of such payment reasonably
satisfactory to the Insurer). In connection with the foregoing, the Insurer
shall have the rights provided pursuant to the Sale and Servicing Agreement and
the Indenture.
Payment of claims under the Policy will be made by the Insurer
following Receipt by the Insurer of the appropriate notice for payment on the
later to occur of (a) 12:00 noon, New York City time, on the second Business Day
following Receipt of such notice for payment, and (b) 12:00 noon, New York City
time, on the relevant Payment Date.
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The terms "Receipt" and "Received" with respect to the Policy, means
actual delivery to the Insurer and to its fiscal agent appointed by the Insurer
at its option, if any, prior to 12:00 p.m., New York City time, on a Business
Day; delivery either on a day that is not a Business Day or after 12:00 p.m.,
New York City time, shall be deemed to be Receipt on the next succeeding
Business Day. If any notice or certificate given under the Policy by the
Indenture Trustee is not in proper form or is not properly completed, executed
or delivered, it shall be deemed not to have been Received, and the Insurer or
the fiscal agent shall promptly so advise the Indenture Trustee and the
Indenture Trustee may submit an amended notice.
Under the Policy, "Business Day" means any day other than (i) a
Saturday or Sunday or (ii) a day on which banking institutions in the City of
New York, New York, the State of New York, are authorized or obligated by law or
executive order to be closed. The Insurer's obligations under the Policy to make
Insured Payments shall be discharged to the extent funds are transferred to the
Indenture Trustee as provided in the Policy, whether or not such funds are
properly applied by the Indenture Trustee.
"Term of the Policy" means the period from and including the date of
issuance of the Policy to and including the date on which the Note Principal
Balance for each Class of Notes is zero, plus such additional period, to the
extent specified in the Policy, during which any payment on the applicable Class
of Notes could be avoided in whole or in part as a preference payment.
The Insurer shall be subrogated to the rights of the holders of the
Class A Notes to receive payments of principal and interest, as applicable, with
respect to distributions on the Class A Notes to the extent of any payment by
the Insurer under the Policy. To the extent the Insurer makes Insured Payments,
either directly or indirectly (as by paying through the Indenture Trustee), to
the Holders of the Class A Notes, the Insurer will be subrogated to the rights
of the Holders of the Class A Notes, as applicable, with respect to such Insured
Payment and shall be deemed to the extent of the payments so made to be a
registered holder of Class A Notes for purposes of payment.
Claims under the Policy constitute direct unsecured and unsubordinated
obligations of the Insurer, and will rank equally with any other unsecured and
unsubordinated obligations of the Insurer except for certain obligations in
respect to tax and other payments to which preference is or may become afforded
by statute. The terms of the Policy cannot be modified, altered or affected by
any other agreement or instrument, or by the merger, consolidation or
dissolution of the Depositor. The Policy by its terms may not be canceled or
revoked prior to distribution in full of all Guaranteed Distributions. The
Policy is governed by the laws of the State of New York. The Policy is not
covered by the Property/Casualty Insurance Security Fund specified in Article 76
of the New York Insurance Law.
To the fullest extent permitted by applicable law, the Insurer agrees
under the Policy not to assert, and waives, for the benefit of each Holder of
Class A Notes, all its rights (whether by counterclaim, setoff or otherwise) and
defenses (including, without limitation, the defense of fraud), whether acquired
by subrogation, assignment or otherwise, to the extent that such rights and
defenses may be available to the Insurer to avoid payment of its obligations
under the Policy in accordance with the express provisions of the Policy.
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Pursuant to the terms of the Sale and Servicing Agreement and the
Indenture, unless an Insurer Default (defined below) exists, the Insurer will be
entitled to exercise certain rights of the Holders of the Class A Notes, without
the consent of such Noteholders, and the Holders of the Class A Notes may
exercise such rights only with the prior written consent of the Insurer.
The Depositor, the Originator, the Servicer, the Seller, HomeGold
Financial, Inc., the Trust and the Insurer will enter into an Insurance and
Indemnity Agreement (the "Insurance Agreement") pursuant to which the Depositor
and the Originator will agree to reimburse, with interest, the Insurer for
amounts paid pursuant to claims under the Policy. The Depositor and the
Originator will further agree to pay the Insurer all reasonable charges and
expenses which the Insurer may pay or incur relative to any amounts paid under
the Policy or otherwise in connection with the transaction and to indemnify the
Insurer against certain liabilities. Except to the extent provided therein,
amounts owing under the Insurance Agreement will be payable solely from the
Trust Property. An event of default by the Originator under the Insurance
Agreement will constitute an event of default by the Originator (in its capacity
as Servicer) under the Sale and Servicing Agreement and allow the Insurer, among
other things, to direct the Indenture Trustee to terminate the Servicer. An
"event of default" by the Originator under the Insurance Agreement includes (i)
the Originator's failure to pay when due any amount owed under the Insurance
Agreement or certain other documents, (ii) the Originator's untruth or
incorrectness in any material respect of any representation or warranty of the
Originator in the Insurance Agreement, the Sale and Servicing Agreement (in its
capacity as Servicer) or certain other documents, (iii) the Originator's failure
to perform or to observe any covenant or agreement in the Insurance Agreement,
the Sale and Servicing Agreement (in its capacity as Servicer) and certain other
documents, (iv) the Originator's failure to pay its debts in general or the
occurrence of certain events of insolvency or bankruptcy with respect to the
Originator, and (v) the occurrence of an event of default under the Sale and
Servicing Agreement (in its capacity as Servicer) or certain other documents.
Monthly Advances
Subject to the following limitations, the Servicer will be obligated to
advance or cause to be advanced before each Payment Date its own funds, or funds
in the Collection Account that are not included in the Available Distribution
Amount for each Payment Date, in an amount equal to the aggregate of all
payments of interest, net of the Servicing Fee rate, that were due during the
related Collection Period on the Mortgage Loans and that were delinquent on the
related "Determination Date," which is the 5th business day prior to such
Payment Date, plus certain amounts representing assumed payments of interest not
covered by any current net income on the Mortgaged Properties acquired by
foreclosure or deed in lieu of foreclosure (any such advance, a "Monthly
Advance").
Monthly Advances are required to be made only to the extent they are
deemed by the Servicer to be recoverable from related late collections,
insurance proceeds or liquidation proceeds. The purpose of making such Monthly
Advances is to maintain a regular cash flow to the Noteholders, rather than to
guarantee or insure against losses. The Servicer will not be required to make
any Monthly Advances with respect to reductions in the amount of the
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monthly payments on the Mortgage Loans due to bankruptcy proceedings or the
application of the Relief Act.
All Monthly Advances will be reimbursable to the Servicer from late
collections, insurance proceeds and liquidation proceeds from the Mortgage Loan
as to which such unreimbursed Monthly Advance was made. In addition, any Monthly
Advances previously made in respect of any Mortgage Loan that are deemed by the
Servicer to be nonrecoverable from related late collections, insurance proceeds
or liquidation proceeds may be reimbursed to the Servicer out of any funds in
the Note Account prior to the distributions on the Notes. In the event the
Servicer fails in its obligation to make any such advance, the Indenture Trustee
will be obligated to make any such advance, to the extent required in the Sale
and Servicing Agreement.
Determination of Losses; Subordination
The Policy will cover all Remaining Overcollateralization Deficits, if
any.
With respect to any defaulted Mortgage Loan that is finally liquidated
through foreclosure sale, disposition of the related Mortgaged Property (if
acquired on behalf of the Noteholders by deed-in-lieu of foreclosure) or
otherwise, the amount of loss realized, if any, will equal the portion of the
unpaid principal balance remaining, if any, plus interest thereon through the
last day of the month in which such Mortgage Loan was finally liquidated, after
application of all amounts recovered (net of amounts reimbursable to the
Servicer for Monthly Advances and expenses, including attorneys' fees) towards
interest and principal owing on the Mortgage Loan. Such amount of loss realized
is referred to herein as "Realized Losses."
The Indenture Trustee
First Union National Bank, a national banking association with its
principal corporate trust office located in Charlotte, North Carolina, has been
named the Indenture Trustee pursuant to the Indenture and the Sale and Servicing
Agreement.
The principal compensation to be paid to the Indenture Trustee in
respect of its obligations under the Indenture and the Sale and Servicing
Agreement will be equal to accrued interest at the Indenture Trustee fee rate of
0.015% per annum on the Stated Principal Balance of each Mortgage Loan. The
Indenture and the Sale and Servicing Agreement will provide that the Indenture
Trustee and any director, officer, employee or agent of the Indenture Trustee
will be indemnified by the Trust and will be held harmless against any loss,
liability or expense (not including expenses, disbursements and advances
incurred or made by the Indenture Trustee, including the compensation and the
expenses and disbursements of its agents and counsel, in the ordinary course of
the Indenture Trustee's performance in accordance with the provisions of the
Sale and Servicing Agreement and the Indenture) incurred by the Indenture
Trustee arising out of or in connection with the acceptance or administration of
its obligations and duties under the Sale and Servicing Agreement and the
Indenture, other than any loss, liability or expense (i) resulting from the
Servicer's actions or omissions in connection with the Sale and Servicing
Agreement, the Indenture and the
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Mortgage Loans (but only to the extent the Indenture Trustee is actually
indemnified by the Servicer pursuant to the Sale and Servicing Agreement), (ii)
that constitutes a specific liability of the Indenture Trustee under the Sale
and Servicing Agreement or the Indenture or (iii) incurred by reason of willful
misfeasance, bad faith or gross negligence in the performance of the Indenture
Trustee's duties under the Sale and Servicing Agreement or the Indenture or as a
result of a breach, or by reason of reckless disregard, of the Indenture
Trustee's obligations and duties under the Sale and Servicing Agreement or the
Indenture.
Servicing; Back-up Servicing Provisions
The Servicer will service the Mortgage Loans pursuant to the provisions
of the Sale and Servicing Agreement. The Insurer may terminate or refuse to
renew the term of the Servicer at such time as permitted under any agreement
between them. In addition, the term of the Servicer may be terminated upon the
occurrence of a Servicer Event of Default as defined in the Sale and Servicing
Agreement. Upon any such termination, all authority and power of the Servicer
under the Sale and Servicing Agreement shall pass to the Back-up Servicer.
Servicing and Other Compensation and Payment of Expenses
The principal compensation to be paid to the Servicer in respect of its
servicing activities for the Notes will be equal to accrued interest at the
"Servicing Fee" rate which will be an amount equal to 0.50% per annum on the
Stated Principal Balance of each Mortgage Loan in both Groups on the related
Payment Date. The Back-up Servicer will be entitled to compensation at the
annual rate of 0.06% of the Stated Principal Balance of the Mortgage Loans in
both Groups (the "Back-up Servicing Fee"). If the Back-up Servicer shall become
the Servicer, it shall no longer be entitled to the Back-up Servicing Fee, but
will be entitled to the Servicing Fee which shall be increased to 0.65% per
annum if Mortgage Loans that are more than 30 days delinquent are equal to or
greater than 12% but less than 18% of all Mortgage Loans (measured by aggregate
Stated Principal Balance as of the time of servicing transfer) and to 0.75% per
annum if Mortgage Loans that are more than 30 days delinquent are equal to or
exceed 18% of all Mortgage Loans (measured by aggregate Stated Principal Balance
as of the time of servicing transfer). As additional servicing compensation, the
Servicer is entitled to retain all late payment charges, to the extent collected
from mortgagors, together with any interest or other income earned on funds held
in the Note Account and any escrow accounts. The Servicer will be obligated to
offset any Prepayment Interest Shortfall on any Payment Date (payments made by
the Servicer in satisfaction of such obligation, "Compensating Interest") to the
extent of the Servicing Fee for such Payment Date. The Servicer is obligated to
pay certain insurance premiums and certain ongoing expenses associated with the
Mortgage Pool and incurred by the Servicer in connection with its
responsibilities under the Sale and Servicing Agreement and is entitled to
reimbursement therefor as provided in the Sale and Servicing Agreement. See
"Servicing of the Mortgage Loans and Contracts-Servicing Compensation and
Payment of Expenses" in the Prospectus for information regarding expenses
payable by the Servicer and "Certain Federal Income Tax Consequences" herein
regarding certain taxes payable by the Servicer.
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Events of Default
An "Event of Default" with respect to each Class of Notes is defined in
the Indenture to include:
(i) default in the payment of any interest due and
payable on or in respect of any Note on any Payment Date, which
default shall continue for a period of five days; or
(ii) the failure to apply funds which are available for
payment in accordance with the priority of distribution
prescribed in the Indenture as described herein, which failure
shall continue for a period of five days; or
(iii) default in the payment of principal due on the
Notes on the Final Maturity Date; or
(iv) failure of the Insurer to make a payment required
under the Policy or certain events of bankruptcy, insolvency,
receivership or reorganization affecting the Insurer; or
(v) certain events of bankruptcy, insolvency,
receivership or reorganization affecting the Trust.
Prior to the occurrence of any Insurer Default (defined below), the
Insurer shall have the right to direct the Indenture Trustee in respect of all
matters relating to any Event of Default and may exercise the rights of the
Noteholders in thereof.
If an Event of Default of the kind referred to in clause (v) above
occurs, the unpaid principal amount of the Notes shall automatically become due
and payable at par together with all accrued and unpaid interest thereon. If an
Event of Default (other than an Event of Default of the kind described in clause
(v) above) occurs and is continuing, the Indenture Trustee may, and if so
directed by the Noteholders evidencing more than 50% of the aggregate Note
Principal Balance of the related Class of Notes (or, if no Insurer Default has
occurred, by the Insurer rather than the Noteholders) shall, declare the unpaid
principal amount of all of such Notes to be due and payable immediately, by
notice in writing to the Trust, the Servicer and the Insurer. Any declaration of
acceleration may under certain circumstances be rescinded by Holders of a
majority of the related Class of Notes.
Following any acceleration of the related Class of Notes, the Indenture
Trustee (or the Insurer) shall have all of the rights, powers and remedies with
respect to the Trust Property as are available to secured parties under the
Uniform Commercial Code or other applicable law; except that, to the extent
permitted by applicable law, the Indenture Trustee shall not in any private sale
sell to a third party the Trust Property, or any portion thereof, unless,
(i) until such time as there has been a final liquidation or
payment of the Mortgage Loans and properties in the related Group
acquired in respect thereof or the Insurer shall have exercised its
right to purchase the Mortgage Loans and properties in the related
Group acquired in respect thereof pursuant to the Sale and Servicing
Agreement, the Holders of the related Class of Notes evidencing not
less than
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66-2/3% of the then outstanding Note Principal Balance of the related
Class of Notes consent to or direct the Indenture Trustee in writing to
make such sale; or
(ii) the proceeds of such sale would be not less than the sum
of all amounts due to the Indenture Trustee and the entire unpaid
principal amount of the Notes and interest due or to become due thereon
on the Payment Date next succeeding the date of such sale.
Right of the Insurer to Direct Voting and Other Rights
Pursuant to the terms of the Sale and Servicing Agreement and the
Indenture, unless there exists a continuance of any failure by the Insurer to
make a required payment under the Policy or there exists a proceeding in
bankruptcy by or against the Insurer (either such condition, an "Insurer
Default"), the Insurer will be entitled to exercise, among others, the following
rights of the Holders of the applicable Class of Notes, without the consent of
such Holders, and the Holders of such Class of Notes may exercise such rights
only with the prior written consent of the Insurer: (i) the right to direct the
Indenture Trustee to terminate the rights and obligations of the Servicer under
the Sale and Servicing Agreement in the event of a default by the Servicer; (ii)
the right to consent to or direct any waivers of defaults by the Servicer; (iii)
the right to remove the Indenture Trustee pursuant to the Sale and Servicing
Agreement and/or the Indenture; (iv) the right to institute proceedings against
the Servicer in the event of default by the Servicer and refusal of the
Indenture Trustee to institute such proceedings; and (v) the right to direct the
Indenture Trustee in respect of all matters relating to an Event of Default
under the Indenture. In addition, unless an Insurer Default exists, the Insurer
will have the right to direct all matters relating to any proceeding seeking the
avoidance as a preferential transfer under applicable bankruptcy, insolvency,
receivership or similar law of any distribution made with respect to the related
Class of Notes, and, unless an Insurer Default exists, the Insurer's consent
will be required prior to, among other things, (i) the removal of the Indenture
Trustee, (ii) the appointment of any successor Indenture Trustee or Servicer or
(iii) any amendment to the Sale and Servicing Agreement or the Indenture.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion of certain of the material federal income tax
consequences of the purchase, ownership and disposition of the Class A Notes is
to be considered only in connection with "Certain Federal Income Tax
Consequences" in the accompanying prospectus. The discussion herein and in the
accompanying prospectus is based upon laws, regulations, rulings and decisions
now in effect, all of which are subject to change. The discussion below and in
the accompanying prospectus does not purport to deal with all federal tax
consequences applicable to all categories of investors, some of which may be
subject to special rules. Investors should consult their own tax advisors in
determining the federal, state, local and any other tax consequences to them of
the purchase, ownership and disposition of the Class A Notes.
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Treatment of the Trust
Tax Counsel is of the opinion that the Trust will not be characterized
as an association (or a publicly traded partnership) taxable as a corporation or
a taxable mortgage pool.
Treatment of the Class A Notes
The Originator, the Seller, the Depositor and the Trust agree, and the
holders of the Class A Notes will agree by their purchase of the Class A Notes,
to treat the Class A Notes as indebtedness for all federal, state and local
income tax purposes. There are no regulations, published rulings or judicial
decisions involving the characterization for federal income tax purpose of
securities with terms substantially the same as the Notes. In general, whether
instruments such as the Class A Notes constitute indebtedness for federal income
tax purposes is a question of fact, the resolution of which is based primarily
upon the economic substance of the instruments and the transaction pursuant to
which they are issued rather than merely upon the form of the transaction or the
manner in which the instruments are labeled. The Internal Revenue Service (the
"IRS") and the courts have set forth various factors to be taken into account in
determining, for federal income tax purposes, whether an instrument constitutes
indebtedness and whether a transfer of property is a sale because the transferor
has relinquished substantial incidents of ownership in the property or whether
such transfer is a borrowing secured by the property. On the basis of its
analysis of such factors as applied to the facts and its analysis of the
economic substance of the contemplated transaction, Dewey Ballantine LLP,
special tax counsel to the Depositor ("Tax Counsel"), is of the opinion that,
for federal income tax purposes, the Class A Notes will be treated as
indebtedness. See "Certain Federal Income Tax Consequences -- Debt Securities"
in the accompanying prospectus.
If the Notes are characterized as indebtedness, interest paid or
accrued on a Class A Note will be treated as ordinary income to holders of the
Notes and principal payments on a Class A Note will be treated as a return of
capital to the extent of the holder's basis in the Class A Note allocable
thereto. An accrual method taxpayer will be required to include in income
interest on the Class A Notes when earned, even if not paid, unless it is
determined to be uncollectible. The Indenture Trustee, on behalf of the Trust,
will report to the holders of the Class A Notes of record and the IRS with
respect to the interest paid and original issue discount, if any, accrued on the
Class A Notes to the extent required by law.
Possible Alternative Characterizations of the Class A Notes. Although,
as described above, it is the opinion of Tax Counsel that for federal income tax
purposes, the Class A Notes will be characterized as indebtedness, such opinion
is not binding on the IRS and thus no assurance can be given that such a
characterization will prevail. If the IRS successfully asserted that the Class A
Notes did not represent debt for federal income tax purposes, holders of the
Class A Notes would likely be treated as owning an interest in a partnership and
not an interest in an association, a publicly traded partnership, or a taxable
mortgage pool taxable as a corporation. If the holders of the Class A Notes were
treated as owning an equitable interest in a partnership, the partnership itself
would not be subject to federal income tax; rather each partner would be taxed
individually on their respective distributive share of the partnership's income,
gain, loss, deductions and credits. The amount, timing and characterization of
items of income and deduction for a holder of a Class A Note would differ if the
Class A Notes were held to constitute partnership interests, rather than
indebtedness.
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Since the parties will treat the Class A Notes as indebtedness for federal
income tax purpose, none of the Servicer, the Indenture Trustee or the Owner
Trustee will attempt to satisfy the tax reporting requirements that would apply
under this alternative characterization of the Class A Notes. Investors that are
foreign persons are strongly advised to consult their own tax advisors in
determining the federal, state, local and other tax consequences to them of the
purchase, ownership and disposition of the Class A Notes.
Special Tax Attributes. The Class A Notes will not represent "real
estate assets" for purposes of Section 856(c)(4)(A) of the Code or "[l]oans ...
primarily secured by an interest in real property" within the meaning of Section
7701(a)(19)(C) of the Code.
Discount and Premium. It is not anticipated that the Class A Notes will
be issued with any original issue discount. See "Certain Federal Income Tax
Consequences -- Discount and Premium -- Original Issue Discount" in the
accompanying prospectus. The prepayment assumption that will be used for
purposes of computing original issue discount, if any, for federal income tax
purposes is the Prepayment Assumption. See "Prepayment and Yield Considerations"
herein. In addition, a subsequent purchaser who buys a Class A Note for less
than its principal amount may be subject to the "market discount" rules of the
Code. See "Certain Federal Income Tax Consequences -- Discount and Premium --
Market Discount" in the accompanying prospectus. A subsequent purchaser who buys
a Class A Note for more than its principal amount may be subject to the "market
premium" rules of the Code. See "Certain Federal Income Tax Consequences --
Discount and Premium -- Securities Purchased at a Premium" in the accompanying
prospectus.
Sale or Redemption of the Class A Notes. If a Class A Note is sold or
retired, the seller will recognize gain or loss equal to the difference between
the amount realized on the sale and such holder's adjusted basis in the Class A
Note. See "Certain Federal Income Tax Consequences -- Debt Securities -- Sale or
Exchange" in the accompanying prospectus.
Other Matters. For a discussion of backup withholding and taxation of
foreign investors in the Class A Notes, see "Certain Federal Income Tax
Consequences -- Backup Withholding" and " --Foreign Investors -- Grantor Trust,
REMIC Regular and Debt Securities" in the accompanying prospectus.
STATE AND LOCAL TAX CONSIDERATIONS
Potential Noteholders should consider the state and local income tax
consequences of the purchase, ownership and disposition of the Class A Notes.
State and local income tax laws 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 Noteholders
should consult their own tax advisors with respect to the various state and
local tax consequences of an investment in the Class A Notes.
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USE OF PROCEEDS
A substantial portion of the net proceeds to be received from the sale
of the Class A Notes will be used to repay indebtedness secured by the Mortgage
Loans and to pay expenses in connection with the pooling of the Mortgage Loans
and the issuance of the Securities. The remaining net proceeds will be used by
the Originator for business purposes, including the origination of new mortgage
loans.
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting
Agreement between the Depositor and Prudential Securities Incorporated (the
"Underwriter"), the Class A Notes will be purchased by the Underwriter, an
affiliate of the Depositor, upon issuance.
The Underwriter has advised the Depositor that it proposes to offer the
Class A Notes purchased by the Underwriter for sale from time to time in one or
more negotiated transactions or otherwise, at market prices prevailing at the
time of sale, at prices related to such market prices or at negotiated prices.
The Underwriter may effect such transactions by selling such Notes to or through
dealers, and such dealers may receive compensation in the form of underwriting
discounts, concessions or commissions from the Underwriter or purchasers of the
Class A Notes for whom they may act as agent. Any dealers that participate with
the Underwriter in the distribution of the Class A Notes purchased by the
Underwriter may be deemed to be underwriters, and any discounts or commissions
received by them or the Underwriter and any profit on the resale of Class A
Notes by them or the Underwriter may be deemed to be underwriting discounts or
commissions under the Securities Act of 1933.
In connection with the offering of the Class A Notes, the Underwriter
and dealers and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Class A Notes.
Such transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M, pursuant to which such person may bid for or
purchase the Class A Notes for the purpose of stabilizing its market price. In
addition, the Underwriter may impose "penalty bids" under contractual
arrangements with the dealers whereby it may reclaim from an Underwriter (or
dealer participating in the offering) for its account, the selling concession
with respect to the Offered Notes that it distributed in the offering but
subsequently purchased in the open market. Any transaction described in this
paragraph may result in the maintenance of the price of the Offered Notes at a
level above that which might otherwise prevail in the open market. No
transaction described in this paragraph is required, and, if taken, may be
discontinued at any time without notice.
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 of 1933.
All of the Mortgage Loans included in the Trust Property will have been
acquired by the Depositor in a privately negotiated transaction with the
Sponsor.
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LEGAL MATTERS
Certain legal matters relating to the Class A Notes will be passed upon
for the Depositor by Dewey Ballantine LLP, New York, New York. Certain legal
matters relating to the Class A Notes will be passed upon for the Underwriter by
Thacher Proffitt & Wood, New York, New York.
EXPERTS
The consolidated balance sheets of Financial Security Assurance Inc.
and its subsidiaries as of December 31, 1998 and 1997 and the related
consolidated statements of income, changes in shareholder's equity, and cash
flows for each of the three years in the period ended December 31, 1998,
incorporated by reference in this Prospectus Supplement, have been incorporated
herein in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
RATINGS
It is a condition to the issuance of the Notes that the Class A-1 Notes
and the Class A-2 Notes each be rated "AAA" by Standard & Poor's and "Aaa" by
Moody's.
The ratings of Moody's and Standard & Poor's assigned to the Notes
address the likelihood of the receipt by Noteholders of all distributions to
which such Noteholders are entitled. The rating process addresses structural and
legal aspects associated with the Notes, including the nature of the underlying
mortgage loans. The ratings assigned to asset-backed securities such as the
Notes do not represent any assessment of the likelihood that principal
prepayments will be made by the mortgagors or the degree to which such
prepayments will differ from that originally anticipated. The ratings assigned
by Moody's and Standard & Poor's on the Class A Notes are based in part upon the
Insurer's claims paying ability. Any change in the ratings of the Insurer by
Standard & Poor's and Moody's may result in a change in the ratings on the Class
A Notes. The ratings do not address the possibility that Noteholders might
suffer a lower than anticipated yield.
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. In the event that the ratings
initially assigned to the Class A Notes are subsequently lowered for any reason,
no person or entity is obligated to provide any additional credit support or
credit enhancement with respect to the Class A Notes.
The Depositor has not requested that any rating agency rate either
Class of Notes other than as stated above. However, there can be no assurance as
to whether any other rating agency will rate either Class of Notes, or, if it
does, what rating would be assigned by any such other rating agency. A rating on
a Class of Notes by another rating agency, if assigned at all, may be lower than
the ratings assigned to the applicable Class of Notes as stated above.
S-92
<PAGE>
LEGAL INVESTMENT
The Class A Notes will not constitute "mortgage related securities" for
purposes of the Secondary Mortgage Market Enhancement Act of 1984 ("SMMEA").
The Depositor makes no representations as to the proper
characterization of the Class A Notes for legal investment or other purposes, or
as to the ability of particular investors to purchase the Class A Notes under
applicable legal investment restrictions. These uncertainties may adversely
affect the liquidity of the Class A Notes. Accordingly, all institutions whose
investment activities are subject to legal investment laws and regulations,
regulatory capital requirements or review by regulatory authorities should
consult with their own legal advisors in determining whether and to what extent
the Class A Notes constitute legal investments for them. See "Legal Investment"
in the Prospectus.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), imposes certain requirements and restrictions on those pension and
other employee benefits plans to which it applies and on those persons who are
fiduciaries with respect to such plans. In accordance with ERISA's fiduciary
standards, before purchasing the Notes, a fiduciary should determine whether
such an investment is permitted under the documents and instruments governing
the plan and is appropriate for the plan in view of its overall investment
policy and the composition of its portfolio.
Section 406 of ERISA and Section 4975 of the Code prohibit certain
transactions involving the assets of certain plans subject thereto (each, a
"Benefit Plan") and persons who are "parties in interest," within the meaning of
ERISA, or "disqualified persons," within the meaning of the Code. Certain
transactions involving the purchase, holding or transfer of the Notes might be
deemed to constitute prohibited transactions under ERISA and the Code if assets
of the Trust were deemed to be assets of a Benefit Plan. Under regulations
issued by the United States Department of Labor set forth in 29 C.F.R.
ss.2510.3101 (the "Plan Asset Regulations"), the assets of the Trust would be
treated as plan assets of a Benefit Plan for the purposes of ERISA and the Code
only if the Benefit Plan acquires an "Equity Interest" in the Trust and none of
the exceptions contained in the Plan Asset Regulations is applicable. An Equity
Interest is defined under the Plan Asset Regulations as an interest other than
an instrument which is treated as indebtedness under applicable local law and
which has no substantial equity features. It is anticipated that the Notes
should be treated as indebtedness without substantial equity features for
purposes of the Plan Asset Regulations. However, even if the Notes are treated
as indebtedness without substantial equity features for such purposes, the
acquisition or holding of Notes by or on behalf of a Benefit Plan could be
considered to give rise to a prohibited transaction if the Trust or any of its
affiliates is or becomes a party in interest or disqualified person with respect
to such Benefit Plan. In this event, certain exemptions from the prohibited
transaction rules could be applicable depending on the type and circumstances of
the plan fiduciary making the decision to acquire a Note. Included among these
exemptions are: Prohibited Transaction Class Exemption ("PTCE") 90-1, regarding
investments by insurance company pooled separate accounts; PTCE 91-38, regarding
investments by bank collective investment funds; PTCE 84-14, regarding
transactions effected by "qualified professional asset managers;" PTCE 95-60,
regarding
S-93
<PAGE>
investments by insurance company general accounts; and PTCE 96-23, regarding
transactions effected by In-House Asset Managers. Each investor using assets of
a Benefit Plan which acquires the Notes, or to whom the Notes are transferred,
will be deemed to have represented that the acquisition and continued holding of
the Notes will be covered by one of the exemptions listed above or another
Department of Labor class exemption.
Due to the complexity of these rules and the penalties imposed upon
persons involved in prohibited transactions, it is particularly important that a
fiduciary investing assets of an ERISA plan consult with counsel regarding the
consequences under ERISA of the acquisition and holding of Notes, including the
availability of any administrative exemptions from the prohibited transaction
rules.
S-94
<PAGE>
INDEX OF DEFINED TERMS
A
Accrued Note Interest.......................................S-74
Accrued Shortfall Interest Carry Forward Amount ............S-74
Aggregate Risks.............................................S-19
Auto Loans..................................................S-21
Available Distribution Amount...............................S-78
B
Back-up Servicer.......................................S-5, S-20
Back-up Servicing Fee.......................................S-86
Balloon Loans...............................................S-23
Base Principal Distribution Amount..........................S-75
Benefit Plan................................................S-93
Business Day................................................S-83
C
CEDE........................................................S-69
CEDEL.......................................................S-69
CEDEL Participants.......................... .............. S-71
CII ........................................................S-21
Class A Notes...............................................S-67
Class A-1 Interest Distribution Amount......................S-74
Class A-1 Note Principal Balance............................S-67
Class A-1 Noteholders.......................................S-67
Class A-2 Interest Distribution Amount......................S-74
Class A-2 Note Principal Balance............................S-68
Class A-2 Noteholders.......................................S-67
Clean-up Call...............................................S-81
Clearing Agency.............................................S-69
Closing Date...........................................S-5, S-23
Collection Period...........................................S-76
Company.....................................................S-21
Compensating Interest....................... .............. S-86
Cooperative.................................................S-71
Cumulative Insurance Payments...............................S-76
Cut-off Date................................................S-23
D
Debt-to-Income Ratio........................................S-52
Depositaries................................................S-69
Depositary..................................................S-69
Depositor..............................................S-5, S-20
Determination Date..........................................S-84
DTC ........................................................S-69
Due Period..................................................S-79
E
ERISA.......................................................S-93
Euroclear...................................................S-69
Euroclear Operator..........................................S-71
Euroclear Participants......................................S-71
Event of Default............................................S-87
Excess Overcollateralization Amount.........................S-79
F
Final Maturity Date.........................................S-68
G
Group.......................................................S-22
Group I.....................................................S-22
Group I Mortgage Loans......................................S-22
Group II....................................................S-22
Group II Mortgage Loans.....................................S-22
Groups......................................................S-22
H
HEP S-62
HLTV Mortgage Loans.........................................S-22
Holdings....................................................S-17
Home Equity Prepayment......................................S-62
I
Indenture Trustee......................................S-5, S-20
Indirect Participants.......................................S-69
Initial Class A-1 Note Principal Balance....................S-67
Initial Class A-2 Note Principal Balance....................S-67
Insurance Agreement.........................................S-84
Insured Payments............................................S-81
Insurer................................................S-5, S-17
Insurer Default.............................................S-88
Interest Accrual Period....................... .............S-75
Interest Distribution Amount................................S-74
IRS ........................................................S-89
S-95
<PAGE>
L
Liquidated Loan Loss........................................S-79
M
Modeling Assumptions........................................S-63
Monthly Advance.............................................S-84
Mortgage Loans..............................................S-20
Mortgage Pools..............................................S-22
Mortgaged Properties........................................S-22
N
Net Monthly Excess Cash Flow................................S-76
Note Clean-up Call Date.....................................S-81
Note Owners.................................................S-69
Noteholder.................................. ...............S-70
Notes.......................................................S-67
O
Order.......................................................S-82
Originator..................................................S-20
Overcollateralization Amount................................S-78
Overcollateralization Deficit...............................S-76
Overcollateralization Increase Amount.......................S-79
Overcollateralization Reduction Amount......................S-79
Owner Trustee..........................................S-5, S-19
P
Participants................................................S-69
Payment Date...........................................S-5, S-73
Piggy Back Mortgage Loans...................................S-22
Plan Asset Regulations......................................S-93
Prepayment Assumption.......................................S-62
Prepayment Interest Shortfalls..............................S-60
Principal Distribution Amount...............................S-75
PTCE........................................................S-93
Purchase and Assignment Agreement...........................S-73
R
Realized Losses.............................................S-85
Receipt.....................................................S-83
Received....................................................S-83
Record Date.................................................S-68
Relief Act..................................................S-60
Relief Act Shortfalls.......................................S-60
Remaining Overcollateralization Deficit.....................S-82
Reserve Account.............................................S-80
Retail Mortgage Loans.......................................S-53
S
Sale and Servicing Agreement................................S-20
SBA ........................................................S-21
SEC ........................................................S-3
Securities..................................................S-20
Seller......................................................S-19
Servicer..............................................S-20, S-57
Servicing Fee...............................................S-86
Shortfall Interest Deferred Amount..........................S-74
Single Risks................................................S-19
Small-Business Loans........................................S-21
SMMEA.......................................................S-93
Specified Overcollateralization Amount......................S-79
T
Tax Counsel.................................................S-89
Term of the Policy..........................................S-83
Terms and Conditions........................................S-71
Trust.......................................................S-19
Trust Agreement.............................................S-19
Trust Property..............................................S-20
U
Underwriter.................................................S-91
W
Wholesale Mortgage Loans....................................S-53
S-96
<PAGE>
================================================================================
HOMEGOLD HOME EQUITY LOAN TRUST,
SERIES 1999-1
$18,418,000 Class A-1 6.87% Asset-Backed Notes
$35,546,000 Class A-2 6.82% Asset-Backed Notes
Home Equity Loan
Asset-Backed Notes,
Series 1999-1
HomeGold, Inc. [Logo]
(Servicer & Originator)
Prudential Securities
Secured Financing Corporation
(Depositor)
-------------------------------------------------
PROSPECTUS SUPPLEMENT
-------------------------------------------------
Prudential Securities
May 19, 1999
