FOR IMMEDIATE RELEASE
Charlotte, North Carolina
October 27, 2000
From: First Union Commercial Mortgage Securities, Inc.
Subject: FIRST UNION-LEHMAN BROTHERS-BANK OF AMERICA
COMMERCIAL MORTGAGE TRUST SERIES 1998-C2
An article appeared in the July 24, 2000 edition of Real Estate Finance &
Investment (Vol. VI, No. 30) relating to missing documentation pertaining to
certain loans underlying FULBA 98-C2. Specifically, the article suggested that
ORIX Real Estate Capital Markets, LLC, as master servicer, may require First
Union National Bank, Lehman Brothers and Bank of America to repurchase as much
as $1 billion in loans due to missing or incomplete documentation. In an
effort to put this issue in context, we have set forth below certain
information which is intended to provide our perspective on this matter:
1. First Union and Lehman Brothers have both received separate demand
letters from ORIX requesting that each institution repurchase certain
identified mortgage loans due to certain document defects. ORIX has not
commenced any litigation against First Union to require First Union to
repurchase the mortgage loans in question. In the event First Union is
named in any litigation relating to the ORIX repurchase request, First
Union intends to vigorously defend such action and to resist the
requested repurchase. First Union is of the strong opinion that it will
not be required to repurchase any of the mortgage loans in question and
does not believe that there is a valid basis for any such litigation.
2. The mortgage loans in question are all performing.
3. The document exceptions in question are merely administrative in nature.
First Union is committed to obtaining all post closing documents. To
date, in excess of 90% of the First Union exceptions identified by ORIX
have been cleared. There are only 78 exceptions which remain to be
cleared. A majority of the remaining exceptions relate to UCC Financing
Statements and substantially all such UCC Financing Statements have been
re-filed with the appropriate recording offices.
4. In addition to the outstanding UCC Financing Statements, First Union is
only awaiting delivery of one mortgage and two assignments of assignments
of leases and rents with evidence of recording thereon from the related
county recording offices and is awaiting delivery of three final title
policies from the title companies which issued such policies and expects
same to be promptly received. Inasmuch as the relevant loan files contain
(a) a duplicate original mortgage and the lien of the mortgage is insured
by a national title company, (b) numerous documents indicating that the
Trust legally owns the assignments of leases and rents with respect to
which the assignments of assignments of leases and rents apply, and (c)
legally binding marked-up title binders, it is First Union's
determination that the absence of the missing documents does not
materially and adversely affect the Trust.
5. Incomplete documentation of the type identified by ORIX in its
correspondence to First Union is not uncommon in CMBS transactions and is
typically cured in the ordinary course of business. Moreover, the
timeliness of receipt of recording information and recorded documents is
outside of the control of the issuer and is dependent upon local, state
and county filing offices.
6. In order to trigger a repurchase obligation, the missing documents must
have a material and adverse effect on the certificateholders or the value
of the mortgage loans. The document exceptions in question do not rise to
this level and are correctable. There is an ongoing process in place at
First Union to cure the exceptions relating to the FULBA 98-C2
securitization. First Union has attempted on numerous occasions to have
its counsel, Brown & Wood LLP, review with counsel for ORIX each document
exception but ORIX has refused such attempts.
7. Brown & Wood LLP has advised First Union that the document exceptions as
reported by ORIX should not trigger a legal obligation to repurchase
loans or bonds. First Union has no intention of repurchasing the loans or
the bonds. In fact, First Union has formally rejected the repurchase
request made by ORIX.
8. On August 23, 2000, representatives of First Union met with
representatives of ORIX to discuss the efforts First Union had made as of
that date to clear the exceptions with respect to those loans identified
by ORIX to be repurchased. Since then, First Union has continued its
dialogue with representatives of ORIX regarding the clearing of such
exceptions.
9. Wells Fargo Bank Minnesota, N.A., the trustee for the transaction, has
informed First Union that the document defects outlined in ORIX's letter
dated July 20, 2000 to Lehman Brothers have been cleared, subject to
Wells Fargo's receipt of certain documents which have been submitted for
recording.
10. Standard & Poor's Ratings Services and Moody's Investors Service, Inc.,
the rating agencies which have rated the transaction, have received
copies of ORIX's repurchase demand and have not downgraded, qualified or
withdrawn the ratings on the securities.
