<PAGE>
Filed Pursuant to Rule 424(b)(2)
File Number 333-13617
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED FEBRUARY 25, 1998)
$499,453,406
(APPROXIMATE)
BEAR STEARNS MORTGAGE SECURITIES INC.
SELLER
PASS-THROUGH CERTIFICATES, SERIES 1998-2
The Pass-Through Certificates, Series 1998-2 (the "Certificates"), consist
of all Classes identified in the chart below (the "Offered Certificates") as
well as two additional Classes of Other Certificates, which are not being
offered for sale hereunder. The original principal amount of one or more
Classes of Certificates may be increased or decreased by up to 10% prior to
their issuance, depending on the Pooled Securities actually delivered to the
Trustee named herein, and may be adjusted, as necessary to obtain the required
ratings on the Offered Certificates. It is a condition to their issuance that
each Class of Certificates receives the rating (set forth under "Summary of
Terms--Certificate Rating" herein) of Moody's Investors Service, Inc.
("Moody's").
(cover continued on next page)
---------------
THE CERTIFICATES DO NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE SELLER,
THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. NONE OF THE CERTIFICATES,
THE UNDERLYING SECURITIES OR THE UNDERLYING MORTGAGE LOANS ARE INSURED OR
GUARANTEED BY ANY GOVERNMENTAL ENTITY, THE SELLER, OR ANY OF ITS AFFILIATES.
DISTRIBUTIONS ON THE CERTIFICATES WILL BE PAYABLE SOLELY FROM ASSETS
TRANSFERRED OR PLEDGED TO THE TRUST FOR THE BENEFIT OF THE RESPECTIVE
CERTIFICATEHOLDERS.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
---------------
FOR A DISCUSSION OF CERTAIN MATERIAL RISKS TO INVESTORS IN THE OFFERED
CERTIFICATES, SEE "RISK FACTORS" BEGINNING ON PAGE 28 HEREIN.
<TABLE>
<CAPTION>
APPROXIMATE ORIGINAL CERTIFICATE
CLASS CERTIFICATE PRINCIPAL BALANCE RATE
- --------------------------- ----------------------------------- ----------------
<S> <C> <C>
Class A Certificates $206,127,524 (1)
Class B Certificates $61,399,747 (1)
Class C Certificates $45,920,819 (1)
Class D Certificates $74,556,836 (1)
Class E Certificates $43,083,016 (1)
</TABLE>
<TABLE>
<CAPTION>
APPROXIMATE ORIGINAL CERTIFICATE
CLASS CERTIFICATE PRINCIPAL BALANCE RATE
- --------------------------- ----------------------------------- ----------------
<S> <C> <C>
Class F Certificates $53,402,301 (1)
Class G Certificates $14,962,963 (1)
Class X Certificates (2) (2)
Class R-1 Certificate $ 100 (1)
Class R-2 Certificate $ 100(3) (1)
</TABLE>
- ---------
1) Each interest bearing Class of Certificates (other than the Class X
Certificates) will be entitled to receive interest on its Certificate
Principal Balance on each monthly Distribution Date at a variable per annum
interest rate (a "Certificate Rate") equal to the lesser of (x) 6.75% and
(y) the weighted average of the Pooled Security Interest Rates, but in no
event greater than (z) a fraction, expressed as a percentage, the numerator
of which is the interest distribution on the Pooled Securities for which
both the Pooled Security distribution and the related Pooled Security
Distribution Date Information has been received by the Trustee by the times
described herein, multiplied by twelve, and the denominator of which is the
aggregate Certificate Principal Balance of the Certificates (other than the
Class PO Certificates). The initial rate of interest on each such Class of
Certificates is projected to be 6.75% per annum, assuming that
distributions and Pooled Security Distribution Date Information on all
Pooled Securities are timely received. See "Yield and Prepayment
Considerations" herein.
(2) The Class X Certificates are interest only securities and do not have a
principal amount. They have a "Notional Amount"equal to the sum of the
Pooled Security Principal Balances of all of the Pooled Securities and
will be entitled to receive interest thereon on each monthly Distribution
Date at the per annum rate equal to a fraction, expressed as a percentage,
the numerator of which is the product of (A) the excess, if any, of (i)
the interest distribution on the Pooled Securities for which both the
Pooled Security distribution and the related Pooled Security Distribution
Date Information have been received by the Trustee by the times described
herein over (ii) the interest paid on such Distribution Date on all
interest bearing Certificates other than the Class X Certificates, and (B)
twelve, and the denominator of which is the Notional Amount. The initial
rate of interest on the Class X Certificates is projected to be
approximately 0.49% per annum, assuming that distributions and Pooled
Security Distribution Date Information on all Pooled Securities are timely
received. See "Yield and Prepayment Considerations" herein.
(3) The Class R-2 Certificate is entitled to receive certain investment income
on amounts on deposit in the Certificate Account as described herein under
"Description of the Certificates--Distributions of Interest and
Principal."
---------------
The Offered Certificates will be purchased by Bear, Stearns & Co. Inc.
(the "Underwriter") from Bear Stearns Mortgage Securities Inc. (the "Seller")
and will be offered by the Underwriter from time to time in negotiated
transactions at varying prices to be determined at the time of sale. Proceeds
to the Seller from the sale of the Offered Certificates are expected to be
approximately 100% of the aggregate original Certificate Principal Balance of
the Offered Certificates, plus accrued interest thereon from February 1, 1998
to but not including the Closing Date.
The Offered Certificates are offered by the Underwriter when, as and if
issued, delivered to and accepted by the Underwriter and subject to certain
other conditions. It is expected that delivery of the Class R-1 and Class R-2
Certificates will be made against payment therefor at the offices of Bear,
Stearns & Co. Inc., 245 Park Avenue, New York, New York 10167 and that delivery
of the other Offered Certificates will be made in book entry form only, through
the same day funds settlement system of The Depository Trust Company, in each
case on or about March 30, 1998.
BEAR, STEARNS & CO. INC.
The date of this Prospectus Supplement is March 26, 1998
<PAGE>
(COVER CONTINUED FROM PREVIOUS PAGE)
The Certificates will represent, in the aggregate, the entire
beneficial ownership interest in a trust (the "Trust") consisting primarily of a
pool of 96 classes of mortgage-backed securities (the "Pooled Securities") with
an aggregate Pooled Security Principal Balance of approximately $515,964,267
following the Pooled Security Distribution Dates relating to the February 1998
Pooled Security Distribution Date Statements, irrespective of whether any of
such dates occurred in March 1998 (the "Pooled Security Information Date").
The Pooled Securities were issued pursuant to pooling agreements or,
with respect to three classes of Pooled Securities an indenture or trust
agreement (each, an "Underlying Agreement") and evidence interests in 83 trusts
or trust estates (the "Pooled Security Underlying Trusts"), the assets of which
consist primarily of (i) conventional, fixed rate, first lien mortgage loans
secured by one- to four-family residences or cooperative loans secured by shares
in cooperative corporations (the "Mortgage Loans") or (ii) mortgage certificates
(the "Resecuritized Certificates," and together with the Pooled Securities, the
"Underlying Securities") representing interests in 48 trusts or trust estates
(the "Resecuritized Certificate Underlying Trusts" and together with the Pooled
Security Underlying Trusts, the "Underlying Trusts"), the assets of which
consist primarily of Mortgage Loans. The Mortgage Loans relating to the
Underlying Trusts are referred to as "Underlying Mortgage Loans." The Pooled
Securities which are backed by Resecuritized Certificates are sometimes referred
to herein as "Resecuritization Pooled Securities." The abbreviation used for
each series of certificates, notes or bonds issued in connection with an
Underlying Trust (each, an "Underlying Series") is set forth in Annex II
attached hereto and the characteristics of the Underlying Securities are
described herein under "Description of the Underlying Securities" and in Annex I
attached hereto.
On the Closing Date, the Seller will acquire the Pooled Securities from
SunAmerica Inc., a Maryland corporation, its subsidiary SunAmerica Life
Insurance Company, an Arizona corporation, and certain of the latter's
subsidiaries (together, the "SunAmerica Parties"), and the Trust will acquire
the Pooled Securities from the Seller. It is anticipated that the SunAmerica
Parties will acquire the Class D, Class E, Class F, Class G, Class X, Class R-2
and the Class PO Certificates.
Distributions of principal and interest on the Certificates with
respect to a month will be made on the day (each, a "Distribution Date") which
is the fifth Business Day after the 25th day (or if the 25th day is not a
Business Day, the following Business Day) of each month, commencing on April 1,
1998. The distribution date with respect to the Pooled Securities (each, a
"Pooled Security Distribution Date") is the 25th day (or if the 25th day is not
a business day, as defined in the related Underlying Agreement, the following
business day) of each month except in the case of one Resecuritization Pooled
Security, it is the 29th day (or, if in February, the last day) of such month
(or if such day is not a business day, as defined in the related Underlying
Agreement, the following business day) and in the case of the other nine
Resecuritization Pooled Securities, it is two or three business days following
the 25th day of such month (or if the 25th day is not a business day, as defined
in the related Underlying Agreement, the following business day). The
distribution date with respect to each Resecuritized Certificate is the 25th day
(or if the 25th day is not a business day, as defined in the related Underlying
Agreement, the following business day) of each month. The Pooled Security
Distribution Dates or distribution dates with respect to the Resecuritized
Certificates, with respect to each Underlying Security are set forth in Annex I
attached hereto. If distributions on a Pooled Security or the Pooled Security
Distribution Date Information with respect thereto has not been timely received,
distributions on the applicable Certificates will be made on a subsequent date
as described under "Description of the Certificates--Distributions of Interest
and Principal" herein.
S-2
<PAGE>
On each Distribution Date, each Class of interest bearing Certificates
is generally entitled to receive interest from interest collections on the
Pooled Securities at the applicable Certificate Rate. In addition, each Class of
Certificates (other than the Class X and Class PO Certificates) is generally
entitled to receive on each Distribution Date and Supplemental Distribution Date
its pro rata share, based upon its respective Certificate Principal Balance
immediately prior to the applicable Distribution Date, of the lesser of (i)
principal collections on the Pooled Securities for which both the Pooled
Security distribution and the Pooled Security Distribution Date Information have
been received by the Trustee by the related Determination Time or Supplemental
Determination Time, as applicable, and (ii) the excess of (x) the aggregate
Pooled Security Principal Balance of such Pooled Securities immediately
following the second preceding Pooled Security Distribution Dates over (y) the
aggregate Pooled Security Principal Balance of such Pooled Securities
immediately following the immediately preceding Pooled Security Distribution
Dates (in the aggregate, for each such date, the "Principal Distribution Amount"
and with respect to each Class, the "Class Percentage Principal"). The Class PO
Certificates are entitled to receive any principal collections on the Pooled
Securities for which both the Pooled Security distribution and the Pooled
Security Distribution Date Information have been received by the Trustee by the
related Determination Time or Supplemental Determination Time, as applicable, in
excess of the Principal Distribution Amount, on each Distribution Date or
Supplemental Distribution Date, as applicable; provided that, if there may be a
Supplemental Distribution Date, such payments on the Class PO Certificates will
be made only on such Supplemental Distribution Date and calculated on an
aggregate basis, taking account of principal collections and the Principal
Distribution Amounts with respect to both the Distribution Date and the
Supplemental Distribution Date, and irrespective of when the Pooled Security
distributions or Pooled Security Distribution Date Information was received (the
"Class PO Principal Distribution").
To the extent that with respect to a Distribution Date or a
Supplemental Distribution Date (i) principal collections on the Pooled
Securities for which both the Pooled Security distribution and the Pooled
Security Distribution Date Information have been received by the Trustee by the
related Determination Time or Supplemental Determination Time, as applicable,
are less than (ii) the excess of (x) the aggregate Pooled Security Principal
Balance of such Pooled Securities immediately following the second preceding
Pooled Security Distribution Dates over (y) the aggregate Pooled Security
Principal Balance of such Pooled Securities immediately following the
immediately preceding Pooled Security Distribution Dates, such difference (the
"Loss Amount") will be allocated to the most junior Class of Certificates (other
than the Class X and Class PO Certificates) outstanding (in reverse alphabetical
order commencing with the Class H Certificates) by reducing its Certificate
Principal Balance. An amount equal to such Loss Amount, to the extent of the
Class Percentage Principal relating to the Classes of Certificates outstanding
other than the most senior Class (in alphabetical order commencing with the
Class A Certificates), will not be paid to the Classes otherwise entitled
thereto in reverse alphabetical order commencing with the Class H Certificates,
but will be paid sequentially, in alphabetical order to the most senior Class of
Certificates outstanding, commencing with the Class A Certificates (other than
the Class X and Class PO Certificates), in each case to zero, as additional
principal ("Additional Principal"). The amount of Additional Principal taken
from each Class of Certificates (in reverse alphabetical order commencing with
the Class H Certificates) will be included in the Class Deferred Principal for
such Class on the following Distribution Date or Supplemental Distribution Date.
If there are insufficient funds available therefor, such entitlement will be
carried forward and will be paid to holders of the most senior Class prior to
payments to holders of more subordinate Classes. A Supplemental Distribution
Date may occur in any month in which either distributions or Pooled Security
Distribution Date Information have not been received on a timely basis for the
related Distribution Date.
S-3
<PAGE>
See "Description of the Certificates--Distributions of Interest and Principal"
and "Risk Factors--Subordination of Certificates" herein.
The yield to maturity on each class of certificates and particularly
the class x certificates will depend on (i) the characteristics of, and the
amount, rate and timing of principal and interest payments on, the pooled
securities, which in turn will be affected (x) in the case of the
resecuritization pooled securities by the amount, rate and timing of principal
and interest payments (including prepayments, repurchases, defaults and
liquidations) on the resecuritized certificates and (y) in all cases by the
amount, rate and timing of principal and interest payments (including
prepayments, repurchases, defaults and liquidations) on the underlying mortgage
loans and the amount and timing of mortgagor defaults resulting in realized
losses, (ii) the allocation of such payments and losses among the various
classes of securities of each underlying series and, in the case of the
resecuritization pooled securities, among the various classes of securities of
each series of resecuritization certificates and (iii) the occurrence of
optional terminations with respect to the underlying trusts. Each of the
underlying securities is subordinate to one or more classes of senior securities
and may be subordinate to one or more classes of mezzanine securities and
subordinated securities. In general, until the principal balances of any
securities subordinated to a pooled security have been reduced to zero, only
certain realized losses due to special hazards, fraud and bankruptcy in excess
of those covered entirely by such subordinated securities will be allocated to
the related pooled security. The underlying mortgage loans generally may be
prepaid in full or in part at any time without penalty. Investors in the class x
certificates should consider the risk that a rapid rate of principal
prepayments, particularly of pooled securities with higher interest rates or
principal prepayments allocated to resecuritized certificates with higher
pass-through rates, or lower than contemplated interest collections or the
allocation of realized losses to pooled securities, particularly those with
higher interest rates, could result in the failure of investors in such class to
recover fully their investments. The yield to investors in each class of
certificates also will be adversely affected by interest shortfalls. The yield
to maturity of a class of certificates purchased at a discount or premium will
be more sensitive to the amount, rate and timing of payments thereon. Holders of
certificates purchased at a discount (or premium) should consider the risk that
a slower (or faster) than anticipated rate of principal payments on the
underlying mortgage loans could result in an actual yield that is lower than the
anticipated yield. No representation is made as to the anticipated yield to
maturity of any class of certificates, the aggregate amount or rate of
distributions on any class of certificates, or the aggregate amount or rate of
principal or interest payments on or realized losses allocated to the pooled
securities, the resecuritized certificates or the underlying mortgage loans. See
"summary of terms--yield and prepayment considerations" and "yield and
prepayment considerations" herein.
There is currently no secondary market for the Certificates and there
can be no assurance that one will develop. The Underwriter intends to establish
a market in each Class of Offered Certificates, but is not obligated to do so.
There is no assurance that any such market, if established, will continue.
As described herein, two separate "real estate mortgage investment
conduit" ("REMIC") elections will be made with respect to the Trust for federal
income tax purposes. As described more fully herein and in the Prospectus, each
Class of Certificates (other than the Class R-1 and Class R-2 Certificates
(sometimes referred to as the "Residual Certificates")) will be designated as a
"regular interest" in a REMIC and the Class R-1 and Class R-2 Certificates will
each represent a "residual interest" in a REMIC. See "Federal Income Tax
Considerations" herein and "Certain Federal Income Tax Consequences" in the
Prospectus.
S-4
<PAGE>
To the extent statements contained herein do not relate to historic or
current information, this Prospectus Supplement may be deemed to contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Act"), and Section 21E of the Securities and
Exchange Act of 1934, as amended (the "Exchange Act"). Actual results could
differ materially from those projected in such statements as a result of the
matters set forth above, under "Summary of Terms--Yield and Prepayment
Considerations" and "Yield and Prepayment Considerations" herein and elsewhere
in this Prospectus Supplement.
The Offered Certificates offered by this Prospectus Supplement
constitute a separate series of Certificates being offered by the Seller
pursuant to its Prospectus dated February 25, 1998, of which this Prospectus
Supplement is a part and which accompanies this Prospectus Supplement. The
Prospectus contains important information regarding this offering which is not
contained herein and prospective investors are urged to read the Prospectus and
this Prospectus Supplement in full.
S-5
<PAGE>
SUMMARY OF TERMS
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT AND IN
THE ACCOMPANYING PROSPECTUS DATED FEBRUARY 25, 1998 (THE "PROSPECTUS").
Reference is made to the "Index of Defined Terms" herein for the location of the
definitions of certain capitalized terms.
A schedule of the Underlying Securities along with the abbreviations
used herein for each Underlying Security is set forth in Annex II attached
hereto. Unless otherwise specified herein, references herein to an amount or
percentage of Pooled Securities or Resecuritized Certificates refers to the
amount or percentage calculated based on the aggregate outstanding principal
balance (the "Pooled Security Principal Balance" or "Resecuritized Certificate
Principal Balance," as applicable), as reported by the Underlying Trustee or
Underlying Servicer of such Underlying Securities following the Pooled Security
Distribution Dates relating to the February 1998 Pooled Security Distribution
Date Statements, after giving effect to distributions made on the Underlying
Securities on or prior to such dates (the "Pooled Security Information Date").
References to a current amount or percentage of Underlying Mortgage Loans or an
average with respect to Underlying Mortgage Loans shall, unless otherwise
specified herein, be to the amount, percentage or average calculated based on
the scheduled principal balances of such Underlying Mortgage Loans, as of
February 1, 1998 after giving effect to any payments made or scheduled to be
made and losses realized on the Underlying Mortgage Loans on or prior to such
date (the "Mortgage Loan Information Date") as reflected on the related Pooled
Security Distribution Date Statements for February 1998. References to a Pooled
Security Distribution Date or Pooled Security Distribution Date Statement of any
month shall refer to a Pooled Security Distribution Date or Pooled Security
Distribution Date Statement, assuming that all calendar days of a month
constitute business days (as defined in the related Underlying Agreement).
The Pooled Securities represent varying percentages of the aggregate
Pooled Security Principal Balance of all Pooled Securities backing payment on
the Certificates. Moreover, the Pooled Securities represent varying interests in
the Underlying Mortgage Loans in the related Underlying Trusts. A Pooled
Security representing a relatively small percentage of all Pooled Securities may
be backed by a disproportionately large amount of Underlying Mortgage Loans; and
conversely a Pooled Security representing a relatively large percentage of all
Pooled Securities may be backed by a disproportionately small amount of
Underlying Mortgage Loans. Similarly, a Resecuritization Pooled Security
representing a relatively small percentage of all Pooled Securities may be
backed by a disproportionately large amount of Resecuritized Certificates.
Accordingly, any aggregated statistical information about the Underlying
Mortgage Loans or the Resecuritized Certificates contained herein should be read
in conjunction with the information, contained in Annex I attached hereto,
regarding the Underlying Mortgage Loans or the Resecuritized Certificates on a
Pooled Security-by-Pooled Security basis, keeping in mind the relative size of
each Pooled Security.
<TABLE>
<CAPTION>
THE CERTIFICATES
<S><C>
TITLE OF SERIES................................ Pass-Through Certificates, Series 1998-2 (the "Certificates").
The Certificates will be issued pursuant to a Pooling Agreement
dated as of March 1, 1998 (the "Agreement") between the Seller
and the Trustee.
OVERVIEW OF POOLED SECURITIES.................. The Offered Certificates and the Other Certificates will
represent the entire beneficial ownership interest in a trust
(the "Trust") consisting primarily of a pool of 96 classes of
mortgage-backed securities (the "Pooled Securities") with an
aggregate Pooled Security Principal Balance of approximately
$515,964,267 as of the Pooled Security Information Date. The
Pooled Securities were issued
</TABLE>
S-6
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
pursuant to pooling agreements or, with respect to two classes of
Pooled Securities an indenture or trust agreement (each, an
"Underlying Agreement") and evidence interests in 83 Underlying
Trusts, the assets of which consist primarily of (i) conventional,
fixed rate, first lien mortgage loans secured by one- to
four-family residences or cooperative loans secured by shares in
cooperative corporations (the "Mortgage Loans") or (ii) mortgage
certificates representing interests in 48 Underlying Trusts, the
assets of which consist primarily of Mortgage Loans.
OTHER CERTIFICATES............................. In addition to the Offered Certificates, the Trust will issue
the following Classes of "Other Certificates" in the indicated
approximate original principal balance, which will provide
credit support to the Offered Certificates, but which is not
offered hereby:
</TABLE>
<TABLE>
<CAPTION>
Approximate
Original
Certificate
Principal Certificate
Class Balance Rate
----- ---------------- ---------
<S> <C> <C>
Class H Certificates $ 16,510,861 (1)
Class PO Certificates (2) (2)
--------------
(1) The Class H Certificates
will be entitled to
receive interest on their
Certificate Principal
Balance on each monthly
Distribution Date at the
same variable per annum
Certificate Rate that will
be paid on the Class A
through Class G
Certificates.
(2) The Class PO Certificates
are principal only
Certificates and will not
bear interest. Their
approximate original
Certificate Principal
Balance of $2,008,801
represents the right to
receive principal in
excess of the aggregate
original Pooled Security
Principal Balance. See
"Description of the
Certificates--Distributions
of Interest and Principal"
herein.
SELLER......................................... Bear Stearns Mortgage Securities Inc., as seller (the
"Seller"). The Seller is an affiliate of the Underwriter. See
"The Seller" in the Prospectus.
TRUSTEE........................................ The Bank of New York, as trustee (the "Trustee").
</TABLE>
S-7
<PAGE>
<TABLE>
<CAPTION>
<S><C>
BOOK-ENTRY;
DENOMINATIONS.................................. Each Class of Offered Certificates (other than the Residual
Certificates) will be registered as a single Certificate held
by a nominee of The Depository Trust Company ("DTC"), and
beneficial interests will be held by investors through the
book-entry facilities of DTC in minimum denominations of
$250,000 and increments of $1.00 in excess thereof.
Notwithstanding the foregoing, one Certificate of each Class of
Certificates may be held by investors in a different
denomination to accommodate the remainder of the initial
principal amount or Notional Amount of the Certificates of such
Class. The Class R-1 and Class R-2 Certificates will each be
issued as a single physical certificate in a denomination of
$100. See "Description of the Certificates--Book-Entry
Registration" herein.
CLOSING DATE................................... On or about March 30, 1998 (the "Closing Date").
DISTRIBUTION DATES............................. Distributions of principal and interest on the Certificates
with respect to a month will be made on the day (each, a
"Distribution Date") which is the fifth Business Day after the
25th day (or if the 25th day is not a Business Day, the
following Business Day) of each month, commencing on April 1,
1998. The distribution date with respect to the Pooled
Securities (each, a "Pooled Security Distribution Date") is the
25th day (or if the 25th day is not a business day, as defined
in the related Underlying Agreement, the following business
day) of each month except in the case of one Resecuritization
Pooled Security, it is the 29th day (or, if in February, the
last day) of such month (or if such day is not a business day,
as defined in the related Underlying Agreement, the following
business day) and in the case of the other nine
Resecuritization Pooled Securities, it is two or three business
days following the 25th day of each month (or if the 25th day
is not a business day, as defined in the related Underlying
Agreement, the following business day). The distribution date
with respect to the Resecuritized Certificates is the 25th day
(or if the 25th day is not a business day, as defined in the
related Underlying Agreement, the following business day) of
each month. A "Business Day" means a day other than a
Saturday, a Sunday or a day on which banking institutions in
New York, New York or the city in which the corporate trust
office of the Trustee is located are authorized or obligated by
law or executive order to be closed.
If the Trustee has not received a distribution on, or the Pooled
Security Distribution Date Information with respect
</TABLE>
S-8
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
to, a Pooled Security by 3:00 p.m. on the Business Day prior to
the related Distribution Date (the "Determination Time"), the
distribution with respect thereto will not be made on the
immediately following Distribution Date but (i) if such
distribution and such Pooled Security Distribution Date
Information are received by 3:00 p.m. on the fifth Business Day
after the Determination Time, it will be made on the sixth
Business Day after the Determination Time (the "Supplemental
Distribution Date") or (ii) if received after 3:00 p.m. on the
fifth Business Day after the Determination Time, it will be made
on the next succeeding Distribution Date, and in neither case will
additional interest be paid thereon. Notwithstanding the
foregoing, if there may be a Supplemental Distribution Date, Class
PO Principal Distributions on the Class PO Certificates will be
made only on the Supplemental Distribution Date. See "Description
of the Certificates--Distributions of Interest and Principal"
herein.
Funds available to be paid on both a Distribution Date and the
immediately following Supplemental Distribution Date will be
aggregated in determining if a Certificate Rate equal to the
lesser of (i) 6.75% per annum and (ii) the weighted average of the
Pooled Security Interest Rates has been achieved with respect to
all Classes of Certificates (other than the Class X Certificates).
For both a Distribution Date and the related Supplemental
Distribution Date, interest will be calculated based on the
Certificate Principal Balance of each Class of Certificates
immediately prior to such Distribution Date. Any interest carried
over to the following Distribution Date will be treated as
received with respect to such following Distribution Date and will
not affect the calculation of interest for the preceding
Distribution Date. Notwithstanding the foregoing, for accounting
purposes, each Distribution Date is deemed to occur in the same
month as the immediately preceding Pooled Security Distribution
Date (assuming for the purpose of calculating the immediately
preceding Pooled Security Distribution Date that all calendar days
are business days).
RECORD DATE.................................... Distributions will be made on each Distribution Date to holders
of record as of the close of business on the last Business Day
of the calendar month preceding the month in which such
Distribution Date occurs; provided that for this purpose the
Distribution Date is deemed to occur on the 30th (the 28th or
29th of February) of each month, without regard to whether such
day is a Business Day (the
</TABLE>
S-9
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
"Record Date"). See "Description of the Certificates--Distributions
of Interest and Principal" herein.
DISTRIBUTIONS OF INTEREST AND
PRINCIPAL...................................... Each Class of interest bearing Certificates (other than the
Class X Certificates) will be entitled to receive interest on
its Certificate Principal Balance on each monthly Distribution
Date at a variable per annum interest rate (a "Certificate
Rate") equal to the lesser of (x) 6.75% and (y) the weighted
average of the Pooled Security Interest Rates, but in no event
greater than (z) a fraction, expressed as a percentage, the
numerator of which is the interest distribution on the Pooled
Securities for which both the Pooled Security distribution and
the related Pooled Security Distribution Date Information have
been received by the Trustee by the times described herein,
multiplied by twelve, and the denominator of which is the
aggregate Certificate Principal Balance of the Certificates
(other than the Class PO Certificates). The initial rate of
interest on each such Class of Certificates is projected to be
6.75% per annum, assuming that distributions and Pooled
Security Distribution Date Information on all Pooled Securities
are timely received. See "Yield and Prepayment Considerations"
herein.
The Class X Certificates are interest only securities and do not
have a principal amount. They have a "Notional Amount" equal to
the sum of the Pooled Security Principal Balances of all of the
Pooled Securities and will be entitled to receive interest thereon
on each monthly Distribution Date at the per annum rate equal to a
fraction, expressed as a percentage, the numerator of which is the
product of (A) the excess, if any, of (i) the interest
distribution on the Pooled Securities for which both the Pooled
Security distribution and the related Pooled Security Distribution
Date Information have been received by the Trustee by the times
described herein over (ii) the interest paid on such Distribution
Date on all interest bearing Certificates other than the Class X
Certificates, and (B) twelve and the denominator of which is the
Notional Amount. The initial rate of interest on the Class X
Certificates is projected to be approximately 0.49% per annum,
assuming that distributions and Pooled Security Distribution Date
Information on all Pooled Securities are timely received. See
"Yield and Prepayment Considerations" herein.
Each Class of Certificates (other than the Class X and Class PO
Certificates) is generally entitled to receive on each
Distribution Date and Supplemental Distribution Date its
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pro rata share, based upon its respective Certificate Principal
Balance immediately prior to the applicable Distribution Date, of
the Principal Distribution Amount. The Class PO Certificates, are
entitled to receive the Class PO Principal Distribution on each
Distribution Date or Supplemental Distribution Date, as
applicable, provided that, if there may be a Supplemental
Distribution Date, the Class PO Principal Distribution will be
made only on such Supplemental Distribution Date and calculated on
an aggregate basis, taking account of principal collections and
the Principal Distribution Amount with respect to both the
Distribution Date and the Supplemental Distribution Date, and
irrespective of when the Pooled Security distributions or Pooled
Security Distribution Date Information was received.
Any Loss Amount with respect to a Distribution Date or a
Supplemental Distribution Date will be allocated to the most
junior Class of Certificates (other than the Class X and Class PO
Certificates) outstanding (in reverse alphabetical order
commencing with the Class H Certificates) by reducing its
Certificate Principal Balance. An amount equal to such Loss
Amount, to the extent of the Class Percentage Principal relating
to the Classes of Certificates outstanding other than the most
senior Class (in alphabetical order commencing with the Class A
Certificates), will not be paid to the Classes otherwise entitled
thereto in reverse alphabetical order commencing with the Class H
Certificates, but will be paid sequentially, in alphabetical order
commencing with the Class A Certificates, to the most senior Class
of Certificates outstanding, commencing with the Class A
Certificates (other than the Class X and Class PO Certificates) in
each case to zero, as additional principal ("Additional
Principal"). The amount of Additional Principal taken from each
Class of Certificates (in reverse alphabetical order commencing
with the Class H Certificates) will be included in the Class
Deferred Principal for such Class on the following Distribution
Date or Supplemental Distribution Date. If there are insufficient
funds available therefor, such entitlement will be carried forward
and will be paid to the most senior Class prior to payments to
other more subordinate Classes. A Supplemental Distribution Date
may occur in any month in which either distributions or Pooled
Security Distribution Date Information have not been received on a
timely basis for the related Distribution Date. Entitlements to
principal payments will be calculated on each Supplemental
Distribution Date with respect to the amounts then being
distributed in the same manner as
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described above with respect to each Distribution Date. In
addition to the foregoing, the Class R-2 Certificate will be
entitled to receive any investment earnings or amounts on deposit
in the Certificate Account (except for amounts paid to the Trustee
as its fee). See "Description of the Certificates--Distributions
of Interest and Principal" and "Risk Factors--Subordination of
Certificates" herein.
ALLOCATION OF LOSS AMOUNTS..................... All Loss Amounts with respect to a Distribution Date shall be
allocated to the most junior Class of Certificates outstanding
(in reverse alphabetical order commencing with the Class H
Certificates) in reduction of their Certificate Principal
Balances until the Certificate Principal Balance of each such
Class of Certificates has been reduced to zero. See
"Description of the Certificates--Allocation of Loss Amounts"
herein.
YIELD AND PREPAYMENT
CONSIDERATIONS................................. GENERAL CONSIDERATIONS. The yield to maturity and weighted
average life of each Class of Offered Certificates will depend
on (i) the characteristics of, and the amount, rate and timing
of principal and interest payments on, the Pooled Securities
which in turn will be affected (x) in the case of the
Resecuritization Pooled Securities by the amount, rate and
timing of principal and interest payments (including
prepayments, repurchases, defaults and liquidations) on the
Resecuritized Certificates and (y) in all cases by the amount,
rate and timing of principal and interest payments (including
prepayments, repurchases, defaults and liquidations) on the
Underlying Mortgage Loans and the amount and timing of
mortgagor defaults resulting in Realized Losses, (ii) the
allocation of such payments and losses among the various
classes of securities of each Underlying Series and, in the
case of the Resecuritization Pooled Securities, among the
various classes of securities of each series of Resecuritized
Certificates, (iii) the occurrence of optional terminations
with respect to the Underlying Trusts and (iv) the purchase
prices paid for the Offered Certificates. In general, the
Underlying Mortgage Loans may be prepaid at any time without
penalty and, accordingly, the rate of principal payments
thereon is likely to vary considerably from time to time. In
addition to the discussion below, prospective investors should
review the discussion under "Yield and Prepayment
Considerations" herein.
In general, principal prepayments on the Underlying Mortgage Loans
are not allocated to the Pooled Securities (other than the
Resecuritization Pooled Securities) or the
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Resecuritized Certificates (and consequently indirectly the
Resecuritization Pooled Securities) until the end of a minimum
period (a "Lock Out Period"), of five years from the related date
of issuance of the related Underlying Securities (or in the case
of the Resecuritization Pooled Securities, the date of issuance of
the Resecuritized Certificates). After the applicable Lock Out
Period, such Underlying Securities are entitled to distributions
of some portion of prepayments, subject, generally, to the
satisfaction of certain delinquency and loss tests. See
"Description of the Underlying Securities--Distributions of
Principal on the Pooled Securities" herein.
Since the applicable Certificate Rate will be based on the
interest collections on the Pooled Securities, disproportionate
allocations of Realized Losses and, after the related Lock Out
Period, principal prepayments, to Pooled Securities with higher
Pooled Security Interest Rates or to Resecuritized Certificates
with relatively high pass-through rates, will adversely affect the
yields on the Certificates. Similarly, to the extent a Pooled
Security bears interest based on the weighted average of either
(i) the pass-through rates of the related Resecuritized
Certificates or (ii) the Mortgage Net Rates of the related
Underlying Mortgage Loans, disproportionate prepayments of such
Resecuritized Certificates with higher pass-through rates or such
Mortgage Loans with higher Mortgage Net Rates will adversely
affect yield on such Pooled Securities and consequently on the
Certificates. The "Mortgage Net Rate" with respect to any
Underlying Mortgage Loan, means the per annum interest rate borne
by an Underlying Mortgage Loan minus certain administrative fees
as provided in the related Underlying Agreement. Annex I attached
hereto sets forth the weighted average Mortgage Net Rate with
respect to each Underlying Security, the type of interest rate
borne by each Underlying Security and the applicable interest rate
on the Pooled Security Information Date.
Since on each Distribution Date and Supplemental Distribution Date
holders of the most senior Class of Certificates outstanding (in
alphabetical order) are entitled to receive additional principal
in an amount equal to the Loss Amounts for such Distribution Date
or Supplemental Distribution Date, and the funds required to pay
such amounts are subtracted from principal otherwise allocated to
other Classes of Certificates (in reverse alphabetical order
commencing with the Class H Certificates), with the right to
receive such funds on a deferred basis to the extent
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of funds available therefor, to the extent that there are Loss
Amounts in an amount greater than anticipated and the yields and
weighted average lives of all Classes of Certificates will be
affected, perhaps materially. See "Description of the
Certificates--Distributions of Interest and Principal" herein.
MORTGAGE LOAN PREPAYMENTS. If prevailing mortgage rates fall
significantly below the mortgage rates on the Underlying Mortgage
Loans, such Underlying Mortgage Loans are likely to be subject to
higher prepayment rates than if prevailing rates remain at or
above the mortgage rates on such Mortgage Loans. Other factors
affecting prepayments of Mortgage Loans include changes in
mortgagors' housing needs, job transfers, unemployment, net equity
in the property (the "Mortgaged Property") securing the Mortgage
Loan and servicing decisions. The Underlying Mortgage Loans may be
prepaid at any time without penalty and usually have due-on-sale
clauses.
TIMING OF PAYMENTS. The timing and amount of payments on the
Underlying Mortgage Loans may significantly affect an investor's
yield. In general, the earlier a prepayment of principal on a
Mortgage Loan, the greater will be the effect on an investor's
yield to maturity. As a result, the effect on an investor's yield
of principal prepayments occurring at a rate higher (or lower)
than the rate anticipated during the period immediately following
the issuance of the Certificates will not be offset by a
subsequent like reduction (or increase) in the rate of principal
prepayments. Furthermore, the effective yield to
Certificateholders will be slightly lower than the yield otherwise
produced by the applicable Certificate Rate and purchase price
because, while interest generally will accrue on each Certificate
from the first day of the month, the distribution of such interest
will not be made earlier than the 1st day of the second month
following the month of accrual. Moreover, (i) any shortfalls in
collections with respect to interest ("Interest Shortfalls") or
(ii) Pooled Securities on which either the related Pooled Security
Distribution Date Information or the distribution thereon has not
been received by the Determination Time, will reduce the amount of
interest and/or principal otherwise payable to a Class of
Certificates and accordingly will reduce the yield to investors in
such Class.
DISCOUNTS AND PREMIUMS. In the case of any Class of Certificates
purchased at a discount, a slower than anticipated rate of
principal payments, other things being
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equal, could result in an actual yield that is lower than the
anticipated yield. In the case of any Class of Certificates
purchased at a premium, a faster than anticipated rate of
principal payments, other things being equal, could result in an
actual yield that is lower than the anticipated yield.
TERMINATION OF UNDERLYING TRUSTS. The Underlying Trusts relating
to the Resecuritized Certificates and the Pooled Securities (other
than eight Resecuritization Pooled Securities) are subject to
termination when the principal balance of the Underlying Mortgage
Loans or securities of the related Underlying Trust falls to some
percentage--typically either 5% or 10%--of the original principal
balance of all Underlying Mortgage Loans or securities of the
related Underlying Trust. See Annex I attached hereto for a list
of such percentages, if any, the entities which may exercise such
termination options and the percentage of the original principal
balance of the Underlying Mortgage Loans or securities remaining
with respect to each Underlying Trust. Any such optional
terminations will result in earlier payments of the outstanding
Certificates (other than the Class X Certificates) and will reduce
the yield of the Class X Certificates.
REINVESTMENT RISK. Since prevailing interest rates are subject to
fluctuation, there can be no assurance that investors in the
Certificates will be able to reinvest the distributions thereon at
yields equaling or exceeding the yield on the respective Class of
Certificates. Yields on any such reinvestment may be lower, and
may even be significantly lower, than yields on the Certificates.
Generally, when prevailing interest rates increase, prepayment
rates on Mortgage Loans tend to decrease, resulting in a reduced
return of principal to investors at a time when reinvestment at
such higher prevailing rates would be desirable. Conversely, when
prevailing interest rates decline, prepayment rates on mortgage
loans tend to increase, resulting in a greater return of principal
to investors at a time when reinvestment at comparable yields may
not be possible. Prospective investors in the Certificates should
consider the related reinvestment risks in light of other
investments that may be available to such investors.
CLASS X CERTIFICATES. Because the Notional Amount of the Class X
Certificates will be based upon the aggregate Pooled Security
Principal Balance, the yield on the Class X Certificates will be
sensitive to the amount, rate and timing of principal prepayments
of the Underlying Mortgage
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Loans which result in principal payments on the Pooled Securities.
A rapid rate of principal prepayments or a high level of Realized
Losses on the Underlying Mortgage Loans in each case which are
allocated to the Pooled Securities will have a materially negative
effect on the yield to investors in the Class X Certificates. In
addition, since, in general, the Class X Certificates will receive
interest at a variable rate based on the amount of interest
received in excess of that needed to pay the Certificate Rate on
the other Classes of Certificates, prepayments or Realized Losses
with respect to Underlying Mortgage Loans with relatively high
Mortgage Net Rates and prepayments or Realized Losses allocated to
Resecuritized Certificates with relatively high pass-through rates
will have a materially negative effect on the yield of the Class X
Certificates. Investors should fully consider the associated
risks, including the risks that a rapid rate of principal
prepayments, a high level of losses or lower than contemplated
interest collections could result in the failure of investors in
the Class X Certificates to recover fully their initial
investments. See "Yield and Prepayment Considerations--Yield on
the Class X Certificates" herein.
RESIDUAL CERTIFICATES. The holders of the Residual Certificates
are entitled to receive distributions of principal and interest
and in the case of the Class R-2 Certificate, certain investment
income, as described herein. However, the holder of the Class R-1
Certificate may have tax liabilities with respect to its Class R-1
Certificate during the early years of the REMIC that substantially
exceed the principal and interest payable thereon during such
periods.
LIQUIDITY...................................... There is currently no secondary market for any Class of
Certificates, and there can be no assurance that one will
develop. The Underwriter intends to establish a market in each
Class of Offered Certificates, but it is not obligated to do
so. There is no assurance that any such market, if
established, will continue. Each Certificateholder will receive
monthly reports pertaining to the Certificates as described
under "The Pooling and Servicing Agreement--Reports to
Certificateholders" herein. There are a limited number of
sources which provide certain information about mortgage
pass-through certificates in the secondary market; however,
there can be no assurance that any of these sources will
provide information about the Certificates. Investors should
consider the effect of limited information on the liquidity of
the various Classes of Certificates.
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CERTAIN FEDERAL INCOME TAX
CONSEQUENCES................................... An election will be made to treat certain assets of the Trust
as a real estate mortgage investment conduit ("REMIC II") for
federal income tax purposes. REMIC II will issue "regular
interests" and one "residual interest." An election will be
made to treat the "regular interests" in REMIC II and certain
assets of the Trust as a real estate mortgage investment
conduit ("REMIC I"). The Certificates (other than the Class
R-1 and Class R-2 Certificates) will be designated as regular
interests in REMIC I (collectively, the "Regular Certificates"
or the "REMIC Regular Certificates"), and the Class R-1 and
Class R-2 Certificates will be designated as the residual
interest in REMIC I and REMIC II, respectively (the "Residual
Certificates" or the "REMIC Residual Certificates"). See
"Federal Income Tax Considerations" herein and "Certain Federal
Income Tax Consequences" in the Prospectus and "Restrictions on
Purchase and Transfer of the Residual Certificates" herein.
ERISA CONSIDERATIONS........................... The Offered Certificates, or interests therein, may not be
transferred to any investor who is, or who is acquiring such
Offered Certificates directly or indirectly for, on behalf of
or with the assets of, an employee benefit plan or other
retirement arrangement subject to Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")
and/or Section 4975 of the Internal Revenue Code of 1986, as
amended (the "Code") unless such investor is an insurance
company general account which meets certain requirements as
described under "ERISA Considerations" herein. See "Risk
Factors--The Certificates--Lack of Liquidity" and "ERISA
Considerations" herein.
LEGAL INVESTMENT............................... The Certificates will not constitute "mortgage related
---
securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984 ("SMMEA"). Accordingly, many
institutions with legal authority to invest in comparably rated
securities secured by first lien mortgage loans may not be
legally authorized to invest in the Certificates. See "Legal
Investment" herein and in the Prospectus.
RESTRICTIONS ON PURCHASE AND
TRANSFER OF THE RESIDUAL
CERTIFICATES................................... The Residual Certificates are not offered for sale to certain
tax exempt organizations that are "disqualified organizations"
as defined in "Certain Federal Income Tax
Consequences--Transfers of REMIC Residual Certificates--Tax on
Disposition of REMIC Residual Certificates;
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Restrictions on Transfer; Holding by Pass-Through Entities" in the
Prospectus. Such "disqualified organizations" are prohibited from
acquiring or holding any beneficial interest in the Residual
Certificates. Further, neither the Residual Certificates nor any
beneficial interest therein may be sold or otherwise transferred
without the express written consent of The Bank of New York acting
as the agent for the holders of the Residual Certificates, as tax
matters person as defined in the Code (the "Tax Matters Person"),
which may be withheld to avoid a risk of REMIC disqualification or
REMIC-level tax. See "Certain Federal Income Tax
Consequences--Transfers of REMIC Residual Certificates--Tax on
Disposition of REMIC Residual Certificates; Restrictions on
Transfer; Holding by Pass-Through Entities" in the Prospectus and
"Restrictions on Purchase and Transfer of the Residual
Certificates" herein. Finally, unless the Tax Matters Person
consents in writing (which consent may be withheld in the Tax
Matters Person's sole discretion), the Residual Certificates
(including a beneficial interest therein) may not be purchased by
or transferred to any person who is not a "United States person,"
as such term is defined in Section 7701(a)(30) of the Code. For
certain additional tax-related restrictions on the transfer of the
Residual Certificates, see "Certain Federal Income Tax
Consequences--REMIC Residual Certificates--Mismatching of Income
and Deductions; Excess Inclusions" and "Certain Federal Income Tax
Consequences--Foreign Investors--REMIC Residual Certificates" in
the Prospectus.
CERTIFICATE RATING............................. It is a condition to their issuance that each Class of Offered
Certificates receive the rating set forth below from Moody's
Investors Service, Inc. ("Moody's"):
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Class Rating
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Class A Certificates Aaa
Class B Certificates Aa2
Class C Certificates Aa3
Class D Certificates A2
Class E Certificates A3
Class F Certificates Baa2
Class G Certificates Baa3
Class X Certificates Aaa
Class R-1 Certificate Aaa
Class R-2 Certificate Aaa
The rating of the Offered Certificates of any Class should be
evaluated independently from similar ratings on other
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types of securities. 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. A
security rating does not represent any assessment of the
likelihood of principal prepayments on the Underlying Mortgage
Loans or of the degree to which such prepayments might differ from
those originally anticipated. Also, a security rating does not
represent any assessment of the yield to maturity that investors
may experience. See "Certificate Rating" herein.
The Seller has not requested ratings of the Offered Certificates
by any rating agency other than Moody's. However, there can be no
assurance as to whether any other rating agency will rate the
Offered Certificates or, if it does, what ratings would be
assigned by such other rating agency. The ratings assigned by such
other rating agency to the Offered Certificates could be lower
than the respective ratings assigned by Moody's.
THE UNDERLYING SECURITIES
GENERAL..................................... Payments on the Certificates will be made from payments
received on the Pooled Securities to be deposited into the
Trust. As of the Pooled Security Information Date, the Pooled
Securities had an aggregate Pooled Security Principal Balance
of approximately $515,964,267. Additional information relating
to the Pooled Securities is set forth under "Description of the
Underlying Securities" herein and in Annex I attached hereto.
The Pooled Securities will consist of 96 classes of Pooled
Securities, which represent subordinated interests in 83
Underlying Trusts, the assets of which consist primarily of (i)
Mortgage Loans or (ii) Resecuritized Certificates representing
interests in 48 Underlying Trusts, the assets of which consist
primarily of Mortgage Loans.
The Seller expects that by the Closing Date, all of the Pooled
Securities will have been delivered to the Trustee as required by
the Agreement. All monthly distributions on each Pooled Security
Distribution Date after the Pooled Security Information Date, will
be available to make payments on the Certificates. Pursuant to the
Agreement, the Trustee will allocate each month's distributions of
interest and principal on the Pooled Securities to make payments
of interest and principal on the Certificates. Fees payable to the
Trustee will not be paid out of amounts
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received on the Pooled Securities but will be paid from investment
earnings on funds on deposit in the Certificate Account. See
"Description of the Certificates--Distributions of Interest and
Principal" herein.
The tables in Annex I attached hereto set forth approximate
information for each of the Underlying Securities as of the Pooled
Security Information Date. The tables and the descriptions of the
Underlying Securities herein are subject to and qualified by
reference to the provisions of the prospectus, prospectus
supplement or other offering document and Underlying Agreement
relating to each Underlying Trust (collectively, the "Supplemental
documents"), as well as any subsequent information related thereto
filed by the issuers thereof on a Current Report on form 8-K with
the Securities and Exchange Commission (the "Commission")
following the closing of the related Underlying Series. The
information set forth in the tables and elsewhere herein that is
particularly within the knowledge of the various trustees relating
to the Underlying Trusts (the "Underlying Trustees"), paying
agents and Underlying Servicers for the Underlying Trusts has been
derived from data requested from and provided by them, including
regular periodic reports provided to holders of Underlying
Securities, loan-by-loan information provided in tape form from
the related Underlying Servicers or underlying issuers and
information from outside sources such as Bloomberg L.P. and
Mortgage Information Corp., But such information has not been
independently represented to the Seller or the Underwriter as
being accurate and complete nor has it been independently verified
by the Seller or the Underwriter. With respect to approximately 5%
of the aggregate outstanding principal balance of the Underlying
Mortgage Loans, loan-by-loan information was not available for
purposes of presenting the information in Annex I attached hereto.
This information comprises all material information on the subject
that the seller and the Underwriter possess or can acquire without
unreasonable effort and expense. Copies of the offering documents
and the February 1998 Pooled Security Distribution Date Statements
relating to each Underlying Security are available for inspection
upon request to the trustee. The Bank of New York, the Trustee for
the Certificates, acts as Underlying Trustee with respect to 15
Pooled Securities. It has not
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undertaken in such latter capacity to provide any
information not otherwise generally available.
DISTRIBUTIONS OF INTEREST ON
POOLED SECURITIES........................... Each Pooled Security is entitled generally to a monthly
distribution of interest at its then-current Pooled Security
Interest Rate on its Pooled Security Principal Balance and to
accrued but previously unpaid interest. With respect to each
Pooled Security Distribution Date, the "Pooled Security
Interest Rate" for any Pooled Security is the stated interest
rate payable on such Pooled Security. As of the Pooled
Security Information Date, the Pooled Security Interest Rates
ranged from approximately 6.250% to approximately 9.500% per
annum and the weighted average Pooled Security Interest Rate
(based on Pooled Security Principal Balance) of the Pooled
Securities was approximately 7.213% per annum. The Pooled
Security Interest Rate for each Pooled Security as of the
Pooled Security Information Date, is shown in Annex I attached
hereto. As shown in such Annex, the interest rate for each
Pooled Security other than nine of the Resecuritization Pooled
Securities and RFC 94S3, M-1 are fixed percentages. Nine of
the Resecuritization Pooled Securities bear interest based on
the weighted average pass-through rate of the related
Resecuritized Certificates and RFC 94S3, M-1 bears interest
based on the weighted average of the Mortgage Net Rates of the
related Underlying Mortgage Loans. Notwithstanding the
foregoing, the interest paid with respect to the Pooled
Securities to the Trustee may be at rates lower than the
applicable Pooled Security Interest Rates as a result of
Interest Shortfalls and Realized Losses applicable to interest
allocated to such Pooled Securities. In addition, the right of
the Pooled Securities to receive interest on any Pooled
Security Distribution Date is subordinated to the right of the
related Senior Securities to receive distributions of interest
and principal, on such Pooled Security Distribution Date. See
"Description of the Underlying Securities--Realized Losses on
Liquidated Mortgage Loans; Subordination" herein and Annex I
attached hereto for a list of the Underlying Series in which
the Underlying Servicer is not obligated to pay Compensating
Interest and any caps on required Compensating Interest
payments.
DISTRIBUTIONS OF PRINCIPAL ON
POOLED SECURITIES........................... To the extent of available funds after certain distributions on
the Senior Securities and in certain cases Mezzanine
Securities, the Pooled Securities are entitled generally to a
monthly distribution of principal, consisting generally of (i)
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a percentage of scheduled principal payments on the related
Underlying Mortgage Loans, based generally on the Pooled
Security Principal Balance of the Pooled Securities as a
proportion of the aggregate principal balance of all securities
in the related Underlying Series; and (ii) a percentage of
principal prepayments and other unscheduled collections
applicable to principal on the related Underlying Mortgage
Loans to the extent provided under the terms of the related
Underlying Agreements as described herein. Prepayments on the
Underlying Mortgage Loans generally are allocated entirely to
the Senior Securities during a Lock Out Period of five years
from the related date of issuance of the Pooled Securities
(other than the Resecuritization Pooled Securities) or the
Resecuritized Certificates. After the applicable Lock Out
Period, such Underlying Securities are entitled to
distributions of some portion of prepayments, subject,
generally, to the satisfaction of certain delinquency and loss
tests. See "Description of the Underlying
Securities--Distributions of Principal on the Pooled
Securities" herein.
DISTRIBUTIONS OF INTEREST AND PRINCIPAL
ON RESECURITIZED CERTIFICATES............... The descriptions above with respect to interest and principal
distributions on the Pooled Securities are also applicable to
the Resecuritized Certificates. As of the Pooled Security
Information Date, the pass-through rates on the Resecuritized
Certificates ranged from approximately 6.250% to approximately
11.720% per annum and the weighted average pass-through rate
(based on Resecuritized Certificate Principal Balance) of the
Resecuritized Certificates was approximately 7.267% per annum.
See "Description of the Underlying Securities--Distributions of
Interest and Principal on Resecuritized Certificates" herein
and Annex I attached hereto for information provided with
respect to each Resecuritized Certificate comparable to that
provided for each Pooled Security.
ALLOCATION OF REALIZED LOSSES
ON LIQUIDATED
MORTGAGE LOANS.............................. Realized Losses will be allocated to the Pooled Securities
following the exhaustion of any applicable Underlying Security
Credit Support as described below. A "Realized Loss" will be
incurred on a defaulted Underlying Mortgage Loan as to which
all amounts that the related Underlying Servicer expects to
recover through the date of disposition of the related
Mortgaged Property have been received (a "Liquidated Mortgage
Loan"), generally in the amount, if any, by which the
liquidation proceeds ("Liquidation
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Proceeds"), net of expenses ("Net Liquidation Proceeds") from such
Liquidated Mortgage Loan are less than the unpaid principal
balance of such Liquidated Mortgage Loan, plus accrued and unpaid
interest thereon and amounts reimbursable to the Underlying
Servicer for previously unreimbursed Advances and foreclosure
costs.
UNDERLYING SECURITY
CREDIT SUPPORT.............................. Each Underlying Security provides credit support for the Senior
Securities, any Mezzanine Securities senior thereto and any
Subordinate Securities senior thereto, in each case of the
related Underlying Series. The subordination of the Underlying
Securities is effected primarily by the allocation of Realized
Losses in excess of available credit support, if any, and
subject to carve outs in certain cases for certain losses due
to special hazards, fraud or bankruptcy, to the Underlying
Securities prior to such losses being allocated to the Senior
Securities of the related Underlying Series, and the allocation
of payments collected on the Underlying Mortgage Loans to the
Senior Securities prior to such payments being allocated to the
Underlying Securities of such series. Annex I provides a
breakdown of any applicable carve out amounts remaining as of
the Pooled Security Information Date (or if not available, as
of the date of issuance of the related Underlying Security)
with respect to the Underlying Series of which each Underlying
Security is a part. In addition, with respect to the 15 Pooled
Securities (other than the Resecuritization Pooled Securities)
identified on Annex I hereto, the Resecuritization Pooled
Securities (other than PHMS 95A, 3-B) and the 45 Resecuritized
Certificates identified on Annex I hereto (collectively, the
"IOU Securities"), the related Senior Securities are entitled
to the amount, if any, by which (i) their applicable percentage
of the outstanding principal balance of a Mortgage Loan
immediately prior to liquidation exceeds (ii) the total amount
of Net Liquidation Proceeds allocable to principal. Such
amounts are provided by amounts otherwise payable to the
Subordinated Securities and Mezzanine Securities, resulting in
reduced payments on the applicable distribution date to the
Subordinated Securities and Mezzanine Securities of such
Underlying Series (including the Pooled Securities and the
Resecuritized Certificates). See "Description of the
Underlying Securities" herein.
With respect to 88 classes of Pooled Securities (constituting
approximately 89.37% of the Pooled Security Principal Balance),
credit support for such Underlying Security (the "Underlying
Security Credit Support")
</TABLE>
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constitutes less than 5.00% of the aggregate outstanding principal
balance of the Underlying Mortgage Loans of the related Underlying
Series. With respect to 91 classes of Pooled Securities
(constituting approximately 92.84% of the Pooled Security
Principal Balance), Underlying Security Credit Support is provided
only by securities subordinated to the Pooled Securities. With
respect to two Pooled Securities, Underlying Security Credit
Support is provided by a limited guarantee or a reserve fund in
addition to securities subordinated to the Pooled Securities and
with respect to the remaining three classes of Pooled Securities,
Underlying Security Credit Support is provided only by a limited
guarantee, reserve fund, or a spread account. See "Description of
the Underlying Securities--Realized Losses on Liquidated Mortgage
Loans; Subordination" which further identifies such Pooled
Securities. Underlying Security Credit Support is provided to
twelve classes of Pooled Securities by another class of Pooled
Securities in the same Underlying Series. Securities subordinated
to the Pooled Securities do not secure payments on the
Certificates (other than the twelve Pooled Securities described in
the immediately preceding sentence). None of the Resecuritized
Certificates, except for the Resecuritized Certificates backing
AMERT 9303, 3-B, have any Underlying Security Credit Support. Any
Underlying Security Credit Support relating to the Underlying
Securities of a particular Underlying Series will not be available
to provide credit support for the Underlying Securities of any
other Underlying Series. Annex I attached hereto provides for each
Underlying Security the percentage of the related Underlying
Series constituting Underlying Security Credit Support with
respect to such Underlying Security. See "Description of the
Underlying Securities" herein.
EARLY TERMINATION OF
UNDERLYING TRUSTS........................... With respect to all of the Pooled Securities (except eight
Resecuritization Pooled Securities) and all of the
Resecuritized Certificates, the Underlying Servicer, the
Underlying Trustee, the holders of a majority in interest of
the residual interest in the Underlying Trust, the seller to
the Underlying Trust, and/or another person, subject to the
limitations imposed by the related Underlying Agreement, may
purchase all Underlying Mortgage Loans and foreclosed Mortgaged
Properties ("REO Properties") remaining in such Underlying
Trust on any Pooled Security Distribution Date or distribution
date for the Resecuritized Certificates, as applicable,
occurring on or after a date specified or event described in
such Underlying Agreement
</TABLE>
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<TABLE>
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<S> <C>
and in the manner and at the termination price specified in such
Underlying Agreement. Most of the Underlying Agreements permit the
optional termination of the Underlying Trust when the outstanding
principal balance of all Underlying Mortgage Loans or securities
of the related Underlying Trust falls to some
percentage--typically either 5% or 10%--of the original principal
balance of all Underlying Mortgage Loans or securities of the
related Underlying Trust of such Underlying Series. See Annex I
attached hereto for a list of such percentages, if any, the
entities which may exercise such termination options and the
percentage of the original principal balance of the Underlying
Mortgage Loans or securities remaining with respect to each
Underlying Trust.
FEDERAL INCOME TAX
STATUS OF THE
UNDERLYING TRUSTS........................... An election was made to treat the Underlying Trust or the
Underlying Mortgage Loans and certain other assets of each of
the Underlying Trusts as one or more REMICs for federal income
tax purposes. Each of the Pooled Securities has been
designated a regular interest in the related REMIC. See
"Certain Federal Income Tax Consequences" in the Prospectus.
RATING OF UNDERLYING SECURITIES............. The latest rating provided by at least one nationally
recognized statistical rating agency for each of the Pooled
Securities is at least "BBB-" (or a comparable rating). None
of the Resecuritized Certificates are rated by a nationally
recognized statistical rating agency. One Pooled Security,
CITIMT 9016, B (constituting approximately 1.10% of the Pooled
Security Principal Balance) has been downgraded by one of the
original rating agencies since initial issuance. Annex I
attached hereto provides with respect to each Pooled Security,
the latest rating by the rating agency which originally rated
the Pooled Security, the applicable rating agency, and the
original rating at the time of issuance of the related
Underlying Series by such rating agency.
THE UNDERLYING MORTGAGE LOANS
GENERAL..................................... As of the Mortgage Loan Information Date, there were
approximately 116,700 Underlying Mortgage Loans having an
aggregate outstanding principal balance of approximately
$27.6 billion, which consist primarily of (i) one- to
four-family, conventional, fixed rate, mortgage loans secured
by first liens on residential real properties
</TABLE>
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<S> <C>
and (ii) in the case of some of the Underlying Series, cooperative
loans secured by shares in cooperative corporations.
Realized Losses have occurred with respect to Underlying Mortgage
Loans in (i) 45 Underlying Series relating to the Pooled
Securities (other than the Resecuritization Pooled Securities) and
(ii) the 48 Underlying Series relating to the Resecuritized
Certificates. Substantially all of the Underlying Series include
Underlying Mortgage Loans that are delinquent, and a significant
number have REO Properties relating to defaulted Underlying
Mortgage Loans. See "Risk Factors--The Underlying Mortgage
Loans--Mortgage Loan Delinquencies and Losses" herein and Annex I
attached hereto which sets forth as of the Mortgage Loan
Information Date, the cumulative Realized Losses, Realized Losses
during January 1998 and a breakdown of the 30-59 day, 60-89 day
and 90 or more day delinquencies, foreclosures in process and REO
Property with respect to each Underlying Series. See "Risk
Factors--The Underlying Mortgage Loans--Mortgage Loan
Delinquencies and Losses" herein.
SERVICERS................................... The Underlying Mortgage Loans are master serviced and/or
serviced by various mortgage servicing companies. See Annex I
attached hereto which sets forth the master servicer if any, or
the servicer (either, the "Underlying Servicer") with respect
to the Underlying Mortgage Loans relating to each Underlying
Series, "Servicing of the Underlying Mortgage Loans" herein and
Annex III attached hereto for certain statistics with respect
to each entity (treating Norwest Bank Minnesota, National
Association and Norwest Mortgage, Inc. as a single entity)
which serves as Underlying Servicer for in excess of 10% of the
Underlying Mortgage Loans.
With respect to all Underlying Series, for each Pooled Security
Distribution Date or distribution date for the Resecuritized
Certificates, as applicable, the Underlying Servicer is obligated
to make an advance (a "P&I Advance") in respect of any delinquent
payment on any related Underlying Mortgage Loan that was due on
the related due date that will, in the Underlying Servicer's
judgment, be recoverable from related late payments or Liquidation
Proceeds.
The Underlying Servicers also are obligated to make advances
("Servicing Advances" and together with P&I Advances, "Advances")
in respect of liquidation expenses
</TABLE>
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<S> <C>
and certain taxes and insurance premiums not paid by a borrower on
a timely basis, to the extent the Underlying Servicer deems such
Servicing Advances recoverable out of Liquidation Proceeds or from
collections on the related Underlying Mortgage Loans. P&I Advances
and Servicing Advances generally are reimbursable to the
Underlying Servicers.
The Underlying Servicers are not obligated with respect to
Underlying Mortgage Loans relating to approximately 10.48% of the
Pooled Securities (by Pooled Security Principal Balance) to pay
Compensating Interest with respect to any Underlying Mortgage Loan
that prepays on a date other than on a due date for such Mortgage
Loan, which, to the extent not allocated to or covered by
available Underlying Security Credit Support, may result in a
reduction in distributions on the applicable Resecuritized
Certificates on a related distribution date and on the Pooled
Securities on a Pooled Security Distribution Date, and hence in a
reduction in, interest payments on the Certificates on a
Distribution Date. In any event, the amount of such Compensating
Interest is usually limited to the amount of the Servicing Fee (or
some percent thereof) with respect to the related Underlying
Series. See "Servicing of the Underlying Mortgage Loans" herein.
See also Annex I attached hereto for a list of the Underlying
Securities for which the related Underlying Servicer is not
obligated to pay Compensating Interest and any maximum limitations
on required Compensating Interest payments.
Each Underlying Servicer is entitled to a monthly fee with respect
to each Underlying Mortgage Loan that such Underlying Servicer
services (the "Servicing Fee") and many Underlying Servicers are
entitled to additional servicing compensation, such as penalties
and late payment or assignment fees. Such compensation generally
will be retained by the Underlying Servicer out of collections of
interest on the Underlying Mortgage Loans prior to any
distribution of such collections on the Resecuritized Certificates
or Pooled Securities, as applicable. Annex I attached hereto sets
forth the range of rates of Servicing Fee for each Underlying
Security to which each Underlying Servicer is entitled.
</TABLE>
S-27
<PAGE>
RISK FACTORS
In addition to the matters described elsewhere in this Prospectus
Supplement, prospective investors should carefully consider the following
factors before deciding whether to invest in any Class of Certificates.
THE CERTIFICATES
Credit Risk from Subordination of the Underlying Securities to Senior Securities
and Mezzanine Securities
As described herein, payments of principal of and interest on the
Underlying Mortgage Loans will be available to make distributions on the related
Underlying Securities on any Pooled Security Distribution Date or distribution
date relating to Resecuritized Certificates (and hence interest and principal
payments on the Certificates) only after certain required distributions have
been made on the related Senior Securities and in certain cases, Mezzanine
Securities, on such Pooled Security Distribution Date or distribution date
relating to Resecuritized Certificates. No distributions of principal or
interest on the Pooled Securities or the Resecuritized Certificates will be made
on any Pooled Security Distribution Date until the Senior Securities and in
certain cases, Mezzanine Securities, of such Underlying Series have received all
principal and interest (generally including accrued but unpaid interest) to
which they are entitled on such Pooled Security Distribution Date.
Prepayments generally are not allocated to the Pooled Securities (other
than the Resecuritization Pooled Securities) or the Resecuritized Certificates
(and consequently indirectly the Resecuritization Pooled Securities) until after
a Lock Out Period of five years from the related date of issuance of the related
Underlying Securities (or in the case of the Resecuritization Pooled Securities,
the date of issuance of the Resecuritized Certificates). A certain percentage of
prepayments (which may increase over time) will be allocated to the applicable
Underlying Securities after such Lock Out Period, subject, in most cases, to the
satisfaction of certain delinquency, loss and other tests with respect to the
Underlying Mortgage Loans. Even where Underlying Securities are entitled to a
percentage of prepayments after a Lock Out Period, such percentage generally
does not exceed the Underlying Securities' pro rata portion of the applicable
Mezzanine Percentage or Subordinated Percentage, as applicable. The "Mezzanine
Percentage" and "Subordinated Percentage," as applicable of each Underlying
Security is the percentage equivalent of a fraction the numerator of which is
equal to the Pooled Security Principal Balance or Resecuritized Certificate
Principal Balance, as applicable, of the Underlying Security (together, in some
instances, with the aggregate principal balance of other Mezzanine Securities or
Subordinated Securities, as applicable of the same Underlying Series) and the
denominator of which is the aggregate principal balance of all securities of
such Underlying Series.
All of the Underlying Agreements relating to the IOU Securities provide
that, in connection with liquidations, the related Senior Securities may be
entitled to receive an amount in excess of the Net Liquidation Proceeds
collected on a Liquidated Mortgage Loan. Distributions of principal and interest
on such classes of Underlying Securities may be delayed, reduced or eliminated
to the extent that a Realized Loss is experienced on an Underlying Mortgage Loan
because amounts otherwise distributable as principal and interest on the
Underlying Securities will be used instead to make distributions of principal
and interest on the related Senior Securities and in certain cases, Mezzanine
Securities.
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All Realized Losses on the Underlying Mortgage Loans, to the extent not
covered by the related Underlying Security Credit Support, if any, will be
allocated to the Pooled Securities (other than the Resecuritization Pooled
Securities) and the Resecuritized Certificates (and then to the Resecuritization
Pooled Securities) prior to being allocated to the related Senior Securities and
in certain cases, Mezzanine Securities, and will adversely affect the yield on
the Certificates.
INTEREST RATE BASED ON INTEREST RECEIVED
Since the interest rate applicable to each Class of Certificates will
be limited by the amount of interest received on the Pooled Securities,
disproportionate payments of Pooled Securities with higher Pooled Security
Interest Rates or of Resecuritized Certificates with relatively high
pass-through rates and/or disproportionate allocations of Realized Losses to
Underlying Securities with higher Pooled Security Interest Rates or pass-through
rates with respect to the Resecuritized Certificates, as applicable, will
adversely affect the yields on the Certificates. Similarly, to the extent a
Pooled Security bears interest based on the weighted average of (i) the
pass-through rates of the Resecuritized Certificates or (ii) the Mortgage Net
Rates of the related Underlying Mortgage Loans, disproportionate prepayments of
such Resecuritized Certificates with higher pass-through rates or such Mortgage
Loans with higher Mortgage Net Rates will adversely affect the yield on such
Pooled Securities and consequently on the Certificates.
SUBORDINATION OF CERTIFICATES
On each Distribution Date, holders of each Class of Certificates (other
than the Class X and Class PO Certificates) are generally entitled to receive
their pro rata share, based on its respective Certificate Principal Balance, of
the Principal Distribution Amount. Notwithstanding the foregoing, holders of the
most senior Class of Certificates outstanding (in alphabetical order) are
entitled to receive on each Distribution Date and Supplemental Distribution Date
additional principal in an amount equal to the Loss Amounts. Such additional
principal is paid from the principal otherwise distributable to the holders of
other Classes of Certificates (in reverse alphabetical order), resulting in a
deferral of amounts due to such other Classes. If there are insufficient funds
available therefor such entitlement will be carried forward and will be paid to
the most senior Class prior to payments to other more subordinate Classes. A
Supplemental Distribution Date may occur in any month in which either
distributions or Pooled Security Distribution Date Information have not been
received on a timely basis for the related Distribution Date. In addition, the
Certificate Principal Balance of the most junior Class of Certificates
outstanding (in reverse alphabetical order) will be written down in an amount
equal to the Loss Amount for such Distribution Date. Accordingly, to the extent
that the Certificate Principal Balance of the Class H Certificates has been
reduced to zero and that there are Loss Amounts, holders of the most junior
Class of Offered Certificates (in reverse alphabetical order) would be subject
to such allocations. See "Description of the Certificates--Distributions of
Interest and Principal" herein.
UNCERTAIN TIMING OF PAYMENTS ON THE CERTIFICATES
Unlike standard corporate bonds, the timing and amount of interest and
principal distributions on each Class of Offered Certificates is not fixed and
will be affected by (i) the characteristics of, and the amount, rate and timing
of principal and interest payments on, the Pooled Securities, which in turn will
be affected (x) in the case of the Resecuritization Pooled Securities by the
amount, rate and timing of principal and interest payments (including
prepayments, repurchases, defaults and liquidations) on the Resecuritized
Certificates and (y) in all cases by the amount, rate and timing of principal
and interest payments (including prepayments, repurchases, defaults and
liquidations) on the Underlying Mortgage
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Loans and the amount and timing of mortgagor defaults resulting in Realized
Losses, (ii) the allocation of such payments and losses among the various
classes of securities of each Underlying Series and, in the case of the
Resecuritization Pooled Securities, among the various classes of securities of
each series of Resecuritized Certificates and (iii) the occurrence of optional
terminations with respect to the Underlying Trusts.
In general, the timing of principal payments on the Underlying Mortgage
Loans will be affected by a variety of economic, geographic, legal, tax and
social factors primarily because the Underlying Mortgage Loans generally may be
prepaid by the borrowers at any time without penalty. Prepayments on the
Underlying Mortgage Loans also may be affected by transfers of the underlying
Mortgaged Properties and the occurrence of natural disasters. Slow prepayment
rates generally are associated with an increasing interest rate environment or
declining real estate values.
In addition to affecting the weighted average lives of the Pooled
Securities and, as a result, each Class of Certificates, the rate of principal
prepayments and Realized Losses on the Underlying Mortgage Loans will affect the
yield to maturity on each Class of Certificates purchased at a discount or at a
premium. Slow prepayment rates on the Underlying Mortgage Loans, will delay the
application of principal payments on the Underlying Mortgage Loans to the Pooled
Securities and the Certificates (other than the Class X Certificates) and as a
general proposition will adversely affect the yield on each Class of
Certificates (other than the Class X Certificates). However, fast prepayments of
Underlying Mortgage Loans with relatively high Mortgage Net Rates, or of
Underlying Mortgage Loans backing Underlying Securities with relatively high
Pooled Security Interest Rates or pass-through rates, as applicable, or for
which the Underlying Trust would have experienced a relatively low incidence of
Realized Losses may reduce aggregate cash flow available to make payments on the
Certificates and consequently may adversely affect the yield on the
Certificates. A rapid rate of principal prepayments, particularly of Pooled
Securities, particularly those with higher interest rates or principal
prepayments allocated to Resecuritized Certificates with higher pass-through
rates, or lower than contemplated interest collections or the allocation of
Realized Losses to Pooled Securities, particularly those with higher interest
rates, could result in the failure of the holders of Class X Certificates to
recover fully their investments. Higher than expected rates of Realized Losses
will adversely affect the yields on the Certificates. See "Summary of Terms--The
Certificates--Yield and Prepayment Considerations" and "Yield and Prepayment
Considerations" herein.
Payment Delay
Only funds actually received by the Trustee, as the registered holder
of the Pooled Securities, together with the related Pooled Security Distribution
Date Information by the Determination Time with respect to such Distribution
Date will be passed through to the Certificateholders on such Distribution Date;
provided that, if there may be a Supplemental Distribution Date, Class PO
Principal Distribution on the Class PO Certificates will only be made on the
Supplemental Distribution Date. To the extent funds and/or Pooled Security
Distribution Date Information has not been received by such time, such funds
will not be passed through as payments on the Certificates until the
Supplemental Distribution Date or the Distribution Date in the following month,
as applicable. The Certificates are not entitled to receive reinvestment income
with respect to any Pooled Securities as to which there is a payment delay. In
addition, while interest paid on the Supplemental Distribution Date will be
aggregated with that paid on the immediately preceding Distribution Date to
determine if a Certificate Rate equal to the lesser of (i) 6.75% per annum and
(ii) the weighted average of the Pooled Security Interest Rates has been
achieved with respect to all interest bearing Classes of Certificates (other
than the Class X Certificates), any interest received thereafter will be paid on
the following Distribution Date as if received with respect
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to the following Distribution Date. This may have the effect of allocating
amounts to the Class X Certificates on such following Distribution Date which,
if timely received would have been allocated to the interest bearing Classes of
Certificates other than the Class X Certificates. Moreover, to the extent there
is not enough interest received on the Pooled Securities to pay interest on the
interest bearing Certificates (other than the Class X Certificates) at a per
annum rate equal to the lesser of (i) 6.75% per annum and (ii) the weighted
average of the Pooled Security Interest Rates, such amounts will not be tracked
and such Certificates will not receive additional interest on subsequent
Distribution Dates. While each Class of Certificates (other than the Class X and
Class PO Certificates) is entitled generally to its pro rata share, based on its
respective Certificate Principal Balance, of the Principal Distribution Amount
with respect to a Distribution Date or Supplemental Distribution Date, as
applicable, the most senior Class of Certificates outstanding (in alphabetical
order commencing with the Class A Certificates) is entitled to receive on each
Distribution Date and Supplemental Distribution Date additional principal in an
amount equal to the Loss Amount for such Distribution Date. Such additional
principal is paid from the principal otherwise distributable to the holders of
other Classes of Certificates (in reverse alphabetical order commencing with the
Class H Certificates), resulting in a deferral of amounts due to such other
Classes. If there are insufficient funds available therefor such entitlement
will be carried forward and will be paid to the most senior Class prior to
payments to other more subordinate Classes. While holders of the Class PO
Certificates are generally entitled to receive on each Distribution Date, the
Class PO Principal Distribution, if there may be a Supplemental Distribution
Date, payments of the Class PO Principal Distribution on the Class PO
Certificates will be made only on the Supplemental Distribution Date. A
Supplemental Distribution Date may occur in any month in which either
distributions or Pooled Security Distribution Date Information have not been
received on a timely basis for the related Distribution Date.
A delay in the receipt by the Trustee of distributions may occur, for
example, with respect to those Pooled Securities that receive distributions by
check rather than by wire transfer of immediately available funds. On the Pooled
Security Distribution Date prior to the Closing Date, 36 classes of Pooled
Securities, as identified on Annex I attached hereto, representing approximately
41.30% of the Pooled Securities by Pooled Security Principal Balance, paid by
check. The Trustee has requested each Underlying Trustee to make payments by
wire transfer of immediately available funds. It is anticipated that such
requests will be granted in time for the May 4, 1998 Distribution Date, except
with respect to two Pooled Securities, representing approximately 1.79% of the
Pooled Security Principal Balance. No assurance can be given, however, that any
such payments will be made by wire transfer. In addition, as indicated in Annex
I attached hereto, the Pooled Security Distribution Date with respect to one
Class of Resecuritization Pooled Securities, representing approximately 0.29% of
the Pooled Security Principal Balance, is the 29th (or, if in February, the last
day) of such month (or the succeeding business day, if such day is not a
business day) and the Pooled Security Distribution Date with respect to one
class of Resecuritization Pooled Securities, representing approximately 3.33% of
the Pooled Securities by Pooled Security Principal Balance, is the second
business day and with respect to eight Classes of Resecuritization Pooled
Securities, representing approximately 21.86% of the Pooled Security Principal
Balance, is the third business day, after the 25th of the month (or the
succeeding business day, if the 25th day is not a business day). Each of such
Resecuritization Pooled Securities provides for payment by wire transfer,
however delay in receipt may occur. In addition, 21 Pooled Securities are held
through the book-entry facilities of DTC. Some delay in receipt of payments on
these book-entry Pooled Securities might be experienced since such payments
first will be forwarded to Cede, as nominee for DTC. DTC will forward such
payments to its Participants, including The Bank of New York, which thereafter
will provide them to the Trustee. Any delay in receipt of distributions by
Certificateholders will have an adverse effect on the yields to
Certificateholders.
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Concentrations of Underlying Servicers and Underlying Trustees
The Underlying Mortgage Loans are serviced by a number of different
Underlying Servicers and the Pooled Securities and Resecuritized Certificates
have a number of different Underlying Trustees. No Servicer services greater
than 10% by principal balance of the Underlying Mortgage Loans except for
Glendale Federal Bank, Federal Savings Bank, Residential Funding Corporation, GE
Capital Mortgage Services, Inc., Norwest Bank Minnesota, National Association
combined with Norwest Mortgage, Inc., and Citicorp Mortgage, Inc. which service
approximately 26.26%, 14.12%, 13.47%, 11.10% and 10.27% of the outstanding
principal balance of the Underlying Mortgage Loans, respectively. No Underlying
Trustee is the trustee with respect to greater than 10% of the Pooled Securities
by Pooled Security Principal Balance except for State Street Bank and Trust
Company, First Trust National Association, The Bank of New York and Bankers
Trust Company which are the Underlying Trustees for approximately 27.58%,
25.16%, 15.46% and 13.38% of the Pooled Securities (by Pooled Security Principal
Balance), respectively. See Annex I attached hereto which sets forth the
Underlying Servicer and the Underlying Trustee with respect to each Underlying
Series, "Servicing of the Underlying Mortgage Loans" herein and Annex III
attached hereto for certain statistics with respect to each entity (treating
Norwest Bank Minnesota, National Association and Norwest Mortgage, Inc. as a
single entity) which serves as Underlying Servicer for more than 10% of the
Underlying Mortgage Loans. From time to time the Underlying Servicer with
respect to any of the Pooled Securities may change. Any transfers of servicing
may have the effect of temporarily interrupting the servicing on the related
Underlying Mortgage Loans. Any such interruptions may result in higher
delinquencies.
LIMITED OBLIGATIONS
The Certificates do not evidence an obligation of or an interest in the
Trustee, the Seller, the Underwriter, the SunAmerica Parties or any of their
respective affiliates. None of the Certificates are insured or guaranteed by
such persons and are not insured or guaranteed by any governmental agency or
private insurer. Payments on the Certificates will be made solely from the
Pooled Securities and from any other assets of the Trust, which are not expected
to be substantial.
RATINGS
The ratings assigned to the Offered Certificates by Moody's take into
account the likelihood of payment of principal and interest on the Pooled
Securities held in the Trust. Consequently, a negative change in the performance
of one or more Pooled Securities may result in the withdrawal or downgrading of
the ratings assigned to the Offered Certificates.
The latest rating provided by at least one nationally recognized
statistical rating agency for each of the Pooled Securities is at least "BBB-"
(or a comparable rating). None of the Resecuritized Certificates are rated by a
nationally recognized statistical rating agency. One Pooled Security, CITIMT
9016, B (constituting approximately 1.10% of the Pooled Security Principal
Balance) has been downgraded by one original rating agency since initial
issuance. Annex I attached hereto provides with respect to each Pooled Security,
the latest rating by the rating agency which originally rated the Pooled
Security, the applicable rating agency, and the original rating at the time of
issuance of the related Underlying Series by such rating agency.
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Legal Investment Considerations; Certificates are not SMMEA Securities
No representations or warranties are made concerning whether the
Certificates are legal investments under any federal or state law, regulation,
rule or order of any court. The Certificates do not constitute "mortgage related
securities" within the meaning of SMMEA. Prospective investors are advised to
consult their counsel as to qualification of the Certificates as legal
investments under any such laws, regulations, rules and orders. See "Legal
Investment" herein.
Lack of Liquidity
There is currently no secondary market for the Certificates. The
Underwriter intends, but is under no obligation, to make a secondary market in
the Offered Certificates. There can be no assurance that a secondary market for
the Offered Certificates will develop or, if it does develop, that it will
continue. The Certificates will not be listed on any securities exchange.
The Offered Certificates, or interests therein, will not be offered for
sale and may not be transferred to any investor who is, or who is acquiring such
Certificate directly or indirectly for, on behalf of or with the assets of, an
employee benefit plan or other retirement arrangement subject to ERISA and/or
Section 4975 of the Code, unless such investor is an insurance company general
account which meets certain requirements as discussed under "ERISA
Considerations" herein. See "ERISA Considerations" herein.
Certain Insolvency Risks
The Seller (i) has been informed by the SunAmerica Parties that counsel
to the SunAmerica Parties will, on the Closing Date, deliver an opinion that the
transfer of the Pooled Securities from the SunAmerica Parties to the Seller
constitutes a sale rather than a pledge of such Pooled Securities to secure
indebtedness and (ii) believes that the transfer of the Pooled Securities from
the Seller to the Trust constitutes a sale rather than a pledge of its interest
in the Pooled Securities to secure indebtedness. However, if any of the
SunAmerica Parties, the Seller or one of their affiliates were to become a
debtor under the federal Bankruptcy Code or, with respect to certain of the
SunAmerica Parties, subject to an insolvency, delinquency or equivalent
proceeding under applicable state insurance law, it is possible that a creditor,
receiver, conservator or trustee in bankruptcy of the SunAmerica Parties, the
Seller (or such affiliate), as a debtor in possession, or, with respect to
certain of the SunAmerica Parties, a receiver (including a conservator,
rehabilitator, liquidator or their equivalents), as successor in interest or
otherwise under applicable state insurance law, may argue that the sale of the
Pooled Securities by the SunAmerica Parties to the Seller or the sale by the
Seller to the Trust were pledges of the Pooled Securities rather than sales.
This position, if argued before or accepted by a federal or state court, as the
case may be, could result in a delay in or reduction of payments to the
Certificateholders.
Suitability
For the foregoing reasons, among others, the yield to maturity and the
aggregate amount and timing of distributions on the Offered Certificates are
subject to material variability from period to period and over the life of the
Offered Certificates. The interaction of the foregoing factors and the effects
thereof are impossible to predict and are likely to change from time to time. As
a result, an investment in the Offered Certificates involves substantial risks
and uncertainties and should only be considered by sophisticated investors with
substantial investment experience with similar types of securities.
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THE UNDERLYING MORTGAGE LOANS
Mortgage Loan Delinquencies and Losses
Realized Losses have occurred with respect to Underlying Mortgage Loans in
(i) 45 Underlying Series relating to the Pooled Securities (other than the
Resecuritization Pooled Securities) and (ii) the 48 Underlying Series relating
to the Resecuritized Certificates. Substantially all of the Underlying Trusts
include Underlying Mortgage Loans that are delinquent, and a significant number
have REO Properties relating to defaulted Underlying Mortgage Loans. Annex I
attached hereto reflects (a) the percentage of Underlying Mortgage Loans,
calculated based on scheduled principal balances, in each Underlying Trust and
in the aggregate that, as of the Mortgage Loan Information Date, were (i) at
least 30 days but not more than 59 days delinquent, (ii) at least 60 days but
not more than 89 days delinquent, (iii) 90 or more days delinquent, (iv) in
foreclosure and (v) REO Properties, and (b) the aggregate principal amount of
Realized Losses that have been incurred with respect to the Underlying Trust
related to each Underlying Security (i) since the initial issuance of the
related Underlying Series through the Mortgage Loan Information Date and (ii)
during January 1998. With respect to a limited number of Underlying Securities,
the REO Properties percentage is calculated based on a book value provided by
the Underlying Servicers.
Underwriting Standards and Potential Delinquencies
Although some of the Underlying Mortgage Loans were originated pursuant to
underwriting standards that generally conform to the underwriting guidelines of
FNMA and FHLMC, others were underwritten in accordance with less stringent
underwriting standards, including particularly those underlying FBCS 9302R, 1;
HMSI 9705, B-2; RALI 97Q12, M-2; RAST 96A3, B-1-B; RAST 96A4, B-2; and RYLPT3
92A, 1-B. In addition, many of the Underlying Trusts include Underlying Mortgage
Loans (i) with original principal balances that exceeded the applicable maximum
for FNMA or FHLMC ("Jumbo Loans") or (ii) were not documented to the
then-current standards of FNMA or FHLMC ("Limited Documentation Loans"). Such
Underlying Mortgage Loans are likely to experience rates of delinquency and
foreclosure that are higher, and may be substantially higher, than Underlying
Mortgage Loans originated in accordance with FNMA or FHLMC underwriting
guidelines. As a result, there may be more losses on these Underlying Mortgage
Loans than on Underlying Mortgage Loans originated in accordance with such
guidelines.
The primary considerations in underwriting a Mortgage Loan are the
assessment of the creditworthiness of the borrower and the value of the
Mortgaged Property as collateral in relation to the amount of the Mortgage Loan.
Because delinquencies and foreclosures may be more prevalent with respect to
Underlying Mortgage Loans not originated in accordance with FNMA or FHLMC
underwriting guidelines, decreases in the values of the related Mortgaged
Properties may have a greater effect on the overall loss experience of such
Underlying Mortgage Loans than on the loss experience of a pool of Mortgage
Loans originated in accordance with FNMA or FHLMC underwriting guidelines. No
assurance can be given that the values of such Mortgaged Properties have
remained or will remain at the levels in effect on the dates of origination of
the related Underlying Mortgage Loans. If the values of the Mortgaged Properties
decline after the dates of origination of the related Underlying Mortgage Loans,
then the rates of losses on the Underlying Mortgage Loans may increase, and such
increase may be substantial.
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Concentration of Underlying Mortgage Loans in Certain States
As of the Mortgage Loan Information Date, approximately 51% of the
Underlying Mortgage Loans (by Underlying Mortgage Loan outstanding principal
balance) are secured by properties located in California. As a consequence,
Realized Losses allocated to the Pooled Securities may exceed those that might
be realized were the Mortgaged Properties more geographically dispersed because
the loss experience of the Underlying Mortgage Loans will be more sensitive to
downturns in the California economy and to local California natural disasters
than would be the case were the Mortgaged Properties more geographically
dispersed. Recently, certain counties in California have been experiencing
severe rain and flooding. In addition, prepayments on the Underlying Mortgage
Loans and resulting payments on the Certificates may be affected significantly
by changes in the housing markets and the regional economies in California in
general. See Annex I for the concentrations of California Mortgaged Properties,
and the highest state concentrations of Mortgaged Properties with respect to the
Underlying Mortgage Loans underlying each Underlying Security.
Deficiency on Liquidated Mortgage Loans
The market value of the Underlying Mortgage Loans included in any
Underlying Trust generally will fluctuate with changes in prevailing rates of
interest, among other factors. Consequently, the Underlying Mortgage Loans
included in an Underlying Trust (or any Mortgaged Property acquired in respect
thereof) may be liquidated at a discount from their par value or from their
purchase price, in which case the Net Liquidation Proceeds might be less than
the aggregate outstanding principal amount of the related note, plus accrued
interest. In such event, any shortfalls in the amounts necessary to make
required distributions on the securities relating to an Underlying Series
generally would be borne, after any Underlying Security Credit Support has been
depleted, by the holders of the related Underlying Securities (and thus by the
Certificates; see "Description of the Certificates--Allocation of Loss Amounts"
herein) prior to being borne by the Senior Securities and in certain cases,
Mezzanine Securities. The Trustee will have no obligation on behalf of the
Certificateholders to monitor or regulate the liquidation of Underlying Mortgage
Loans included in any Underlying Trust.
DESCRIPTION OF THE CERTIFICATES
The following summaries describing certain provisions of the
Certificates do not purport to be complete and are subject to, and are qualified
in their entirety by reference to, the Prospectus and the provisions of the
Agreement relating to the Offered Certificates offered hereby.
General
The Pass-Through Certificates, Series 1998-2 (the "Certificates"),
consist of all Classes of Certificates offered hereby (the "Offered
Certificates") in addition to the Certificates (the "Other Certificates"), which
are not being offered for sale hereby. The Certificates will evidence in the
aggregate the entire beneficial ownership interest in the Trust. The Trust will
consist of (i) the Pooled Securities, (ii) such amounts as from time to time are
on deposit in the Certificate Account, and (iii) all proceeds of the foregoing.
Each Class of Offered Certificates, other than the Residual Certificates
(the "Book-Entry Certificates") will be represented by a single certificate
registered in the name of Cede & Co. ("Cede") as the nominee of DTC, and
beneficial interests therein will be held by investors through the book-entry
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facilities of DTC, in minimum denominations of $250,000 and increments of $1.00
in excess thereof, except that one Certificate of each Class may be held by
investors in a different denomination to accommodate the remainder of the
initial principal amount or Notional Amount of the Certificates of such Class.
No person acquiring an interest in the Book-Entry Certificates (a
"Certificate Owner") will be entitled to receive a certificate representing such
person's interest in the Trust, except in the event Definitive Certificates are
issued under the limited circumstances set forth below under "--Definitive
Certificates." Unless and until Definitive Certificates are issued, all
references to actions by holders of Book-Entry Certificates shall refer to
actions taken by DTC upon instructions from its Participants, and all references
herein to distributions, notices, reports and statements to holders of
Book-Entry Certificates shall refer to distributions, notices, reports and
statements to DTC or Cede, as the registered holder of the Book-Entry
Certificates, as the case may be, for distribution to Certificate Owners in
accordance with DTC procedures.
The Class R-1 and Class R-2 Certificates will each be issued in
fully-registered form in a single certificate in a denomination of $100.
Distributions of principal and interest as set forth below initially
will be made by the Trustee to Cede, as the registered holder of the Book-Entry
Certificates, and to the holders of the Residual Certificates. Upon the issuance
of Definitive Certificates to persons other than Cede, distributions will be
made by the Trustee to the persons in whose names such Certificates are
registered at the close of business on each Record Date, which will be the last
Business Day of the month preceding the month in which the related Distribution
Date occurs. Such distributions will be made (i) by check mailed to each
Certificateholder entitled thereto at the address appearing in the Certificate
Register to be maintained in accordance with the provisions of the Agreement or
(ii) upon timely receipt by the Trustee of written instructions from a
Certificateholder holding Certificates representing an initial aggregate
Certificate Principal Balance of not less than $1,000,000, by wire transfer to a
United States dollar account maintained by the payee at any United States
depository institution with appropriate facilities for receiving such a wire
transfer, PROVIDED, HOWEVER, that the final payment in respect of each Class of
Certificates will be made only upon presentation and surrender of such
respective Certificates at the office or agency of the Trustee specified in the
notice to Certificateholders of such final payment.
Book-Entry Registration
DTC is a limited purpose trust company organized under the laws of the
State of New York and is a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to Section 17A of the Securities Exchange
Act of 1934. DTC was created to hold securities for its participating
organizations ("Participants") and to facilitate the clearance and settlement of
securities transactions between Participants through electronic book-entries,
thereby eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers (including Bear, Stearns & Co. Inc.),
banks, trust companies and clearing corporations. 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").
Certificate Owners that are not Participants or Indirect Participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, Book-Entry Certificates may do so only through Participants and
Indirect Participants. In addition, Certificate Owners will receive all
distributions of
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principal and interest on the Book-Entry Certificates through Participants.
Under a book-entry format, Certificate Owners may experience some delay in their
receipt of payments, since such payments will be forwarded to Cede, as nominee
for DTC. DTC will forward such payments to its Participants, which thereafter
will forward them to Indirect Participants or Certificate Owners. It is
anticipated that, except as provided below under "--Definitive Certificates,"
the only "Certificateholder" with respect to the Book-Entry Certificates will be
Cede, as nominee for DTC. Certificate Owners will not be recognized by the
Trustee as Certificateholders, as such term is used in the Agreement, and
Certificate Owners will be permitted to exercise the rights of
Certificateholders only indirectly through DTC and its Participants.
Under the rules, regulations and procedures creating and affecting DTC
and its operations (the "Rules"), DTC will be required to make book-entry
transfers of Book-Entry Certificates among Participants and to receive and
transmit distributions of principal of, and interest on, Book-Entry
Certificates. Participants and Indirect Participants with which Certificate
Owners have accounts with respect to the Book-Entry Certificates similarly are
required to make book-entry transfers and receive and transmit such payments on
behalf of their respective Certificate Owners. Accordingly, although,
Certificate Owners will not possess physical certificates, the Rules provide a
mechanism by which Participants and Certificate Owners will receive payments and
will be able to transfer their interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants, and on behalf of certain banks, the ability of
a Certificate Owner to pledge Book-Entry Certificates to persons or entities
that do not participate in the DTC system, or to otherwise act with respect to
such Book-Entry Certificates, may be limited due to the absence of physical
certificates for such Book-Entry Certificates.
DTC has advised the Seller that it will take any action permitted to be
taken by a holder of Book-Entry Certificates under the Agreement only at the
direction of one or more Participants to whose accounts with DTC the Book-Entry
Certificates are credited. Additionally, DTC has advised the Seller that it will
take such action where the consent of specified percentages of the Book-Entry
Certificates is required under the Agreement only at the direction of and on
behalf of Participants whose interests represent such specified percentages. DTC
may take conflicting actions on behalf of other Participants.
Neither the Seller, the Trustee nor the SunAmerica Parties will have
any liability for any aspect of the records relating to or payment made on
account of beneficial ownership interests of the Book-Entry Certificates held by
Cede, as nominee for DTC, or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
Definitive Certificates
Except for the Residual Certificates, the Offered Certificates will be
issued in fully registered, certificated form ("Definitive Certificates") to
Certificate Owners or their nominees, rather than to DTC or its nominee, only if
(i) the Seller advises the Trustee in writing that DTC is no longer willing or
able to discharge properly its responsibilities as depository with respect to
the Certificates and the Seller is unable to locate a qualified successor within
30 days or (ii) the Seller, at its option, elects to terminate the book-entry
system through DTC.
Upon the occurrence of either event described in clause (i) or (ii) of
the immediately preceding paragraph, the Trustee is required to notify DTC,
which in turn will notify all Certificate Owners through Participants, of the
availability of Definitive Certificates. Upon surrender by Cede, as nominee of
DTC, of the Definitive Certificates representing the Book-Entry Certificates and
receipt of instructions for
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re-registration, the Trustee will reissue the Book-Entry Certificates as
Definitive Certificates to Certificate Owners. Under no circumstances will
Definitive Certificates of any Class be issued in an amount representing an
interest in, as of the Closing Date, less than $250,000 principal amount of the
respective Class of Book-Entry Certificates, except with respect to any
initially issued Certificate in a lower principal amount or Notional Amount as
described above.
The Residual Certificates and Definitive Certificates will be
transferable and exchangeable on a "Certificate Register" to be maintained by
the Trustee at the office or agency of the Trustee maintained for that purpose
in New York, New York. A Residual Certificate or Definitive Certificate
surrendered to the Trustee for registration of transfer or exchange must be
accompanied by a written instrument of transfer in form satisfactory to the
Trustee. No service charge will be made for any registration of transfer or
exchange of the Residual Certificates and Definitive Certificates, but payment
of a sum sufficient to cover any tax or other governmental charge may be
required. Such office or agency of the Trustee is currently located at 101
Barclay Street, 12E, New York, New York 10286.
Distributions of Interest and Principal
Distributions of principal and interest on the Certificates with respect
to a month will be made on the day (each, a "Distribution Date") which is the
fifth Business Day after the 25th day (or if the 25th day is not a Business Day,
the following Business Day) of each month, commencing on April 1, 1998. The
distribution date with respect to the Pooled Securities (each, a "Pooled
Security Distribution Date") is the 25th day (or if the 25th day is not a
business day, as defined in the related Underlying Agreement, the following
business day) of each month except in the case of one Resecuritization Pooled
Security, it is the 29th day (or, if in February, the last day) of such month
(or if such day is not a business day, as defined in the related Underlying
Agreement, the following business day) and in the case of the other nine
Resecuritization Pooled Securities, it is two or three business days following
the 25th day of such month (or if the 25th day is not a business day, the
following business day). The distribution date with respect to the Resecuritized
Certificates is the 25th day (or if the 25th day is not a business day, as
defined in the related Underlying Agreement, the following business day) of each
month. The Pooled Security Distribution Dates with respect to each Pooled
Security are set forth in Annex I attached hereto. A "Business Day" means a day
other than a Saturday, a Sunday or a day on which banking institutions in New
York, New York or the city in which the corporate trust office of the Trustee is
located are authorized or obligated by law or executive order to be closed.
If the Trustee has not received a distribution on, or the Pooled
Security Distribution Date Information with respect to, a Pooled Security by
3:00 p.m. on the Business Day prior to the related Distribution Date (the
"Determination Time"), the distribution with respect thereto will not be made on
the immediately following Distribution Date, but, (i) if such distribution and
such Pooled Security Distribution Date Information are received by 3:00 p.m. on
the fifth Business Day after the Determination Time (the "Supplemental
Determination Time"), it will be made on the sixth Business Day after the
Determination Time (the "Supplemental Distribution Date") or (ii) if received
after 3:00 p.m. on the fifth Business Day after the Determination Time, it will
be made on the next succeeding Distribution Date, and in neither case will
additional interest be paid thereon. Notwithstanding the foregoing, if there may
be a Supplemental Distribution Date, payment of the Class PO Principal
Distribution on the Class PO Certificates will be made only on the Supplemental
Distribution Date.
Funds available to be paid on both a Distribution Date and the
immediately following Supplemental Distribution Date will be aggregated in
determining if a Certificate Rate equal to the lesser of (i) 6.75% per annum and
(ii) the weighted average of the Pooled Security Interest Rates has been
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achieved with respect to all Classes of interest bearing Certificates (other
than the Class X Certificates). Any interest carried over to the following
Distribution Date will be treated as received with respect to such following
Distribution Date and will not affect the calculation of interest for the
preceding Distribution Date. Notwithstanding the foregoing, for accounting
purposes, each Distribution Date is deemed to occur in the same month as the
immediately preceding Pooled Security Distribution Date (assuming for the
purpose of calculating the immediately preceding Pooled Security Distribution
Date that all calendar days are business days). See "Risk Factors--The
Certificates--Payment Delay" herein for the reasons that delay in receipt of
payments may occur and Annex I attached hereto for a list of the Pooled
Securities which are book-entry or which pay by check.
Interest is calculated based upon a 360-day year consisting of 12 months
of 30 days each. Distributions will be made on each Distribution Date to holders
of record as of the close of business on the last Business Day of the calendar
month preceding the month in which such Distribution Date occurs; provided that
for this purpose the Distribution Date is deemed to occur on the 30th (the 28th
or 29th of February ) of each month, without regard to whether such day is a
Business Day (the "Record Date").
With respect to each Distribution Date, the interest bearing
Certificates will accrue interest during the month preceding the month in which
a Distribution Date is deemed to occur (each, an "Interest Accrual Period"). On
each Distribution Date, holders of the Certificates of each interest bearing
Class will be entitled to receive interest from funds received as interest on
the Pooled Securities. Each interest bearing Class of Certificates (other than
the Class X Certificates) will be entitled to receive interest on its
Certificate Principal Balance on each such Distribution Date at a variable per
annum interest rate (a "Certificate Rate") equal to the lesser of (x) 6.75% and
(y) the weighted average of the Pooled Security Interest Rates, but in no event
greater than (z) a fraction, expressed as a percentage, the numerator of which
is the interest distribution on the Pooled Securities for which both the Pooled
Security distribution and the related Pooled Security Distribution Date
Information have been received by the Trustee by the times described herein,
multiplied by twelve and the denominator of which is the aggregate Certificate
Principal Balance of the Certificates (other than the Class PO Certificates).
The initial rate of interest on each such Class of Certificates is projected to
be 6.75% per annum, assuming that distributions and Pooled Security Distribution
Date Information on all Pooled Securities are timely received. See "Yield and
Prepayment Considerations" herein.
The Class X Certificates are interest only securities and do not have a
principal amount. They have a "Notional Amount" equal to the sum of the Pooled
Security Principal Balances of all of the Pooled Securities and will be entitled
to receive interest thereon on each monthly Distribution Date at the per annum
rate equal to a fraction, expressed as a percentage, the numerator of which is
the product of (A) the excess, if any, of (i) the interest distribution on the
Pooled Securities for which both the Pooled Security distribution and the
related Pooled Security Distribution Date Information have been received by the
Trustee by the times described herein over (ii) the interest paid on such
Distribution Date on all interest bearing Certificates other than the Class X
Certificates, and (B) twelve and the denominator of which is the Notional
Amount. The initial rate of interest on the Class X Certificates is projected to
be approximately 0.49% per annum, assuming that distributions and Pooled
Security Distribution Date Information on all Pooled Securities are timely
received. See "Yield and Prepayment Considerations" herein.
Each purchaser of interest bearing Certificates on the Closing Date
will pay 56 days of accrued interest at the rate of 6.75% (or in the case of the
purchaser of the Class X Certificates, approximately 0.49%) per annum on the
original Certificate Principal Balance or Notional Amount, as applicable, of the
Certificates purchased and will receive 30 days of interest on the first
Distribution Date and/or related
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Supplemental Distribution Date at the related Certificate Rate. On the May 4,
1998 Distribution Date, each purchaser of interest bearing Certificates will
receive with respect to its Certificates, in addition to interest at the
Certificate Rate to be distributed on such date, an amount equal to the sum of
(i) with respect to each interest bearing Class of Certificates (other than the
Class X Certificates) the excess of (x) 26 days of interest at 6.75% per annum
on the original Certificate Principal Balance thereof over (y) 26 days of
interest at the Certificate Rate for such Class of Certificates in effect for
the May 4, 1998 Distribution Date on the Certificate Principal Balance of such
Class of Certificates following the April 1, 1998 Distribution Date, or if there
is one, the related Supplemental Distribution Date and (ii) with respect to any
Class X Certificates, the excess of (x) 26 days of interest at approximately
0.49% per annum of the original Notional Amount thereof over (y) 26 days of
interest at the Certificate Rate for such Class of Certificates in effect for
the May 4, 1998 Distribution Date on the Notional Amount of such Class of
Certificates following the April 1, 1998 Distribution Date, or if there is one,
the related Supplemental Distribution Date.
Each Class of Certificates (other than the Class X and Class PO
Certificates) is generally entitled to receive on each Distribution Date and
Supplemental Distribution Date its pro rata share, based upon its respective
Certificate Principal Balance immediately prior to the applicable Distribution
Date, of the lesser of (i) principal collections on the Pooled Securities for
which both the Pooled Security distribution and the Pooled Security Distribution
Date Information have been received by the Trustee by the related Determination
Time or Supplemental Determination Time, as applicable and (ii) the excess of
(x) the aggregate Pooled Security Principal Balance of such Pooled Securities
immediately following the second preceding Pooled Security Distribution Dates
over (y) the aggregate Pooled Security Principal Balance of such Pooled
Securities immediately following the immediately preceding Pooled Security
Distribution Dates (in the aggregate, for each such date, the "Principal
Distribution Amount" and with respect to each Class, the "Class Percentage
Principal"). The Class PO Certificates are entitled to receive any principal
collections on the Pooled Securities for which both the Pooled Security
distribution and the Pooled Security Distribution Date Information have been
received by the Trustee by the related Determination Time or Supplemental
Determination Time, as applicable, in excess of the Principal Distribution
Amount, on each Distribution Date or Supplemental Distribution Date, as
applicable; provided that, if there may be a Supplemental Distribution Date,
such payments on the Class PO Certificates will be made only on such
Supplemental Distribution Date and calculated on an aggregate basis, taking
account of principal collections and the Principal Distribution Amounts with
respect to both the Distribution Date and the Supplemental Distribution Date,
and irrespective of when the Pooled Security distributions or Pooled Security
Distribution Date Information was received (the "Class PO Principal
Distribution").
To the extent that with respect to a Distribution Date or a
Supplemental Distribution Date (i) principal collections on the Pooled
Securities for which both the Pooled Security distribution and the Pooled
Security Distribution Date Information have been received by the Trustee by the
related Determination Time or Supplemental Determination Time, as applicable,
are less than (ii) the excess of (x) the aggregate Pooled Security Principal
Balance of such Pooled Securities immediately following the second preceding
Pooled Security Distribution Dates over (y) the aggregate Pooled Security
Principal Balance of such Pooled Securities immediately following the
immediately preceding Pooled Security Distribution Dates, such difference (the
"Loss Amount") will be allocated to the most junior Class of Certificates (other
than the Class X and Class PO Certificates) outstanding (in reverse alphabetical
order commencing with the Class H Certificates) by reducing its Certificate
Principal Balance. An amount equal to such Loss Amount, to the extent of the
Class Percentage Principal relating to the Classes of Certificates outstanding
other than the most senior Class (in alphabetical order commencing with the
Class A Certificates), will not be paid to the Classes otherwise entitled
thereto in reverse alphabetical order commencing with the Class H Certificates,
but will be paid sequentially, in alphabetical order to the most senior Class of
Certificates outstanding, commencing with the Class A Certificates (other than
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the Class X and Class PO Certificates), in each case to zero, as additional
principal ("Additional Principal"). The amount of Additional Principal taken
from each Class of Certificates (in reverse alphabetical order commencing with
the Class H Certificates) will be included in the Class Deferred Principal for
such Class on the following Distribution Date or Supplemental Distribution Date.
"Class Deferred Principal" means, for each Class of Certificates other
than the Class X and Class PO Certificates (in reverse alphabetical order
commencing with the Class H Certificates), immediately following any
Distribution Date or Supplemental Distribution Date, as applicable, an amount
equal to the excess of (i) the applicable Class Optimal Principal for such
Distribution Date or Supplemental Distribution Date over (ii) the principal paid
to such Class of Certificates on such Distribution Date or Supplemental
Distribution Date.
"Class Optimal Principal" means, with respect to each Class of
Certificates (other than the Class X and Class PO Certificates) an amount equal
to the sum of (i) the applicable Class Percentage Principal, (ii) Additional
Principal, if any, to be paid to such Class and (iii) the applicable Class
Deferred Principal immediately following the prior Distribution Date or
Supplemental Distribution Date, if any, as applicable.
"Available Funds" means with respect to any Distribution Date or
Supplemental Distribution Date, the aggregate amount on deposit in the
Certificate Account for which both the Pooled Security distribution and the
related Pooled Security Distribution Date Information have been received by the
Trustee as of the immediately prior Determination Time or Supplemental
Determination Time, as applicable, plus any investment income earned thereon to
and including the Distribution Date or Supplemental Distribution Date, as
applicable.
On each Distribution Date, the Trustee will apply the Available Funds on
deposit in the Certificate Account with respect to such Distribution Date, in
the following manner and order of priority:
(A) from investment income, 80% of investment income on amounts
deposited into the Certificate Account from the 25th day of each month to the
Distribution Date to the Trustee as its fee pursuant to the Agreement, and all
other investment income to the holder of the Class R-2 Certificate;
(B) from amounts with respect to interest received on the Pooled
Securities, to the holders of each Class of Certificates as distributions of
interest, an amount equal to interest for the applicable Class accrued at the
applicable per annum Certificate Rate during the Interest Accrual Period
preceding such Distribution Date on its Certificate Principal Balance or
Notional Amount, as applicable, immediately prior to such Distribution Date;
(C) if there will not be a Supplemental Distribution Date, from amounts
with respect to principal received on the Pooled Securities, any Class PO
Principal Distribution to the holders of the Class PO Certificates, until its
Certificate Principal Balance has been reduced to zero and then to the holder of
the Class R-2 Certificate;
(D) from amounts with respect to principal received on the Pooled
Securities, first to the holders of the Class R-1 and Class R-2 Certificates,
pro rata, until their Certificate Principal Balances have been reduced to zero
and then to the holders of each remaining Class of Certificates other than the
Class X and Class PO Certificates (in alphabetical order commencing with the
Class A Certificates) as distributions of principal, up to an amount equal to
the applicable Class Optimal Principal until the Certificate Principal Balance
of the respective Class has been reduced to zero.
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On each Supplemental Distribution Date, the Trustee will apply the
Available Funds on deposit in the Certificate Account with respect to such
Supplemental Distribution Date, in the following manner and order of priority:
(A) from investment income, 80% of investment income on amounts
deposited into the Certificate Account from the Distribution Date to the
Supplemental Distribution Date, to the Trustee as its fee pursuant to the
Agreement, and all other investment income to the holder of the Class R-2
Certificate;
(B) from amounts with respect to interest received on the Pooled
Securities, to the holders of each Class of Certificates as distributions of
interest, the applicable Supplemental Distribution Date Interest Distribution;
(C) from amounts with respect to principal received on the Pooled
Securities, any Class PO Principal Distribution, to the holders of the Class PO
Certificates, until its Certificate Principal Balance has been reduced to zero
and then to the holder of the Class R-2 Certificate; and
(D) from amounts with respect to principal received on the Pooled
Securities, to the holders of each remaining Class of Certificates other than
the Class X and Class PO Certificates (in alphabetical order commencing with the
Class A Certificates) as distributions of principal, up to an amount equal to
the applicable Class Optimal Principal, until the Certificate Principal Balance
of the respective Class has been reduced to zero.
"Supplemental Distribution Date Interest Distribution" means, with
respect to any Supplemental Distribution Date, and for (i) each Class of
Certificates (other than the Class X and Class PO Certificates), up to an
amount, which when added to the interest distributed on each Class of
Certificates on the immediately prior Distribution Date equals the amount of
interest for the applicable Class that would have accrued at a Certificate Rate
equal to the lesser of (x) 6.75% per annum and (y) the weighted average of the
Pooled Security Interest Rates, during the Interest Accrual Period preceding the
immediately prior Distribution Date on its Certificate Principal Balance,
immediately prior to such Distribution Date and (ii) the Class X Certificates an
amount equal to the excess of (x) all interest collections constituting
Available Funds over (y) the amount of interest distributed pursuant to clause
(i) above.
Following payment in full of all Classes of Certificates, any amounts
remaining in the Certificate Account (other than the portion of investment
income payable to the Trustee) shall be paid to the holder of the Class R-2
Certificate. It is not anticipated that there will be any such amounts so
remaining.
The "Certificate Principal Balance" for any Class of Certificates (other
than the Class X Certificates) means the aggregate principal amount of such
Class of Certificates outstanding as of any date of determination, which is
equal to the aggregate principal amount of such Class of Certificates on the
Closing Date minus the sum of (i) all distributions of principal previously made
on such Class of Certificates pursuant to the distribution provisions of the
Agreement and (ii) other than with respect to the Class PO Certificates, any
Loss Amounts previously allocated to such Class of Certificates.
The sole sources of payment on the Certificates will be distributions on
the Pooled Securities. The Certificates will not be guaranteed by the Seller,
the Underwriter, the Trustee, any government agency or instrumentality, or any
other person.
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Allocation of Loss Amounts
All Loss Amounts will be allocated to the most junior Class of
Certificates outstanding (in reverse alphabetical order commencing with the
Class H Certificates) until the Certificate Principal Balance of such Class of
Certificates has been reduced to zero. In addition, since Additional Principal
is paid from the amounts otherwise payable as Class Percentage Principal with
respect to the most junior Class of Certificates outstanding (in reverse
alphabetical order), any amounts reallocated from the most junior Class of
Certificates outstanding (in reverse alphabetical order) will never be paid.
The sum of all Realized Losses with respect to the Pooled Securities
for which both Pooled Security distribution and the Pooled Security Distribution
Date Information have been timely received with respect to the related
Distribution Date or Supplemental Distribution Date, as applicable, may or may
not be equal to the Loss Amount for such applicable date. This may occur if (i)
any repayment of any unpaid principal shortfall amount with respect to AMERT
9303, 3-B is received, (ii) an interest shortfall occurs resulting in accreted
principal with respect to CHASE 94E, B-2, or (iii) any recoveries of principal
paid to the Pooled Securities with respect to Realized Losses previously
allocated to Pooled Securities.
DESCRIPTION OF THE UNDERLYING SECURITIES
General
Payments with respect to the Certificates will be made from
distributions received on the Pooled Securities. The Pooled Securities consist
of 96 classes of mortgage-backed securities with an aggregate Pooled Security
Principal Balance of approximately $515,964,267 as of the Pooled Security
Information Date.
The Pooled Securities evidence interests in 83 Underlying Trusts, the
assets of which consist primarily of (i) Mortgage Loans or (ii) Resecuritized
Certificates representing interests in 48 Underlying Trusts, the assets of which
consist primarily of Mortgage Loans. All of the Underlying Securities constitute
REMIC "regular interests" with respect to the related Underlying Trust. Each
Underlying Security was initially issued either pursuant to an effective
registration statement or an exemption from registration pursuant to the Act.
The abbreviation used for each Underlying Security is set forth in Annex II
attached hereto and the characteristics of the Underlying Securities are
described herein in Annex I attached hereto.
The Seller expects that by the Closing Date, the Trustee will have
received all of the Pooled Securities, as required by the Agreement. All monthly
distributions on each Pooled Security Distribution Date after the Pooled
Security Information Date will be available for payment on the Certificates as
described herein. See "Description of the Certificates--Distributions of
Interest and Principal" herein.
The tables in Annex I attached hereto set forth approximate information
for each of the Underlying Securities as of the Pooled Security Information
Date, except as otherwise noted therein. The tables and the descriptions of the
Underlying Securities herein are subject to and qualified by reference to the
provisions of the Supplemental Documents related to the Underlying Securities or
the
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related Senior Securities, as well as any subsequent information related
thereto filed by the issuers thereof on a Current Report on Form 8-K with the
Securities and Exchange Commission following the closing of the related
Underlying Series. The information set forth in the tables and elsewhere herein
that is peculiarly within the knowledge of the various Underlying Trustees,
paying agents and Underlying Servicers for the Underlying Trusts has been
derived from data requested from and provided by them, including regular
periodic reports provided to holders of Underlying Securities, loan-by-loan
information provided in tape form from the related Underlying Servicers or
underlying issuers and information from outside sources such as Bloomberg L.P.
and Mortgage Information Corp., but such information has not been independently
represented to the Seller or the Underwriter as being accurate and complete nor
has it been independently verified by the Seller or the Underwriter. With
respect to approximately 5% of the aggregate outstanding principal balance of
the Underlying Mortgage Loans, loan-by-loan information was not available for
purposes of presenting the information in Annex I attached hereto. This
information comprises all material information on the subject that the Seller
and the Underwriter possess or can acquire without unreasonable effort and
expense. Copies of the offering documents and the February 1998 Pooled Security
Distribution Date Statements relating to each Underlying Security are available
for inspection upon request to the Trustee. The Bank of New York, the Trustee
for the Certificates, acts as Underlying Trustee with respect to 15 Pooled
Securities. It has not undertaken in such latter capacity to provide any
information not otherwise generally available.
Each of the Underlying Securities is either a Mezzanine Security or a
Subordinated Security. "Mezzanine Securities" have rights which are subordinate
to those of the related Senior Securities, but senior to those of the related
Subordinated Securities. "Subordinated Securities" have rights which are
subordinate to both Senior Securities and Mezzanine Certificates, if any.
"Senior Securities" have rights which are senior to those of another class or
classes of securities and are not subordinated to the rights of any other class
of securities. Certain classes of each type of security may be senior to other
classes of the same type of security.
The latest rating provided by at least one nationally recognized
statistical rating agency for each of the Pooled Securities is at least "BBB-"
(or a comparable rating). None of the Resecuritized Certificates are rated by a
nationally recognized statistical rating agency. One Pooled Security, CITIMT
9016, B (constituting approximately 1.10% of the Pooled Securities Principal
Balance) has been downgraded by one of the original rating agencies since
initial issuance. Annex I attached hereto provides with respect to each Pooled
Security, the latest rating by the rating agency which originally rated the
Pooled Security, the applicable rating agency, and the original rating at the
issuance of the related Underlying Series by such rating agency.
Distributions of Interest on the Pooled Securities
Each Pooled Security is entitled generally to a monthly distribution of
interest at its then-current Pooled Security Interest Rate on its Pooled
Security Principal Balance and to accrued but previously unpaid interest. As of
the Pooled Security Information Date, the Pooled Security Interest Rates ranged
from approximately 6.250% to approximately 9.500% per annum and the weighted
average Pooled Security Interest Rate (based on Pooled Security Principal
Balance) of the Pooled Securities was approximately 7.213% per annum. The Pooled
Security Interest Rate for each Pooled Security as of the Pooled Security
Information Date, is shown in Annex I attached hereto. As shown in such Annex,
the interest rate for each Pooled Security other than nine of the
Resecuritization Pooled Securities and RFC 94S3, M-1 are fixed percentages. Nine
of the Resecuritization Pooled Securities bear interest based on the weighted
average pass-through rate of the related Resecuritized Certificates and RFC
94S3, M-1 bears interest based on the weighted average of the Mortgage Net Rates
of the related Underlying
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Mortgage Loans. Notwithstanding the foregoing, the interest paid with respect to
the Pooled Securities to the Trustee may be at rates lower than the applicable
Pooled Security Interest Rates as a result of Interest Shortfalls and Realized
Losses applicable to interest allocated to such Pooled Securities. In addition,
the right of the Pooled Securities to receive interest on any Pooled Security
Distribution Date is subordinated to the right of the related Senior Securities
to receive distributions of interest and, principal, on such Pooled Security
Distribution Date. See "--Realized Losses on Liquidated Mortgage Loans;
Subordination" herein and Annex I attached hereto for a list of the Underlying
Series in which the Underlying Servicer is not obligated to pay Compensating
Interest or any caps on required Compensating Interest payments. Interest on the
Pooled Securities generally is computed on the basis of a 360-day year
consisting of twelve 30-day months. None of the Pooled Securities provides for
negative amortization.
Distributions of Principal on the Pooled Securities
To the extent of available funds after certain distributions on the
Senior Securities and in certain cases, Mezzanine Securities, the Pooled
Securities are entitled generally to a monthly distribution of principal,
consisting generally of (i) a percentage of scheduled principal payments on the
related Underlying Mortgage Loans, based generally on the Pooled Security
Principal Balance of the Pooled Securities as a proportion of the aggregate
principal balance of all securities in the related Underlying Series; and (ii)
to the extent allocated to the Pooled Securities as described below, a
percentage of principal prepayments and other unscheduled collections applicable
to principal on the related Underlying Mortgage Loans to the extent provided
under the terms of the related Underlying Agreements.
No distributions of principal or interest on the Pooled Securities or
the Resecuritized Certificates, will be made on any Pooled Security Distribution
Date until all classes with a higher priority of such Underlying Series have
received all principal and interest (generally including accrued but unpaid
interest) to which they are entitled on such Pooled Security Distribution Date
except that CFC 9418, B-3 and SBMSI 9409, B-4 will be entitled to receive
interest prior to the receipt of principal by other Subordinated Securities in
the same Underlying Series.
Prepayments on the Underlying Mortgage Loans generally are not
allocated to the Pooled Securities (other than the Resecuritization Pooled
Securities) or the Resecuritized Certificates (and consequently indirectly the
Resecuritization Pooled Securities) during a Lock Out Period of generally five
years from the related date of issuance of the related Underlying Securities (or
in the case of the Resecuritization Pooled Securities, the date of issuance of
the Resecuritized Certificates). This is accomplished by maintaining the
applicable percentage of prepayments to the related Senior Securities (the
"Senior Prepayment Percentage") at 100% during the Lock Out Period rather than
paying a pro rata portion of prepayments to the related Senior Securities and
Subordinated Securities. After the five year Lock Out Period, a certain
percentage of prepayments may be allocated to the related Subordinated
Securities subject in most cases to the satisfaction of certain loss and
delinquency tests. Generally, the Senior Prepayment Percentage (subject to such
tests) is reduced to the related senior percentage for the applicable Pooled
Security Distribution Date plus a portion of the subordinate or junior
percentage. The portion of the subordinate percentage is generally equal to 70%
for any Pooled Security Distribution Date in the sixth year after the date of
issuance, 60% in the seventh year, 40% in the eighth year, 20% in the ninth year
and for any Pooled Security Distribution Date thereafter, the applicable senior
percentage. The senior percentage or subordinate percentage is equal to the
aggregate principal balance of the related Senior Securities, in general other
than principal only securities, or Subordinated Securities, respectively,
divided by the aggregate principal balance of all related Underlying Mortgage
Loans (in general, less any
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related principal only balance). Generally, if the senior percentage with
respect to a given distribution date exceeds the initial senior percentage, the
senior prepayment percentage once again equals 100%.
Most of the Pooled Securities have one or more loss and delinquency
tests. The delinquency tests generally provide that the above reductions of the
senior prepayment percentages do not apply if (i) Underlying Mortgage Loans
delinquent for 60 days or more, for a rolling period of 3, 6 or 12 months,
exceed a stated percentage of generally either 2% or 4% of the aggregate
principal balance of the related Underlying Mortgage Loans, (ii) the outstanding
principal balance of the Underlying Mortgage Loans delinquent for 60 days or
more, for a rolling period of 6 months, is less than a stated percentage,
generally 50% of the aggregate certificate balance of the related Subordinated
Securities, (iii) the average monthly payment for Underlying Mortgage Loans
delinquent for 60 days or more, for a rolling period of 3, 6 or 12 months,
exceed a stated percentage of generally either 2% or 4% of the aggregate monthly
payments of the related Underlying Mortgage Loans or (iv) Underlying Mortgage
Loans delinquent for 60 days or more averaged over any two consecutive of the
preceding three months exceed a stated percentage of generally 2% of the
aggregate principal balance of the related Underlying Mortgage Loans. The loss
tests generally provide that if Realized Losses on the related Underlying
Mortgage Loans are more than a stated percentage, generally progressing from 30%
to 35% to 40% to 45% to 50% if occurring on a Pooled Security Distribution Date
in the sixth, seventh, eighth, ninth or tenth year, respectively, of the initial
principal balance of the Subordinated Securities, the above reductions of the
senior prepayment percentages do not apply. Many of the Pooled Securities have
more than one delinquency test and if so, a second loss test with different
percentages than those indicated above.
Notwithstanding the preceding general descriptions of the loss and
delinquency tests with respect to the Pooled Securities, CITIMT 9016, B; CITIMT
9205, B; and CITIMT 9219, B (together, the "CITIMT Special Securities") each
have two methods by which Subordinated Securities can receive amounts with
respect to prepayments. First, when cumulative deposits put into a reserve
account reach a target specified in the related Underlying Agreement, for each
dollar put into the reserve account over the target during any period, one
dollar of prepayments are paid to the Mezzanine Securities until their principal
balance is reduced to zero. After the principal balance on the Mezzanine
Securities is reduced to zero, any such payments are made to the Subordinated
Securities. Second, after a five year Lockout Period, the Senior Securities
(which are protected from losses and delinquencies on the Underlying Mortgage
Loans by credit enhancement from a reserve fund or spread account established
under the Underlying Agreement) are subject to a reduction in the maximum credit
enhancement amount available to such Senior Securities equal to 20% of the
excess, if any, of (a) the current maximum credit enhancement amount available
for the Senior Securities (from a reserve fund or spread account) on the
proceeding Pooled Security Distribution Date (net of certain withdrawals and
advances) over (b) the product of the original maximum credit enhancement
percentage and an aggregate adjusted balance of the related Underlying Mortgage
Loans (but not less than three times the adjusted balance of the largest single
Underlying Mortgage Loan). The percentage used in the preceding calculation
becomes 25%, 33 1/3%, and 50% in the sixth, seventh, eighth, and ninth years
after the date of issuance of the related Underlying Series. For each Pooled
Security Distribution Date occurring on or after the tenth year after the date
of issuance of the related Underlying Series, the reduction to the maximum
credit enhancement available to the Senior Securities will be equal to 100%.
These reductions to the maximum payments to the Senior Securities will
not occur unless both a loss and a delinquency test are satisfied. Aggregate net
losses on the related Underlying Mortgage Loans must be less than a percentage,
ranging from 25% to 60%, of the original maximum credit enhancement amount
available to the Senior Securities, for the years from the sixth year after the
date of issuance of the related Underlying Series through the sixteenth year
after the date of issuance of the related
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Underlying Series, and beyond. Further, the adjusted balance of the Underlying
Mortgage Loans delinquent for 60 days or more for a rolling period of 6 months,
cannot exceed a stated percentage equal to the then-current Mortgage Bankers
Association of America delinquency rate for similar collateral for that period
(the "MBA level") of the adjusted balance of all related Underlying Mortgage
Loans; and the adjusted balance of the Underlying Mortgage Loans delinquent for
60 days or more, averaged over any two consecutive months out of the preceding
three months, cannot exceed a stated percentage equal to the MBA level of the
adjusted balance of all related Underlying Mortgage Loans. For CITIMT 9219, B,
the delinquency tests substitute 2% for the MBA level.
Distributions of Interest and Principal on Resecuritized Certificates
The descriptions above with respect to interest and principal
distributions on the Pooled Securities are also applicable to the Resecuritized
Certificates. As of the Pooled Security Information Date, the pass-through rates
on the Resecuritized Certificates ranged from approximately 6.250% to
approximately 11.720% per annum and the weighted average pass-through rate
(based on Resecuritized Certificate Principal Balance) of the Resecuritized
Certificates was approximately 7.267% per annum. See Annex I attached hereto for
information provided with respect to each Resecuritized Certificate comparable
to that provided for each Pooled Security.
Realized Losses on Liquidated Mortgage Loans; Subordination
A Realized Loss will be incurred on a Liquidated Mortgage Loan
generally in the amount, if any, by which the Net Liquidation Proceeds from such
Liquidated Mortgage Loan are less than the unpaid principal balance of such
Liquidated Mortgage Loan, plus accrued and unpaid interest thereon and amounts,
if any, reimbursable to the Underlying Servicer for previously unreimbursed
Advances. To the extent that the amount of the Realized Loss is not covered by
the related Underlying Security Credit Support, if any, the amount of such
Realized Loss generally will be allocated to the related Underlying Securities
in reduction of their Pooled Security Principal Balances or Resecuritized
Certificate Principal Balances, as applicable, before any Realized Losses are
allocated to the related Senior Securities.
With respect to the IOU Securities, the related Senior Securities are
entitled to the amount, if any, by which (i) the applicable percentage of the
outstanding principal balance of an Underlying Mortgage Loan immediately prior
to liquidation exceeds (ii) the total amount of Net Liquidation Proceeds
allocable to principal. Such amounts are provided by amounts otherwise payable
to the Subordinated Securities and Mezzanine Securities, resulting in reduced
payments on the applicable distribution date to the Subordinated Securities and
Mezzanine Securities of such Underlying Series. Distributions of principal and
interest on the related Pooled Securities may be delayed, reduced or eliminated
to the extent that a Realized Loss is experienced on an Underlying Mortgage Loan
because amounts otherwise distributable as principal and interest on the Pooled
Securities or Resecuritized Certificates will be used instead to make
distributions of principal and interest on the related Senior Securities.
Realized Losses also include Mortgagor Bankruptcy Losses, Special
Hazard Losses and Fraud Losses (collectively, "Special Loss Occurrences").
"Mortgagor Bankruptcy Losses" occur when the unpaid principal balance of an
Underlying Mortgage Loan is reduced or the payment terms of an Underlying
Mortgage Loan are modified in connection with the bankruptcy proceedings of the
borrower. "Special Hazard Losses" are losses attributable to physical damage to
the Mortgaged Properties of a type that is not covered by standard hazard
insurance policies, but do not include losses caused by war, nuclear reaction,
nuclear or atomic weapons, insurrection or normal wear and tear. "Fraud Losses"
are
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losses on the Underlying Mortgage Loans resulting from a mortgage insurer's
failure to pay a claim with respect to an Underlying Mortgage Loan on the
grounds of fraud, dishonesty or misrepresentation in the application for
insurance.
In general, Realized Losses on the Underlying Mortgage Loans from
Special Loss Occurrences, up to a limit (the "Special Loss Limit") specified in
the related Underlying Agreement, are allocated entirely to the subordinated
securities (including the Underlying Securities) of the related Underlying
Series prior to being allocated to the related Senior Securities. Realized
Losses from Special Loss Occurrences in excess of the applicable Special Loss
Limits generally are allocated to all securities of the related Underlying
Series pro rata. Annex I attached hereto sets forth for each Underlying Series,
the Special Loss Limits remaining as of the Pooled Security Information Date, if
any (or if not available, as of the date of issuance of the related Underlying
Security) with respect to Mortgagor Bankruptcy Losses, Special Hazard Losses and
Fraud Losses.
With respect to 88 classes of Pooled Securities (constituting
approximately 89.37% of the Pooled Security Principal Balance), credit support
for such Underlying Security (the "Underlying Security Credit Support")
constitutes less than 5.00% of the aggregate outstanding principal balance of
the Underlying Mortgage Loans of the related Underlying Series. With respect to
91 classes of Pooled Securities (constituting approximately 92.84% of the Pooled
Security Principal Balance), Underlying Security Credit Support is only provided
by securities subordinated to the Pooled Securities. With respect to FBCS 9302R,
1 and SBMSI 92D, B-4, Underlying Security Credit Support is provided by a
limited guarantee or a reserve fund in addition to securities subordinated to
the Pooled Securities and with respect to CITIMT 9016, B; CITIMT 9205, B; and
CITIMT 9219, B, Underlying Security Credit Support is provided by only a limited
guarantee, reserve fund or spread account. Underlying Security Credit Support is
provided to twelve classes of Pooled Securities by another class of Pooled
Securities in the same Underlying Series. Securities subordinated to the Pooled
Securities do not secure payments on the Certificates (other than the twelve
Pooled Securities described in the immediately preceding sentence). None of the
Resecuritized Certificates, except for the Resecuritized Certificates backing
AMERT 9303, 3-B have any Underlying Security Credit Support. Any Underlying
Security Credit Support relating to the Underlying Securities of a particular
Underlying Series will not be available to provide credit support for the
Underlying Securities of any other Underlying Series. Annex I attached hereto
provides for each Underlying Security the percentage of the related Underlying
Series constituting Underlying Security Credit Support with respect to such
Underlying Security.
Early Termination of Underlying Trusts
With respect to all of the Pooled Securities (except eight
Resecuritization Pooled Securities) and all of the Resecuritized Certificates,
the Underlying Servicer, the Underlying Trustee, holders of a majority in
interest of the residual interest in the Underlying Trust, the seller to the
Underlying Trust, and/or another person, subject to the limitations imposed by
the related Underlying Agreement, may purchase all Underlying Mortgage Loans and
REO Properties remaining in such Underlying Trust on any Pooled Security
Distribution Date or distribution date for the Resecuritized Certificates, as
applicable, occurring on or after a date specified or event described in such
Underlying Agreement and in the manner and at the termination price specified in
such Underlying Agreement. Most of the Underlying Agreements permit the optional
termination of the Underlying Trust when the outstanding principal balance of
all Underlying Mortgage Loans or securities of the related Underlying Trust
falls to some percentage--typically either 5% or 10%--of the original principal
balance of all Underlying Mortgage Loans or securities of the related Underlying
Trust. See Annex I attached hereto for a list of such percentages, if any, the
entities which may exercise such termination options and the percentage of the
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original principal balance of the Underlying Mortgage Loans or securities
remaining with respect to each Underlying Trust.
Generally, after any termination of an Underlying Trust, available
funds are distributed first to the Underlying Servicer (or Underlying Trustee)
to reimburse it for all previously unreimbursed expenses and Advances, and
second to the related holders of securities, often in a stated priority with the
Underlying Securities entitled to distributions only after all distributions are
made on the Senior Securities.
Aggregate Collateral Report
The Underlying Trustee for an Underlying Series with respect to each
Pooled Security will furnish the related holders of securities, including the
Trustee as holder of the related Pooled Securities, with monthly statements
prepared by the related Underlying Servicer, the related Underlying Trustee or
another party (each, an "Pooled Security Distribution Date Statement")
containing information with respect to principal and interest distributions and
Realized Losses for such Underlying Series and the related Underlying Mortgage
Loans. In addition, the Trustee may receive information with respect to Realized
Losses and principal and interest payments relating to a Pooled Security ("Other
Information" and, together with the Pooled Security Distribution Date
Statements, the "Pooled Security Distribution Date Information") relating to the
Underlying Series directly from the related Underlying Trustee and through other
means. Under the Agreement, the Trustee will be required to prepare and deliver
to Certificateholders, based on and to the extent of the information so
furnished to it in the Pooled Security Distribution Date Statements, no later
than five Business Days following each Distribution Date or if there will be a
Supplemental Distribution Date following the Distribution Date, no later than
three Business Days following the Supplemental Distribution Date, an "Aggregate
Collateral Report," together with the monthly Distribution Date Statement (as
described herein under "The Pooling and Servicing Agreement--Reports to
Certificateholders") for such Distribution Date. Any financial information
contained in such reports will not have been examined or reported upon by an
independent public accountant.
The Aggregate Collateral Report for each month will include the
following information:
(1) For each Pooled Security with an amount of monthly
distribution to be included in the payment on the Certificates on the related
Distribution Date and the Supplemental Distribution Date, and to the extent
reported in the related Pooled Security Distribution Date Statement:
(A) the Pooled Security Principal Balance of such Pooled Security
before and after the related Pooled Security Distribution Date, which date shall
be specified;
(B) the Pooled Security Interest Rate and Interest Shortfalls net of
Compensating Interest, expressed as a per annum rate borne by such Pooled
Security with respect to the related Pooled Security Distribution Date;
(C) the amount of interest distributed on such Pooled Security on the
related Pooled Security Distribution Date, as well as any amount by which the
amount of interest scheduled to be distributed on such Pooled Security on such
Pooled Security Distribution Date exceeded the amount of interest actually
distributed thereon;
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(D) all Realized Losses incurred on the Underlying Mortgage Loans on
the related Pooled Security Distribution Date, since the date of issuance of
such Pooled Security and since the Mortgage Loan Information Date;
(E) all Realized Losses allocated to the Pooled Security on the related
Pooled Security Distribution Date since the Mortgage Loan Information Date;
(F) the amount, aggregate principal balance and percentage of the
Underlying Mortgage Loans that were (i) more than 30 but fewer than 60 days
delinquent, (ii) more than 60 but fewer than 90 days delinquent, (iii) 90 days
or more delinquent, (iv) in foreclosure, and (v) REO Property, each as of the
end of the reporting period to which the Pooled Security Distribution Date
Statement delivered with respect to such Pooled Security as of the related
Pooled Security Distribution Date relates;
(G) the amount of principal distributed on such Pooled Security on the
related Pooled Security Distribution Date;
(H) the total amount distributed on such Pooled Security on the related
Pooled Security Distribution Date; and
(I) the amount of any Underlying Security Credit Support remaining with
respect to each Pooled Security on the related Pooled Security Distribution
Date, stated as a percent of the aggregate outstanding principal balance of the
Underlying Mortgage Loans;
(2) For all Underlying Mortgage Loans, an aggregate statement
of delinquency statistics reporting all of the information specified in clause
(l)(F) above in the aggregate for the related Pooled Security Distribution Date
and each of the eleven prior reporting periods;
(3) The number and aggregate Pooled Security Principal Balance
of all of the Pooled Securities as of the respective related Pooled Security
Distribution Date; and
(4) The aggregate outstanding principal balance of the
Underlying Mortgage Loans as reported in the related Pooled Security
Distribution Date Statements.
DESCRIPTION OF THE UNDERLYING MORTGAGE LOANS
General
As of the Mortgage Loan Information Date, there were approximately
116,700 Underlying Mortgage Loans having an aggregate outstanding principal
balance of approximately $27.6 billion, which consist primarily of (i)
conventional, fixed rate, mortgage loans secured by first liens on one- to
four-family residential real properties and (ii) in the case of some of the
Underlying Series, cooperative loans secured by shares in cooperative
corporations. Substantially all of the Underlying Mortgage Loans amortize over a
period of thirty years, with level monthly scheduled payments.
Certain general characteristics of the Underlying Mortgage Loans are
set forth in Annex I attached hereto. With respect to approximately 5% of the
aggregate outstanding principal balance of the Underlying Mortgage Loans,
loan-by-loan information was not available for purposes of presenting the
information in Annex I attached hereto. References to an amount or percentage of
Underlying Mortgage
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Loans or an average with respect to the Underlying Mortgage Loans shall, unless
otherwise specified herein, be to the amount, percentage or average calculated
based on the scheduled principal balances of the Underlying Mortgage Loans as of
the Mortgage Loan Information Date, as reflected on the Pooled Security
Distribution Date Statements for February 1998.
The Pooled Securities represent varying percentages of the aggregate
Pooled Security Principal Balance of all Pooled Securities backing payments on
the Certificates. Moreover, the Pooled Securities represent varying interests in
the Underlying Mortgage Loans in the related Underlying Trusts. A Pooled
Security representing a relatively small percentage of all Pooled Securities may
be backed by a disproportionately large amount of Underlying Mortgage Loans; and
conversely a Pooled Security representing a relatively large percentage of all
Pooled Securities may be backed by a disproportionately small amount of
Underlying Mortgage Loans. Similarly, a Resecuritization Pooled Security
representing a small percentage of all Pooled Securities may be backed by a
disproportionately large amount of Resecuritized Certificates. Accordingly, any
aggregated statistical information about the Underlying Mortgage Loans contained
herein should be read in conjunction with the information, contained in Annex I,
regarding the Underlying Mortgage Loans on a Pooled Security-by-Pooled Security
basis, keeping in mind the relative size of each Pooled Security.
Origination of Underlying Mortgage oans
The Underlying Mortgage Loans were originated by various originators
and were subject to the underwriting standards and procedures of such
originators. Some of the Underlying Mortgage Loans were originated pursuant to
"limited documentation" programs, in which the credit approval programs may have
been based on an examination of fewer documents than would be examined in a more
standard underwriting process. Substantially all of the Underlying Mortgage
Loans backing FBCS 9302R, 1 and RYLPT3 1992A, 1-B were originated by depository
institutions that have since been placed in receivership or conservatorship by
the Resolution Trust Corporation or the Federal Deposit Insurance Corporation.
Such depository institutions may have been in distress at the time the related
Underlying Mortgage Loans were originated. Under such circumstances, customary
review, underwriting and servicing practices may not have been followed. As a
consequence, the credit risk may be greater than that customarily associated
with residential Underlying Mortgage Loans. The Seller does not have and could
not have obtained in a reasonably efficient manner, complete information
relating to the originators of the Underlying Mortgage Loans and to the current
financial status of the originators. None of the Seller, the Trust, the
Underwriter, the SunAmerica Parties nor any of their affiliates has underwritten
the Underlying Mortgage Loans.
Mortgage Interest Rates on Underlying Mortgage Loans
The interest rate on the notes relating to each of the Underlying
Mortgage Loans is a fixed rate. Annex I attached hereto shows the weighted
average gross interest rate ("GWAC") and weighted average Mortgage Net Rate
("NWAC") with respect to the Underlying Mortgage Loans of each Underlying
Security.
Original Loan-to-Value Ratios
Some of the Underlying Mortgage Loans had loan-to-value ratios at
origination ("Original Loan-to-Value Ratios") greater than 80%. In a majority of
the Underlying Trusts all such Mortgage Loans were covered by primary mortgage
insurance policies. However, to the extent that the Underlying Mortgage Loans
were originated in geographical areas where housing prices subsequently
declined, the
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<PAGE>
current loan-to-value ratios of such Underlying Mortgage Loans may exceed the
Original Loan-to-Value Ratios, notwithstanding the seasoning of the Underlying
Mortgage Loans. Accordingly, with respect to the Underlying Mortgage Loans that
are not covered by primary mortgage insurance policies, Realized Losses could be
more severe than might be incurred if all of the Underlying Mortgage Loans with
Original Loan-to-Value Ratios greater than 80% were covered by primary mortgage
insurance policies. It should be noted that neither the Seller nor the
Underwriter are aware of the current loan-to-value ratios of the Underlying
Mortgage Loans.
Underlying Mortgage Loans Secured by Cooperative Loans
While the Underlying Trusts relating to a majority of the Pooled
Securities do not include Underlying Mortgage Loans secured by shares in
cooperative corporations, some of the Underlying Trusts included or could
include Underlying Mortgage Loans secured by shares in cooperative corporations.
Cooperative loans are evidenced by promissory notes secured by security
interests in shares issued by cooperative apartment corporations and in the
related proprietary leases or occupancy agreements granting exclusive rights to
occupy specific dwelling units in the related buildings. If the borrower
defaults on a cooperative loan, the lender's remedies are similar to the
remedies which apply to a foreclosure of a mortgage or deed of trust, in that
the lender can foreclose the loan and assume "ownership" of the apartment. The
more limited market for cooperative apartments may result in Realized Losses
that are more severe than might be incurred if all of the Underlying Mortgage
Loans were secured by one- to four-family Mortgaged Properties.
Delinquencies
Realized Losses have occurred with respect to Underlying Mortgage Loans
in (i) 45 Underlying Series relating to the Pooled Securities (other than the
Resecuritization Pooled Securities), and (ii) the 48 Underlying Series relating
to the Resecuritized Certificates. Substantially all of the Underlying Series
include Underlying Mortgage Loans that are delinquent, and a significant number
have REO Properties relating to defaulted Underlying Mortgage Loans. See "Risk
Factors--The Underlying Mortgage Loans--Mortgage Loan Delinquencies and Losses"
herein and Annex I attached hereto which sets forth as of the Underlying
Mortgage Loan Information Date, the cumulative Realized Losses, Realized Losses
during January 1998 and a breakdown of the 30-59 day, 60-89 day and 90 or more
day delinquencies, foreclosures in process and REO Property with respect to each
Underlying Series. See "Risk Factors--The Underlying Mortgage Loans--Mortgage
Loan Delinquencies and Losses" herein.
Geographic Concentration
As of the Mortgage Loan Information Date, approximately 51% of the
Underlying Mortgage Loans (by Underlying Mortgage Loan outstanding principal
balance) are secured by properties located in California. As a consequence,
Realized Losses allocated to the Pooled Securities may exceed those that might
be realized were the Mortgaged Properties more geographically dispersed because
the loss experience of the Underlying Mortgage Loans will be more sensitive to
downturns in the California economy and to local California natural disasters
than would be the case were the Mortgaged Properties more geographically
dispersed. Recently, certain counties in California have been experiencing
severe rain and flooding. In addition, prepayments on the Underlying Mortgage
Loans and resulting payments on the Certificates may be affected significantly
by changes in the housing markets and the regional economies in California in
general. See Annex I for the concentrations of California Mortgaged Properties,
and the highest state concentrations of Mortgaged Properties with respect to the
Underlying Mortgage Loans underlying each Underlying Security.
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<PAGE>
Standard Hazard Insurance Policies
The following description is general and does not purport to be
complete. In general, coverage under standard hazard insurance policies
("Standard Hazard Insurance Policies") varies among insurers.
The Underlying Agreements generally require the Underlying Servicer to
cause to be maintained with respect to each Underlying Mortgage Loan one or more
Standard Hazard Insurance Policies. Each such policy will provide, at a minimum,
the same coverage as that provided by a standard fire and extended coverage
insurance policy that is customary for residential housing and issued by a
company authorized to issue such policies in the state in which the related
Mortgaged Property is located. Because the Standard Hazard Insurance Policies
relating to the Underlying Mortgage Loans are underwritten by different insurers
and cover Mortgaged Properties located in various states, such policies do not
contain identical terms and conditions. The basic terms, however, generally are
determined by state law and generally are similar. In general, the standard form
of fire and extended coverage policy covers physical damage to, or destruction
of, the improvements on the related Mortgaged Property caused by fire,
lightning, explosion, smoke, windstorm, hail, riot, strike and civil commotion,
subject to the conditions and exclusions specific to each policy.
Most Standard Hazard Insurance Policies provide coverage in an amount
at least equal to the lesser of (l) the maximum insurable value of the Mortgaged
Property or (2) the principal balance due from the borrower on the related
Underlying Mortgage Loan, and in any event in an amount sufficient to avoid the
application of any co-insurance clause contained in the policy.
Any losses incurred with respect to Underlying Mortgage Loans due to
uninsured risks (including earthquakes, mudflows and floods) or insufficient
hazard insurance proceeds may affect payments with respect to securities of the
related Underlying Series, including the Underlying Securities, which may in
turn affect payments with respect to the Certificates.
SERVICING OF THE UNDERLYING MORTGAGE LOANS
The Underlying Servicers
Various servicers and master servicers (each, an "Underlying Servicer")
provide customary servicing functions with respect to the Underlying Mortgage
Loans pursuant to the Underlying Agreements entered into with the Underlying
Trustees for the related Underlying Series in exchange for a servicing fee (the
"Servicing Fee"). The Servicing Fee for each Underlying Servicer equals an
amount equal to the product of (i) the outstanding principal balance of the
related Underlying Mortgage Loans and (ii) a percentage which ranges generally
from 0.125% to 2.375%. Many Underlying Servicers are entitled to additional
servicing compensation, such as penalties and late payment or assignment fees.
The servicing compensation generally will be retained by the Underlying
Servicers out of collections of interest on the Underlying Mortgage Loans prior
to any distribution of such collections on the Underlying Securities. Annex I
attached hereto sets forth the Servicing Fee or range of Servicing Fees for each
Underlying Security. By subtracting the NWAC from the GWAC, each as set forth in
such Annex I, the weighted average of the total fees with respect to the
Underlying Series relating to each Underlying Security can be determined.
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<PAGE>
The duties to be performed by the Underlying Servicers include
collection and remittance of principal and interest payments on the Underlying
Mortgage Loans, administration of mortgage escrow accounts, collection of
insurance claims, foreclosure procedures, and, if necessary, the advance of
funds to the extent certain payments are not made by the borrowers and are
considered to be recoverable under applicable insurance policies or from
Liquidation Proceeds of certain other collections on such Underlying Mortgage
Loan. Each Underlying Servicer also provides such accounting and reporting
services as are necessary to provide required information to the related
Underlying Trustee with respect to the Underlying Mortgage Loans.
Some of the Underlying Agreements provide that the Underlying Servicer
is authorized to employ subservicers to service the related Underlying Mortgage
Loans directly, although the Underlying Servicer generally will remain liable
for its servicing obligations under the related Underlying Agreement.
Concentrations of Underlying Servicers and Underlying Trustees
The Underlying Mortgage Loans are serviced by a number of different
Underlying Servicers and the Pooled Securities and Resecuritized Certificates
have a number of different Underlying Trustees. No Servicer services greater
than 10% by principal balance of the Underlying Mortgage Loans except for
Glendale Federal Bank, Federal Savings Bank, Residential Funding Corporation, GE
Capital Mortgage Services, Inc., Norwest Bank Minnesota, National Association
combined with Norwest Mortgage, Inc., and Citicorp Mortgage, Inc. which service
approximately 26.26%, 14.12%, 13.47%, 11.10% and 10.27% of the outstanding
principal balance of the Underlying Mortgage Loans, respectively. No Underlying
Trustee is the trustee with respect to greater than 10% of the Pooled Securities
by Pooled Security Principal Balance except for State Street Bank and Trust
Company, First Trust National Association, The Bank of New York and Bankers
Trust Company which are the Underlying Trustees for approximately 27.58%,
25.16%, 15.46% and 13.38% of the Pooled Securities (by Pooled Security Principal
Balance), respectively. See Annex I attached hereto which sets forth the
Underlying Servicer and the Underlying Trustee with respect to each Underlying
Series, "Servicing of the Underlying Mortgage Loans" herein and Annex III
attached hereto for certain statistics with respect to each entity (treating
Norwest Bank Minnesota, National Association and Norwest Mortgage, Inc. as a
single entity) which serves as Underlying Servicer for more than 10% of the
Underlying Mortgage Loans. From time to time the Underlying Servicer with
respect to any of the Pooled Securities may change. Any transfers of servicing
may have the effect of temporarily interrupting the servicing on the related
Underlying Mortgage Loans. Any such interruptions may result in higher
delinquencies.
Servicing Advances
Prior to each Pooled Security Distribution Date or distribution date
for the Resecuritized Certificates, as applicable, the Underlying Servicer is,
and any successor servicer will be, obligated to make an advance (a "P&I
Advance") in respect of any delinquent payment on any related Underlying
Mortgage Loan that was due on the related due date unless such advance is deemed
"non-recoverable" from late collections from the related borrower or from
Liquidation Proceeds or certain other collections. In addition, the Underlying
Servicers are required to make advances ("Servicing Advances" and together with
P&I Advances, "Advances") in respect of liquidation expenses and certain taxes
and insurance premiums not paid by a borrower on a timely basis, to the extent
the Underlying Servicer deems such Servicing Advances recoverable out of
Liquidation Proceeds or from certain other collections. P&I Advances and
Servicing Advances generally are reimbursable to the Underlying Servicers.
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Any failure by an Underlying Servicer to make any required advance
generally will constitute an Event of Default under the applicable Underlying
Agreement, for which the Underlying Servicer generally could be terminated. If
an Underlying Servicer fails to make a required advance of principal and
interest, the Underlying Trustee with respect to most Underlying Series may be
obligated to make such advance. Neither the Underlying Servicer nor the
Underlying Trustee will be required to make an advance of principal and interest
that it deems non-recoverable.
Compensating Interest
If an Underlying Mortgage Loan is prepaid in full or liquidated other
than on a Due Date, the borrower generally is required to pay interest only to
the date of prepayment or liquidation. In such event the Underlying Servicer,
with respect to Underlying Mortgage Loans relating to approximately 89.52% of
the Pooled Securities (by Pooled Security Principal Balance), is obligated to
pay interest from the last day for which interest is due from the borrower to
the next Due Date ("Compensating Interest"). Each such Underlying Servicer's
obligation is limited to the amount of its monthly servicing fee or a portion
thereof, or is limited to prepayments in full and other liquidations in full.
Annex I attached hereto lists the Underlying Series for which the related
Underlying Servicer is not obligated to pay Compensating Interest and any
maximum limitations on required compensating interest payments. Accordingly, to
the extent Compensating Interest is not covered by payments by the related
Underlying Servicer or any available Underlying Security Credit Support or
otherwise, there may be shortfalls in interest distributions on the applicable
Resecuritized Certificates on a related distribution date and on Pooled
Securities on a Pooled Security Distribution Date, and hence amounts available
to make interest payments on the Certificates on a Distribution Date. See "Yield
and Prepayment Considerations" herein.
YIELD AND PREPAYMENT CONSIDERATIONS
General
The yield to maturity and weighted average life of each Class of
Certificates will depend on the characteristics of, and the amount, rate and
timing of principal and interest payments on, the Underlying Securities, the
allocation of such payments and losses among the various classes of securities
of each Underlying Series and the occurrence of optional terminations with
respect to the Underlying Trusts. Investors should carefully consider the
associated risks, discussed under the headings "Yield and Prepayment
Considerations" and "Legal Investment" in the "Summary of Terms" herein and
under the headings "Yield and Prepayment Considerations" and "Legal Investment"
in the Prospectus.
Assumed Final Distribution Dates
The "Assumed Final Distribution Date" for distributions on each Class of
Certificates is May 2, 2030. The Assumed Final Distribution Date is
approximately one month after the Pooled Security Distribution Date on which the
final scheduled distribution on the last to mature of the related Pooled
Securities is scheduled to be made. Since the rate of payment of principal on
the Underlying Mortgage Loans can be expected to exceed the rate of payments
used in calculating each such final scheduled distribution, the date of the
final distribution on each class of Certificates is expected to be earlier, and
could be substantially earlier, than the Assumed Final Distribution Date.
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<PAGE>
Weighted Average Lives
The weighted average life of a security refers to the average amount of
time that will elapse from the date of its issuance until each dollar of
principal of such security will be distributed to the investor. The weighted
average life of a Certificate is determined by (a) multiplying the amount of the
reduction, if any, of the Certificate Principal Balance or Notional Amount of
such Certificate from one Distribution Date to the next Distribution Date by the
number of years from the date of issuance to the second such Distribution Date,
(b) summing the results and (c) dividing the sum by the aggregate amount of the
reductions in the Certificate Principal Balance or Notional Amount of such
Certificate referred to in clause (a). The weighted average lives of the
Certificates will be influenced by, among other factors, the rate at which
principal is paid on the related Underlying Mortgage Loans. Principal payments
of Underlying Mortgage Loans may be in the form of scheduled amortization or
prepayments including as a result of foreclosure proceedings or by virtue of the
purchase of an Underlying Mortgage Loan in advance of its stated maturity as
required or permitted by the related Underlying Agreement. In general, the
Underlying Mortgage Loans may be prepaid by the borrowers at any time without
payment of any prepayment fee or penalty. The actual weighted average life and
term to maturity of each Class of Certificates, in general, will be shortened if
the level of such prepayments of principal increases.
SPA Model
Prepayments on mortgage loans are commonly measured relative to a
prepayment standard or model. The standard prepayment assumption model used in
this Prospectus Supplement ("SPA") represents an assumed rate of prepayment each
month of the then outstanding principal balance of a pool of new mortgage loans.
SPA does not purport to be either a historical description of the prepayment
experience of any pool of mortgage loans or a prediction of the anticipated rate
of prepayment of any pool of mortgage loans, including the Underlying Mortgage
Loans. 100% SPA assumes prepayment rates of 0.2% per annum of the then
outstanding principal balance of such mortgage loans in the first month of the
life of the mortgage loans and an additional 0.2% per annum in each month
thereafter (for example 0.4% per annum in the second month) until the thirtieth
month. Beginning in the thirtieth month and in each month thereafter during the
life of the mortgage loans, 100% SPA assumes a CONSTANT prepayment rate of 6%
per annum. Multiples will be calculated from this prepayment rate series; for
example, 250% SPA assumes prepayment rates will be 0.50% per annum in month one,
1.00% per annum in month two, reaching 15.00% per annum in month 30 and
remaining CONSTANT at 15.00% per annum thereafter. 0% SPA assumes no
prepayments.
Pricing Assumption
The Certificates were structured assuming, among other things, a
prepayment assumption of 250% SPA. The prepayment assumptions to be used for
pricing purposes for the respective Classes may vary as determined at the time
of sale. The actual rate of prepayment may vary considerably from the rate used
for any prepayment assumption.
Decrement and Weighted Average Life Tables
The following tables indicate the percentages of the original
Certificate Principal Balance or Notional Amount of each Class of Certificates
outstanding after certain dates and the weighted average lives (in years) of
each Class of Certificates, assuming various constant percentages of SPA.
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<PAGE>
For each of the following tables it was assumed, among other things,
that (i) the Trust consists of the Pooled Securities in the principal amounts as
of the Pooled Security Information Date described on Annex I attached hereto
after giving effect to distributions payable thereon in February 1998; (ii) the
principal balance of each Underlying Mortgage Loan is as of the Mortgage Loan
Information Date and is based on information contained in the related Pooled
Security Distribution Date Statements for February 1998; (iii) the original
Certificate Principal Balance of each class of Certificates will be as set forth
herein; (iv) Distribution Dates on the Certificates occur on the 5th Business
Day after the 25th day of each month, assuming for this purpose that every
calendar day is a Business Day, commencing March 30, 1998; (v) each Underlying
Mortgage Loan has a mortgage rate, remaining term to maturity and loan age based
on information provided by the Underlying Trustees, paying agents or Underlying
Servicers as of the Mortgage Loan Information Date or in the case of the
approximately 5% of aggregate outstanding principal balance of the Underlying
Mortgage Loans for which loan-by-loan information was not available, aggregate
information as set forth in Annex I attached hereto; (vi) the Underlying
Mortgage Loans prepay at the constant percentages of SPA specified in the tables
and all principal prepayments constitute prepayments in full of the Underlying
Mortgage Loans and are received on the last day of each month commencing
February 28, 1998; (vii) all amounts due with respect to the Underlying Mortgage
Loans underlying the Pooled Securities are applied to the payment of such Pooled
Securities on the applicable Pooled Security Distribution Dates, assuming that
all calendar days are business days; (viii) there have occurred no delinquencies
or losses on the Underlying Mortgage Loans after the time period covered by the
Pooled Security Distribution Date Statements for February 1998; (ix) there are
no optional terminations of the Underlying Securities; (x) the Closing Date is
March 27, 1998; (xi) each month consists of 30 days; (xii) no reinvestment
income will be earned on funds in the Certificate Account in excess of that paid
to the Trustee; (xiii) no expenses will be paid on any Distribution Date by the
Trust; (xiv) scheduled monthly payments of principal and interest on the
Underlying Mortgage Loans will be timely received on the first day of the month,
commencing March 1998 and (xv) distributions and Pooled Security Distribution
Date Statements relating to each Pooled Security are received by the
Determination Time in each month and there are no Supplemental Distribution
Dates.
Discrepancies will exist between the characteristics of the actual
Pooled Securities and the Underlying Mortgage Loans and characteristics of the
Pooled Securities and the Underlying Mortgage Loans assumed in preparing the
tables. To the extent that the Pooled Securities and the Underlying Mortgage
Loans have characteristics which differ from those assumed in preparing the
tables, the Certificates may mature earlier or later than indicated by the
tables.
Based on the foregoing assumptions, the tables below indicate the
weighted average life of each Class of Offered Certificates and set forth the
percentages of the initial Certificate Principal Balance or Notional Amount of
each such Class that would be outstanding after the Distribution Date deemed to
be in March of each of the years indicated, assuming that the Underlying
Mortgage Loans prepay at the percentage of SPA indicated therein. Neither SPA
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 Underlying Mortgage
Loans. Variations in the actual prepayment experience and the balance of the
Underlying Mortgage Loans that prepay may increase or decrease the percentage of
initial Certificate Principal Balance or Notional Amount (and weighted average
life) shown in the following tables. Such variations may occur even if the
average prepayment experience of all such Underlying Mortgage Loans equals any
of the specified percentages of SPA.
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<PAGE>
Percentage of Original Certificate Principal Balance or Notional Amount
Outstanding
<TABLE>
Class A, B, C D, E, F, G and X** Class R-1 and Class R-2
Certificates Certificates
------------ ------------
% of SPA % of SPA
-------- --------
<CAPTION>
100% 200% 250% 300% 500% 100% 200% 250% 300% 500%
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage 100 100 100 100 100 100 100 100 100 100
February 1999 99 98 98 98 97 0 0 0 0 0
February 2000 96 94 93 92 89 0 0 0 0 0
February 2001 92 88 86 85 77 0 0 0 0 0
February 2002 87 81 77 74 64 0 0 0 0 0
February 2003 82 72 68 64 50 0 0 0 0 0
February 2004 76 64 58 53 38 0 0 0 0 0
February 2005 70 55 49 44 27 0 0 0 0 0
February 2006 64 48 41 36 19 0 0 0 0 0
February 2007 59 41 34 29 13 0 0 0 0 0
February 2008 53 35 28 23 9 0 0 0 0 0
February 2009 48 29 23 18 6 0 0 0 0 0
February 2010 44 25 19 14 4 0 0 0 0 0
February 2011 39 21 15 11 3 0 0 0 0 0
February 2012 35 18 12 9 2 0 0 0 0 0
February 2013 31 15 10 7 1 0 0 0 0 0
February 2014 27 12 8 5 1 0 0 0 0 0
February 2015 24 10 6 4 1 0 0 0 0 0
February 2016 20 8 5 3 * 0 0 0 0 0
February 2017 17 6 4 2 * 0 0 0 0 0
February 2018 14 5 3 2 * 0 0 0 0 0
February 2019 11 4 2 1 * 0 0 0 0 0
February 2020 9 3 1 1 * 0 0 0 0 0
February 2021 6 2 1 1 * 0 0 0 0 0
February 2022 4 1 1 * * 0 0 0 0 0
February 2023 2 1 * * * 0 0 0 0 0
February 2024 1 * * * * 0 0 0 0 0
February 2025 1 * * * * 0 0 0 0 0
February 2026 * * * * * 0 0 0 0 0
February 2027 * * * * * 0 0 0 0 0
February 2028 0 0 0 0 0 0 0 0 0 0
Weighted Average Life
(in years)*** 11.6 8.8 7.9 7.2 5.5 0.01 0.01 0.01 0.01 0.01
</TABLE>
- ------------------------
* Indicates an outstanding balance greater than 0% and less than 0.5% of the
original Certificate Principal Balance or Notional Amount.
** Notional Amount.
*** The weighted average life of a Certificate is determined by (a) multiplying
the amount of the reduction, if any, of the principal balance or notional
amount of such Certificate from one Distribution Date to the next
Distribution Date by the number of years from the date of issuance to the
second such Distribution Date, (b) summing the results and (c) dividing the
sum by the aggregate amount of the reductions in the principal balance or
notional amount of such Certificate.
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<PAGE>
Yield on the Class X Certificates
The significance of the effects of prepayments on the Class X
Certificates is illustrated in the following table entitled "Sensitivity of the
Class X Certificates to Prepayments," which shows the pre-tax yield (on a
corporate bond equivalent basis) to holders of the Class X Certificates under
different constant percentages of SPA. The yields of such Certificates set forth
in the following table were calculated using the assumptions specified above
under "--Decrement and Weighted Average Life Tables" and assuming that the
purchase price of the Class X Certificates is approximately 2.00%, including
accrued interest and such Class X Certificates are purchased on March 27, 1998.
As indicated in the following table, the yield to investors in the
Class X Certificates will be highly sensitive to the rate of principal payments
(including prepayments) of the Underlying Mortgage Loans (especially those
Underlying Mortgage Loans with high interest rates), which generally can be
prepaid at any time and prepayments allocated to Resecuritized Certificates with
relatively high pass-through rates.
It is not likely that the Underlying Mortgage Loans will prepay at a
constant rate until maturity or that all of the Underlying Mortgage Loans will
prepay at the same rate or that they will have the characteristics assumed.
There can be no assurance that the Underlying Mortgage Loans will prepay at any
of the rates shown in the table or at any other particular rate. The timing of
changes in the rate of prepayments may affect significantly the yield realized
by a holder of a Class X Certificate and there can be no assurance that the
pre-tax yield to an investor in the Class X Certificates will correspond to any
of the pre-tax yields shown herein. Each investor must make its own decision as
to the appropriate prepayment assumptions to be used in deciding whether or not
to purchase a Class X Certificate.
<TABLE>
<CAPTION>
Sensitivity of the Class X Certificates to Prepayments
(Pre-Tax Yields to Maturity)
% of SPA
------------------------------------------------------
100% 200% 250% 300% 500%
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Class X Certificates 18.2% 14.8% 13.2% 11.7% 5.9%
</TABLE>
<PAGE>
The yields set forth in the preceding table were calculated by
determining the monthly discount rates which, when applied to the assumed stream
of cash flow to be paid on the Class X Certificates, would cause the discounted
present value of such assumed stream of cash flow to equal the assumed purchase
price of the Class X Certificates (plus accrued interest) and converting such
monthly rates to corporate bond equivalent rates. Such calculation does not take
into account variations that may occur in the interest rates at which investors
may be able to reinvest funds received by them as payments of interest on the
Class X Certificates and consequently does not purport to reflect the return on
any investment in the Class X Certificates when such reinvestment rates are
considered.
Actual Experience Will Vary From Assumptions
Discrepancies will exist between the characteristics of the actual
Pooled Securities and Underlying Mortgage Loans and characteristics of the
Pooled Securities and Underlying Mortgage Loans assumed in preparing the tables
contained herein. To the extent that Pooled Securities and Underlying Mortgage
Loans have characteristics which differ from those assumed in preparing the
tables, each Class of Certificates may mature earlier or later than indicated by
the tables, and the weighted average life on
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<PAGE>
each such Class of Certificates may also differ. In addition, it is unlikely
that the Underlying Mortgage Loans will prepay at any constant rate. The timing
of changes in the rate of prepayment may significantly affect the yield realized
by a holder of Certificates.
THE POOLING AGREEMENT
General
The Certificates will be issued pursuant to a Pooling Agreement between
the Seller, as the seller, and The Bank of New York, as the Trustee (the
"Agreement" ). The Seller will provide to a prospective or actual
Certificateholder without charge, upon written request, a copy (without
exhibits) of the Agreement. Requests should be addressed to Bear Stearns
Mortgage Securities Inc., 245 Park Avenue, New York, New York 10167.
Assignment of Pooled Securities
At the time of issuance of the Certificates, the Seller will cause the
Pooled Securities to be assigned to the Trustee and will assign to the Trustee
certain of its rights under the agreement pursuant to which it purchased the
Pooled Securities from the SunAmerica Parties including the benefit of certain
representations and warranties of the SunAmerica Parties and the remedies
provided for therein for any breach thereof. The SunAmerica Parties will
represent, among other things, that as of the Closing Date (i) each is the owner
of the Pooled Securities transferred by it free and clear of any lien or adverse
interests of any person and (ii) that each has acquired its ownership in the
Pooled Securities transferred by it in good faith without notice of any adverse
claim.
Upon discovery or receipt of notice by either the Seller or the Trustee
of a breach of any of the representations and warranties regarding the Pooled
Securities which materially and adversely affects the interests of the
Certificateholders, the Seller or the Trustee, the party discovering such breach
will give prompt notice to the other and to the SunAmerica Parties. Within
thirty days of the earlier of either discovery by or notice to the SunAmerica
Parties of any such breach, the applicable SunAmerica Party has agreed to use
its best efforts promptly to cure such breach in all material respects and, if
such breach cannot be cured, such SunAmerica Party shall, repurchase each Pooled
Security affected by the breach, each at a repurchase price equal to the
outstanding Pooled Security Principal Balance thereof as of the date of
repurchase plus interest thereon at the applicable Pooled Security Interest
Rates through the next succeeding Pooled Security Distribution Date unless the
repurchase is made on a Pooled Security Distribution Date, then interest through
such date (net of interest received by the Trust on such Pooled Securities on
such date).
Notwithstanding the foregoing, for a period of two years following the
Closing Date, in lieu of repurchasing Pooled Securities as described above, the
SunAmerica Parties may substitute therefor one or more pass-through mortgage
related securities issued by the same depositor or the Government National
Mortgage Association ("GNMA"), the Federal National Mortgage Association
("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC") (each, a
"Substitute Pooled Security") which meet the following criteria: (i) the
Substitute Pooled Securities have a fixed interest rate no lower than the Pooled
Security Interest Rate of the related Pooled Security at the time of
substitution, (ii) the sum of the outstanding principal amounts of the
Substitute Pooled Securities equals or exceeds the sum of the outstanding Pooled
Security Principal Balances of the Pooled Securities being substituted for and
(iii) for any Pooled Security being substituted for, the Substitute Pooled
Security as of the date
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of substitution, (a) has Underlying Mortgage Loans with a weighted average gross
coupon no more than 50 basis points below or no more than 50 basis points above
the weighted average gross coupon of the Underlying Mortgage Loans relating to
the Pooled Security being substituted for, (b) has Underlying Mortgage Loans
consisting of conventional, fixed rate, one- to four-family, fully amortizing,
level payment, first lien mortgage loans with original maturities of up to 30
years, (c) if not issued by GNMA, FNMA or FHLMC, is rated as of the date of
substitution in at least the same rating category by a nationally recognized
statistical rating agency as the Pooled Security being substituted for is rated
as of the date of substitution, (d) the inclusion of which in the Trust will not
result in a withdrawal or downgrading in the ratings assigned to the
Certificates by Moody's, written confirmation of which shall be provided by
Moody's to the Trustee and (e) will not cause REMIC I or REMIC II to lose its
status as a REMIC for federal income tax purposes as indicated in an opinion of
counsel to be provided to the Trustee.
Certificate Account
The Trustee shall establish and maintain in the name of the Trustee,
for the benefit of the Certificateholders, an account (the "Certificate
Account") which shall meet the requirements for an Eligible Account as set forth
in the Agreement (an "Eligible Account"). The Trustee will cause all
distributions received on the Pooled Securities by the Trustee in its capacity
as holder of the Pooled Securities, from whatever source, to be deposited
directly into the Certificate Account. Amounts on deposit in the Certificate
Account will be invested in certain investments permitted by the Agreement
("Permitted Investments"). Eighty percent of any investment income on amounts
deposited into the Certificate Account from the 25th day of each month to the
Determination Time will be paid to the Trustee on each Distribution Date as
compensation for its services and losses on such investments shall be reimbursed
by the Trustee from its own funds, and the remaining investment income will be
paid to the holder of the Class R-2 Certificate. Additionally, eighty percent of
any investment income on amounts deposited into the Certificate Account from the
Determination Time to the Supplemental Determination Time will be paid to the
Trustee on each Distribution Date as compensation for its services and losses on
such investments shall be reimbursed by the Trustee from its own funds, and the
remaining investment income will be paid to the holder of the Class R-2
Certificate. Any additional investment income will be paid to the holder of the
Class R-2 Certificate.
Reports to Certificateholders
On each Distribution Date, the Trustee will prepare, and will forward
by mail, a statement to each Certificateholder and to the Seller stating:
(i) the Available Funds for such Distribution Date separately
stating available interest and available principal;
(ii) the amount of interest being distributed on each Class of
Certificates for such Distribution Date and the Certificate
Rates constituted thereby;
(iii) the amount of reinvestment income distributed to the Class R-2
Certificate;
(iv) the amount of principal being distributed on each Class of
Certificates (other than the Class X Certificates) for such
Distribution Date separately listing the amount of Additional
Principal paid to the most senior Class or Classes;
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(v) the amount added to or subtracted from the Class Deferred
Principal with respect to each Class of Certificates on such
Distribution Date and the Class Deferred Principal with
respect to each Class of Certificates immediately following
such Distribution Date;
(vi) the Loss Amounts allocated to the most junior Class or Classes
of Certificates on such Distribution Date and since the
Closing Date;
(vii) the Certificate Principal Balances for each Class of
Certificates before and after applying payments and allocating
the Loss Amount on such Distribution Date;
(viii) the aggregate Pooled Security Principal Balance immediately
following the second preceding Pooled Security Distribution
Dates; and
(ix) the aggregate Pooled Security Principal Balance immediately
following the immediately preceding Pooled Security
Distribution Dates.
In the case of the information furnished pursuant to clauses (ii) and (iv)
above, the amounts shall also be expressed as a dollar amount per $1,000
Certificate.
In addition, the Trustee promptly will furnish to the Seller,
SunAmerica Inc. and, upon request, to each Certificateholder, at the expense of
such Certificateholder, copies of any notices, statements, reports or other
information, including, without limitation, the Pooled Security Distribution
Date Statements received by the Trustee in its capacity as the holder of the
Pooled Securities.
On each Supplemental Distribution Date, the Trustee will prepare, and
will forward by mail, a statement to each Certificateholder and to the Seller
stating (i) the information described above relating to Distribution Dates, (ii)
the sum of the amount of interest being distributed on each Class of
Certificates for such Supplemental Distribution Date and the immediately
preceding Distribution Date and the new Certificate Rates constituted thereby
and (iii) the information contained in the Distribution Date Statement with
respect to the preceding Distribution Date, presented on a combined basis with
the information contained in clause (i).
On or before March 31st of each calendar year, commencing in 1999, the
Trustee will prepare and deliver by first class mail to the Seller and each
person who at any time during the prior calendar year was a Certificateholder of
record a statement containing the information required to be contained in the
regular monthly report to Certificateholders, as set forth in clause (ii), (iii)
and (iv) above and the comparable amounts with respect to Supplemental
Distribution Dates aggregated for such prior calendar year or in the case of a
Certificateholder, the applicable portion thereof during which such person was a
Certificateholder. Such obligation of the Trustee will be satisfied to the
extent that substantially comparable information is provided by the Trustee
pursuant to any requirements of the Code, and regulations thereunder as from
time to time are in force.
Amendments
The Agreement may be amended by the Seller and the Trustee, without the
prior written consent of any Certificateholder (i) to cure any ambiguity or
mistake, (ii) to correct or supplement any provision therein which may be
inconsistent with any other provision therein, (iii) to make any other
provisions with respect to matters or questions arising under the Agreement that
are not materially inconsistent with other provisions of the Agreement and (iv)
to make such modifications as may be required or permitted
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in connection with a substitution or repurchase of a Pooled Security permitted
under the Agreement; provided, however, that such amendment will not, as
evidenced by an opinion of counsel delivered to the Trustee, adversely affect in
any material respect the interests of any Certificateholder. In addition, the
Agreement may be amended to modify, eliminate or add to any of its provisions to
such extent as may be necessary to maintain the qualification of REMIC I and
REMIC II as REMICs for federal income tax purposes, provided that the Trustee
has received an opinion of counsel to the effect that such action is necessary
or helpful to maintain such qualification. The Agreement may also be amended by
the Seller and the Trustee and the holders of Certificates evidencing more than
50% of the aggregate Certificate Principal Balances of the Certificates (as
applicable, the "Majority Certificateholders") for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Agreement or modifying in any manner the rights of Certificateholders;
provided, however, that no such amendment may (i) reduce in any manner the
amount of, or delay the timing of, amounts required to be distributed on any
Certificate without the consent of the holder of such Certificate; (ii) modify
the provisions of the section of the Agreement governing amendments of the
Agreement, without the consent of the holders of all Certificates; or (iii) be
made unless the Trustee has received an opinion of counsel (at the expense of
the party seeking such amendment) that such amendment will not adversely affect
the status of REMIC I and REMIC II as REMICs for federal income tax purposes.
Action With Respect to Underlying Series
The Trustee will exercise all voting rights provided to the holders of
the Pooled Securities pursuant to an Underlying Agreement (in the case of
book-entry Pooled Securities, by directing Cede & Co.) solely upon the direction
of the Majority Certificateholders.
Certificateholder Action
No Certificateholder will have any right to institute any action, suit
or proceeding in equity or at law upon or under or with respect to the Agreement
unless such holder previously has given to the Trustee and the Seller a written
notice of default and unless also the Majority Certificateholders have made
written request upon the Trustee to institute such action, suit or proceeding in
its own name as Trustee thereunder and have offered to the Trustee such
reasonable indemnity as the Trustee may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee, for 30 days
after its receipt of such notice, request and offer of indemnity, will have
neglected or refused to institute any such action, suit or proceeding.
Termination
The respective obligations and responsibilities of the Seller and the
Trustee created by the Agreement will terminate upon the final distribution to
Certificateholders by the Trustee of all amounts required to be distributed
pursuant to the Agreement. The Trust may also be terminated and the Certificates
retired on any Distribution Date upon the Seller's determination, based upon an
opinion of counsel, that the real estate mortgage investment conduit status of
either of the REMICs has been lost or that a substantial risk exists that such
status will be lost for the then current taxable year, in which case, the Seller
has the right to purchase the Pooled Securities.
Indemnification of the Trustee
The Trustee and its directors, officers, employees and agents, will be
indemnified by the Trust against any loss, liability or expense arising out of
or incurred in connection with, the exercise and
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performance of any powers and duties of the Trustee under the Agreement, with
certain exceptions described in the Agreement. The Trustee and its directors,
officers, employees and agents will not be protected against any liability which
would otherwise be imposed by reason of willful misfeasance, bad faith or
negligence in the performance of the obligations and duties of the Trustee.
Certain Matters Regarding the Trustee
The Trustee for the Certificates will be The Bank of New York. The
Trustee's corporate office is located at 101 Barclay Street, 12E, New York, New
York 10286, Attention: Mortgage Backed Securities Group, and its telephone
number is (212) 815-2297.
The Trustee may at any time resign and be discharged from the trust by
giving 30 days' written notice thereof to the Seller and the Certificateholders.
Upon receiving such notice of resignation, the Seller shall promptly appoint a
successor trustee. If no successor trustee has been so appointed and has
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee. If at any time the
Trustee fails to meet the eligibility requirements or is incapable of acting, or
certain insolvency events occur, then the Seller shall remove the Trustee and
appoint a successor trustee. The Majority Certificateholders may at any time
remove the Trustee and appoint a successor trustee. No resignation, discharge or
removal of the Trustee will become effective until a successor trustee shall
have assumed the Trustee's responsibilities and obligations under the Agreement.
FEDERAL INCOME TAX CONSIDERATIONS
An election will be made to treat the Pooled Securities, the
Certificate Account and certain other assets owned by the Trust as a REMIC
("REMIC II") for federal income tax purposes. REMIC II will issue "regular
interests" and one "residual interest." An election will be made to treat the
"regular interests" in REMIC II and certain other assets owned by the Trust as a
REMIC ("REMIC I"). The Certificates (other than the Class R-1 and Class R-2
Certificates) will be designated as regular interests in REMIC I and are herein
referred to as "Regular Certificates" or "REMIC Regular Certificates." The Class
R-2 Certificate will be designated as the residual interest in REMIC II and the
Class R-1 Certificate will be designated as the residual interest in REMIC I
(collectively, the "Residual Certificates" or the "REMIC Residual
Certificates"). All Certificateholders are advised to see "Certain Federal
Income Tax Consequences" in the Prospectus for a discussion of the anticipated
federal income tax consequences of the purchase, ownership and disposition of
the REMIC Regular Certificates and the REMIC Residual Certificates.
Because the REMIC Regular Certificates will be considered REMIC regular
interests, they generally will be taxable as debt obligations under the Internal
Revenue Code of 1986, as amended (the "Code"), and interest paid or accrued on
the Regular Certificates, including original issue discount with respect to any
Regular Certificates issued with original issue discount, will be taxable to
Certificateholders in accordance with the accrual method of accounting. The
Class X Certificates will be issued with original issue discount. Some or all of
the other Classes of Regular Certificates may also be subject to the original
issue discount provisions. See "Certain Federal Income Tax Consequences--REMIC
Regular Certificates--Current Income on REMIC Regular Certificates--Original
Issue Discount" in the Prospectus. All purchasers of REMIC Regular Certificates
are urged to consult their tax advisors for advice regarding the effect, if any,
of the tax provisions of the Code and Treasury regulations relating to original
issue discount on the purchase of the Regular Certificates. The prepayment
assumption that
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will be used in determining the rate of accrual of original issue discount with
respect to the Certificates is 250% SPA. The prepayment assumption represents a
rate of payment of unscheduled principal on a pool of mortgage loans, expressed
as an annualized percentage of the outstanding principal balance of such
mortgage loans at the beginning of each period. See "Yield and Prepayment
Considerations--SPA Model" herein for a description of the prepayment assumption
model used herein. However, no representation is made as to the rate at which
prepayments actually will occur. In addition, other Classes of Regular
Certificates may be treated as having been issued at a premium. See "Certain
Federal Income Tax Consequences--REMIC Regular Certificates--Premium" in the
Prospectus.
The Residual Certificates generally will not be treated as evidences of
indebtedness for federal income tax purposes. Instead, the Residual Certificates
will be considered as residual interests in a REMIC, representing rights to the
taxable income or net loss of REMIC I (in the case of the Class R-1
Certificates) or REMIC II (in the case of the Class R-2 Certificates). Holders
of the Residual Certificates will be required to report and will be taxed on
their pro rata share of such income or loss, and such reporting requirements
will continue until there are no Certificates of any Class outstanding, even
though holders of Residual Certificates previously may have received full
payment of any stated interest and principal. The taxable income of holders of
the Residual Certificates attributable to the Residual Certificates may exceed
any principal and interest payments received by such Certificateholders during
the corresponding period, which would result in a negligible (or even negative)
after-tax return, in certain circumstances.
The Offered Certificates (including the Residual Certificates) will be
treated as "regular" or "residual interests in a REMIC" for domestic building
and loan associations, and "real estate assets" for real estate investment
trusts ("REITs"), subject to the limitations described in "Certain Federal
Income Tax Consequences--REMIC Certificates--Status of REMIC Certificates" in
the Prospectus. Similarly, interest on such Certificates will be considered
"interest on obligations secured by mortgages on real property" for REITs,
subject to the limitations described in "Certain Federal Income Tax
Consequences--REMIC Certificates--Status of REMIC Certificates" in the
Prospectus.
CERTAIN STATE TAX CONSIDERATIONS
Because the income tax laws of the states vary, it is impossible to
predict the income tax consequences to the Certificateholders in all of the
state taxing jurisdictions in which they are subject to tax. Certificateholders
are urged to consult their own advisors with respect to state income and
franchise taxes.
ERISA CONSIDERATIONS
The Certificates, or interests therein, may not be transferred to any
investor who is, or who is acquiring such Certificates directly or indirectly
for, on behalf of or with the assets of, an employee benefit plan or other
retirement arrangement subject to Title I of ERISA and/or Section 4975 of the
Code (each a "Plan") unless such investor is an insurance company and the source
of funds to be used by the investor to pay the purchase price of the
Certificates is funds held by the investor in an "insurance company general
account" (as defined in Section V(e) of Prohibited Transaction Class Exemption
95-60 ("PTCE 95-60") as published in 60 Fed. Reg. 35925 (July 12, 1995)) and the
investor reasonably believes, as of the date hereof, the amount of reserves and
liabilities for the general account contracts held by or on behalf of any Plan
(and any other Plan of the same employer or its affiliates (as defined in
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Section V(a)(1) of PTCE 95-60)) or by the same employee organization ) does not
exceed 10% of the total reserve and liabilities of such general account plus
surplus (such determination to be made in accordance with Section I(a) of PTCE
95-60). By acquiring a Certificate, the owner of a Book-Entry Certificate will
be deemed to have represented, and the holder of a Definitive Certificate will
be required to represent, that it meets one of the requirements set forth in the
immediately preceding sentence. Any such deemed or actual representation may be
relied upon by the Trustee in providing any representation, certification or
opinion of counsel required to be made to each Underlying Trustee with respect
to the acquisition of such Pooled Securities by, or with the assets of, any
Plan.
If any proposed transferee shall become a holder of a Certificate in
violation of these provisions, then the last preceding permitted transferee
shall be restored, to the extent permitted by law, to all rights as holder
thereof retroactive to the date of registration of such transfer of such
Certificate. The Trustee shall be under no liability to any person for any
registration or transfer of a Certificate that is not permitted or for making
any payments due on such Certificate to the holder or taking any other action
with respect to such holder under the Agreement. Any proposed transferee who
becomes a holder of a Certificate shall agree to indemnify (or, in the case of a
Book-Entry Certificate, shall be deemed to agree to indemnify) the Seller, the
Trustee, the Underlying Servicers, the SunAmerica Parties and each Underlying
Trustee against any loss, damage or penalty incurred as a result of the transfer
of any Certificate to such purposed transferee in violation of such
restrictions.
There can be no assurance that any Department of Labor exemption will
apply with respect to any particular Plan that acquires the Certificates or,
even if all the conditions specified therein were satisfied, that any such
exemption would apply to transactions involving the Trust. Prospective Plan
investors should consult with their legal counsel concerning the impact of ERISA
and the Code and the potential consequences to their specific circumstances
prior to making an investment in the Certificates. In addition, a Plan fiduciary
should consider its general fiduciary obligations under ERISA in determining
whether to purchase a Certificate on behalf of a Plan. Neither the Seller, the
Trustee, the Underwriter, the SunAmerica Parties nor any of their respective
affiliates will make any representation to the effect that the Certificates
satisfy all legal requirements with respect to the investment therein by Plans
generally or any particular Plan or to the effect that the Certificates are an
appropriate investments for Plans. See "Risk Factors--The Certificates--Lack of
Liquidity" herein.
LEGAL INVESTMENT
The Certificates will not constitute "mortgage related securities" for
---
purposes of the Secondary Mortgage Market Enhancement Act of 1984 ("SMMEA").
Accordingly, many institutions with legal authority to invest in comparably
rated securities secured by first lien mortgage loans may not be legally
authorized to invest in the Certificates. See "Legal Investment" herein and in
the Prospectus.
RESTRICTIONS ON PURCHASE AND TRANSFER OF THE RESIDUAL CERTIFICATES
The Residual Certificates are not offered for sale to any investor that
is a "disqualified organization" as described in "Certain Federal Income Tax
Consequences--Transfers of REMIC Residual Certificates--Tax on Disposition of
REMIC Residual Certificates" and "--Restrictions on Transfer; Holding by
Pass-Through Entities" in the Prospectus.
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The Residual Certificates may not be transferred without the prior
express written consent of holder of such Residual Certificate as "Tax Matters
Person" or by The Bank of New York, acting as agent for the Tax Matters Person.
The Tax Matters Person or its agent will not give its consent to any proposed
transfer to a disqualified organization. As a prerequisite to such consent to
any other transfer, the proposed transferee must provide the Tax Matters Person
and the Trustee with an affidavit that the proposed transferee is not a
disqualified organization (and, unless the Tax Matters Person or its agent
consents to the transfer to a person who is not a U.S. Person, an affidavit that
it is a U.S. Person (as defined below)). Notwithstanding the fulfillment of the
prerequisites described above, the Tax Matters Person or its agent may withhold
its consent to a transfer, but only to the extent necessary to avoid a risk of
REMIC disqualification or REMIC-level tax. In the event that legislation is
enacted which would subject the Trust to tax (or disqualify either REMIC I or
REMIC II as a REMIC) on the transfer of an interest in a Residual Certificate to
any other person or persons, the Tax Matters Person or its agent may, without
action on the part of holders, amend the Agreement to restrict or prohibit
prospectively such transfer. A transfer in violation of the restrictions set
forth herein may subject a Residual Certificateholder to taxation. See "Certain
Federal Income Tax Consequences--Transfers of REMIC Residual Certificates--Tax
on Disposition of REMIC Residual Certificates" and "--Restrictions on Transfer;
Holding by Pass-Through Entities" in the Prospectus. Moreover, certain transfers
of the Residual Certificates that are effective to transfer legal ownership may
nevertheless be ineffective to transfer ownership for federal income tax
purposes, if at the time of the transfer the Residual Certificate represents a
"non-economic residual interest" as defined in the REMIC Regulations and if
avoiding or impeding the assessment or collection of tax is a significant
purpose of the transfer. See "Certain Federal Income Tax Consequences--Transfers
of REMIC Residual Certificates" and "--Restrictions on Transfer; Holding by
Pass-Through Entities" in the Prospectus. Further, unless the Tax Matters Person
or its agent consents in writing (which consent may be withheld in the Tax
Matters Person's or its agent's sole discretion), the Residual Certificates
(including a beneficial interest therein) may not be purchased by or transferred
to any person who is not a "United States person," as such term is defined in
Section 7701(a)(30) of the Code (a "U.S. Person").
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Offered Certificates are being purchased from the Seller by the
Underwriter upon issuance. The Underwriter is an affiliate of the Seller.
Distribution of such Certificates will be made from time to time in negotiated
transactions or otherwise at varying prices to be determined at the time of
sale. Proceeds to the Seller from the sale of the Offered Certificates are
expected to be approximately 100% of the aggregate original Certificate
Principal Balance of the Offered Certificates, plus accrued interest thereon
from February 1, 1998 to but not including the Closing Date. In connection with
the purchase and sale of the Offered Certificates, the Underwriter may be deemed
to have received compensation from the Seller in the form of underwriting
discounts. The Seller and the SunAmerica Parties will indemnify the Underwriter
against certain civil liabilities, including liabilities under the Act, or will
contribute to payments the Underwriter may be required to make in respect
thereof. It is expected that the SunAmerica Parties will acquire the Class D,
Class E, Class F, Class G, Class X, Class R-2 and Class PO Certificates.
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LEGAL MATTERS
Certain legal matters relating to the Certificates will be passed upon
for the Seller and the Underwriter by Stroock & Stroock & Lavan LLP, New York,
New York.
CERTIFICATE RATING
It is a condition to the issuance of each Class of Offered Certificates
that it receives the rating set forth below from Moody's.
Class Rating
----- ------
Class A Aaa
Class B Aa2
Class C Aa3
Class D A2
Class E A3
Class F Baa2
Class G Baa3
Class X Aaa
Class R-1 Aaa
Class R-2 Aaa
The ratings assigned by Moody's to mortgage pass-through certificates
address the likelihood of the receipt of all distributions on the mortgage loans
and/or underlying mortgage securities by the related Certificateholders under
the agreements pursuant to which such certificates are issued. Moody's ratings
take into consideration the credit quality of the related mortgage pool,
including any credit support providers, the structural and legal aspects
associated with such certificates and/or underlying mortgage securities, and the
extent to which the payment stream on the mortgage pool is adequate to make
payments required by such certificates. Moody's ratings on such certificates do
not, however, constitute a statement regarding frequency of prepayments on the
mortgage loans.
The ratings of Moody's do not address the possibility that, as a result
of principal prepayments (i) Certificateholders might suffer a lower than
anticipated yield and (ii) if there is a rapid rate of principal payments
(including principal prepayments) on the Underlying Mortgage Loans or the
Resecuritized Certificates investors in the Class X Certificates could fail to
fully recover their investments. The ratings on the Class R-1 and Class R-2
Certificates address only the return of its respective principal balance and
interest thereon.
The ratings assigned to the Offered Certificates should be evaluated
independently from similar ratings on other types of securities. A rating is not
a recommendation to buy, sell or hold securities and may be subject to revision
or withdrawal at any time by Moody's.
The Seller has not requested ratings of the Offered Certificates by any
rating agency other than Moody's. However, there can be no assurance as to
whether any other rating agency will rate the Offered Certificates or, if it
does, what ratings would be assigned by such other rating agency. The ratings
assigned by such other rating agency to the Offered Certificates could be lower
than the respective ratings assigned by Moody's.
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<TABLE>
<CAPTION>
INDEX OF DEFINED TERMS
<S> <C>
Act ............................................................................................................S-5
Additional Principal............................................................................................S-3
Advances.......................................................................................................S-26
Aggregate Collateral Report....................................................................................S-49
Agreement.......................................................................................................S-6
Assumed Final Distribution Date................................................................................S-55
Available Funds................................................................................................S-41
Book-Entry Certificates........................................................................................S-35
Business Day....................................................................................................S-8
Cede...........................................................................................................S-35
Certificate Account............................................................................................S-61
Certificate Owner..............................................................................................S-36
Certificate Principal Balance..................................................................................S-42
Certificate Rate................................................................................................S-1
Certificate Register...........................................................................................S-38
Certificateholder..............................................................................................S-37
Certificates....................................................................................................S-1
CITIMT Special Securities......................................................................................S-46
Class Deferred Principal.......................................................................................S-41
Class Optimal Principal........................................................................................S-41
Class Percentage Principal......................................................................................S-3
Class PO Principal Distribution.................................................................................S-3
Closing Date....................................................................................................S-8
Code...........................................................................................................S-17
Commission.....................................................................................................S-20
Compensating Interest..........................................................................................S-55
Definitive Certificates........................................................................................S-37
Determination Time..............................................................................................S-9
disqualified organizations.....................................................................................S-17
Distribution Date...............................................................................................S-2
DTC S-8
Eligible Account...............................................................................................S-61
ERISA..........................................................................................................S-17
Exchange Act....................................................................................................S-5
FHLMC..........................................................................................................S-60
FNMA...........................................................................................................S-60
Fraud Losses...................................................................................................S-47
GNMA...........................................................................................................S-60
GWAC...........................................................................................................S-51
Indirect Participants..........................................................................................S-36
Interest Accrual Period........................................................................................S-39
Interest Shortfalls............................................................................................S-14
IOU Securities.................................................................................................S-23
Jumbo Loans....................................................................................................S-34
Limited Documentation Loans....................................................................................S-34
Liquidated Mortgage Loan.......................................................................................S-22
Liquidation Proceeds...........................................................................................S-23
Lock Out Period................................................................................................S-13
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Loss Amount.....................................................................................................S-3
Majority Certificateholders....................................................................................S-63
MBA level......................................................................................................S-47
Mezzanine Percentage...........................................................................................S-28
Mezzanine Securities...........................................................................................S-44
Moody's.........................................................................................................S-1
Mortgage Loans..................................................................................................S-2
Mortgage Net Rate..............................................................................................S-13
Mortgaged Property.............................................................................................S-14
Mortgagor Bankruptcy Losses....................................................................................S-47
Net Liquidation Proceeds.......................................................................................S-23
Notional Amount.................................................................................................S-1
NWAC...........................................................................................................S-51
Offered Certificates............................................................................................S-1
Original Loan-to-Value Ratios..................................................................................S-51
Other Certificates..............................................................................................S-7
Other Information..............................................................................................S-49
Participants...................................................................................................S-36
Permitted Investments..........................................................................................S-61
Plan...........................................................................................................S-65
Pooled Securities...............................................................................................S-2
Pooled Security Distribution Date...............................................................................S-2
Pooled Security Distribution Date Information..................................................................S-49
Pooled Security Distribution Date Statement....................................................................S-49
Pooled Security Information Date................................................................................S-2
Pooled Security Interest Rate..................................................................................S-21
Pooled Security Principal Balance...............................................................................S-6
Pooled Security Underlying Trusts...............................................................................S-2
Principal Distribution Amount...................................................................................S-3
Prospectus......................................................................................................S-6
PTCE 95-60.....................................................................................................S-65
Realized Loss..................................................................................................S-22
Record Date....................................................................................................S-10
Regular Certificates...........................................................................................S-17
REITs..........................................................................................................S-65
REMIC...........................................................................................................S-4
REMIC I........................................................................................................S-17
REMIC II.......................................................................................................S-17
REMIC Regular Certificates.....................................................................................S-17
REMIC Residual Certificates....................................................................................S-17
REO Properties.................................................................................................S-24
Resecuritization Pooled Securities..............................................................................S-2
Resecuritized Certificate Principal Balance.....................................................................S-6
Resecuritized Certificate Underlying Trusts.....................................................................S-2
Resecuritized Certificates......................................................................................S-2
Residual Certificates...........................................................................................S-4
Rules..........................................................................................................S-37
Seller..........................................................................................................S-7
Senior Prepayment Percentage...................................................................................S-45
Senior Securities..............................................................................................S-44
Servicing Advances.............................................................................................S-26
Servicing Fee..................................................................................................S-27
SMMEA..........................................................................................................S-17
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Special Hazard Losses..........................................................................................S-47
Special Loss Limit.............................................................................................S-48
Special Loss Occurrences.......................................................................................S-47
Standard Hazard Insurance Policies.............................................................................S-53
Subordinated Percentage........................................................................................S-28
Subordinated Securities........................................................................................S-44
Substitute Pooled Security.....................................................................................S-60
SunAmerica Parties..............................................................................................S-2
Supplemental Determination Time................................................................................S-38
Supplemental Distribution Date..................................................................................S-9
Supplemental Distribution Date Interest Distribution...........................................................S-42
Supplemental Documents.........................................................................................S-20
Tax Matters Person.............................................................................................S-18
Trust...........................................................................................................S-2
Trustee.........................................................................................................S-7
U.S. Person....................................................................................................S-67
Underlying Agreement............................................................................................S-2
Underlying Mortgage Loans.......................................................................................S-2
Underlying Securities...........................................................................................S-2
Underlying Security Credit Support.............................................................................S-23
Underlying Servicer............................................................................................S-26
Underlying Trustees............................................................................................S-20
Underlying Trusts...............................................................................................S-2
Underwriter.....................................................................................................S-1
United States person...........................................................................................S-18
</TABLE>
S-71
<PAGE>
ANNEX I
COLLATERAL INFORMATION
The tables in this Annex I set forth information for each of
the Underlying Securities concerning such Underlying Securities and the
related Underlying Mortgage Loans. The tables and the descriptions of
the Underlying Securities herein are subject to and qualified by
reference to the provisions of the Underlying Agreements and the
prospectuses, prospectus supplements or other final offering documents
related to the Underlying Securities or the related Senior Securities,
as well as any subsequent information related thereto filed on a
Current Report on Form 8-K with the Securities and Exchange Commission
following the closing of the related Underlying Series. The information
set forth in the tables and elsewhere herein that is particularly
within the knowledge of the various Underlying Trustees, paying agents
and Underlying Servicers for the Underlying Trusts has been derived
from data requested from and provided by them, including regular
periodic reports provided to holders of Underlying Securities, loan-by-
loan information provided in tape form from the related Underlying
Servicers or underlying issuers and information from outside sources
such as Bloomberg L.P. and Mortgage Information Corp., but such
information has not been independently represented to the Seller or the
Underwriter as being accurate and complete nor has it been
independently verified by the Seller or the Underwriter. With respect
to approximately 5% of the aggregate outstanding principal balance of
the Underlying Mortgage Loans, loan-by-loan information was not
available for purposes of presenting the information in this Annex I.
This information comprises all material information on the subject that
the Seller and the Underwriter possess or can acquire without
unreasonable effort and expense. Copies of the offering documents, the
February 1998 Pooled Security Distribution Date Statements relating to
each Pooled Security and the February 1998 distribution date statements
relating to each Resecuritized Certificate are available for inspection
upon request to the Trustee. The Bank of New York, the Trustee for the
Certificates, acts as Underlying Trustee with respect to 15 Pooled
Securities. It has not undertaken in such latter capacity to provide
any information not otherwise generally available.
All of the information provided herein as to the Underlying
Securities is as reported by the Underlying Trustee or Underlying
Servicer of such Underlying Securities following the Pooled Security
Distribution Dates relating to the February 1998 Pooled Security
Distribution Date Statements, after giving effect to distributions made
on the Underlying Securities on or prior to such dates (the "Pooled
Security Information Date"). Generally, all of the information provided
herein as to the Underlying Mortgage Loans is provided as of February
1, 1998 after giving effect to any payments made or scheduled to be
made and losses realized on the Underlying Mortgage Loans on or prior
to such date (the "Mortgage Loan Information Date"). Unless otherwise
noted, "weighted average" numbers are calculated based on the loan
balances (except in the case of certain REO properties, it may be book
value) as of the Mortgage Loan Information Date.
A key to the abbreviations used for each Underlying Series and
Class designation for the Pooled Securities is contained in Annex II
hereto.
The following is a description of each item reported in the
following tables. Where a dash "-" is shown, the relevant information
is contained in the box directly above such dash. Where "n/a" is shown,
the relevant information is not available. The tables should be read in
conjunction with these descriptions and the endnotes that follow each
table.
I-1
<PAGE>
1. Pooled Securities and Resecuritized Certificates. Each Pooled
Security is numbered in the Column titled "Pooled Sec." Each
of the Resecuritized Certificates backing a Resecuritization
Pooled Security follows directly after the respective
Resecuritization Pooled Security and is numbered with respect
to the applicable Resecuritization Pooled Security in the
Column titled "Resec. Cert."
2. Shelf, Series and Des. These first three columns indicate,
collectively, the abbreviated "shelf" name and series
designation of each Underlying Series and the abbreviated
designation of the Underlying Security for such Underlying
Series. For the full name of each Underlying Security
referenced by the applicable abbreviation, see Annex II.
3. Issue Date. This column states the date the Underlying
Securities were issued. Each entry is listed by year/month.
For example, an entry of 1994/02 would mean an Issue Date of
February 1994.
4. Coupon. This column indicates the approximate Pooled Security
Interest Rate for each Pooled Security and interest rate on
each Resecuritized Certificate as of the Pooled Security
Information Date.
5. Coupon Type. This column indicates whether the interest rate
on each Underlying Security is fixed at the percentage shown
under column entitled "Coupon," in which case the code "FIX"
is inserted, or is based on the weighted average interest rate
on the related Underlying Mortgage Loans or Resecuritized
Certificates, in which case the code "WAC" is inserted.
6. Resec. This column indicates whether the Underlying Security
is backed by Mortgage Loans, in which case the code "ML" is
inserted, or Resecuritized Certificates , in which case the
code "RC" is inserted.
7. Pub/Pri. This column indicates whether the Underlying Security
was initially offered publicly pursuant to a registration
statement under the Act, in which case the code "Public" is
inserted, or privately pursuant to an exemption from
registration under the Act, in which case the code "Private"
is inserted.
8. Sen Pct. This column shows, for each Underlying Security as of
the Pooled Security Information Date, a fraction, expressed as
a percentage the numerator of which is the Senior Securities
of such Underlying Series plus the PO Securities, if any of
such Underlying Series, and the denominator of which is the
principal balance of all Mortgage Loans in the related
Underlying Trust as of the Mortgage Loan Information Date.
9. Gross Original Balance. This column lists the approximate
principal balance of each Class of Securities of which the
Underlying Security constitutes a part or the whole, as of the
related Issue Date.
10. Gross Current Balance. This column lists the approximate
principal balance of each class of Securities of which the
Underlying Security constitutes a part or the whole, as of the
Pooled Security Information Date.
11. Under Sec Principal Balance. This column shows the approximate
principal balance of each Underlying Security as of the Pooled
Security Information Date.
12. % of Coll. This column shows, for each Underlying Security as
of the Pooled Security Information Date, a fraction, expressed
as a percentage the numerator of which is the principal
balance of such Underlying Security, and the denominator of
which is the principal balance of all
I-2
<PAGE>
Underlying Mortgage Loans in the related Underlying Trust as
of the Mortgage Loan Information Date.
13. Collateral Balance. This column shows the aggregate scheduled
principal balance of the Underlying Mortgage Loans with
respect to each Underlying Security as of the Mortgage Loan
Information Date.
14. Credit Enhanc. This column indicates the percentage that the
Underlying Security Credit Support represents, if any, of the
aggregate scheduled principal balances of the Underlying
Mortgage Loans with respect to each Underlying Security as of
the Mortgage Loan Information Date.
15. Cum Realized Losses. The column lists the cumulative dollar
amount of Realized Losses on the Underlying Mortgage Loans
allocated to any of the securities issued by the related
Underlying Trust since the Issue Date or, for the
Resecuritization Pooled Securities the cumulative dollar
amount of Realized Losses on the Underlying Mortgage Loans
allocated to the related Underlying Trusts since the Issue
Date where available.
16. Jan 98 Realized Losses. The column lists the dollar amount of
Realized Losses on the Underlying Mortgage Loans allocated to
any of the securities in the related Underlying Series during
January 1998 or, for the Resecuritization Pooled Securities
the cumulative dollar amount of Realized Losses on the
Underlying Mortgage Loans allocated to the related Underlying
Trusts during January 1998.
17. Current Under Trustee. This column indicates the current
Underlying Trustee with respect to each Underlying Security.
Listed below is the abbreviation used with respect to each
Underlying Trustee.
<TABLE>
<CAPTION>
------------------------- -------------------------------------------------------
ABBREVIATION FULL NAME OF UNDERLYING TRUSTEE
------------ -------------------------------
------------------------- -------------------------------------------------------
<S> <C>
BNY The Bank of New York
------------------------- -------------------------------------------------------
BKTRU Bankers Trust Company
------------------------- -------------------------------------------------------
CHASE The Chase Manhattan Bank, N.A.
------------------------- -------------------------------------------------------
CITIB Citibank, N.A.
------------------------- -------------------------------------------------------
FCHIC First National Bank of Chicago
------------------------- -------------------------------------------------------
FSTAR Firstar Trust Company
------------------------- -------------------------------------------------------
FTRUS First Trust National Association
------------------------- -------------------------------------------------------
NORWB Norwest Bank Minnesota, National Association
------------------------- -------------------------------------------------------
STATE State Street Bank and Trust Company
------------------------- -------------------------------------------------------
TEXAS Texas Commerce Bank National Association
------------------------- -------------------------------------------------------
USBNK U.S. Bank National Association
------------------------- -------------------------------------------------------
</TABLE>
I-3
<PAGE>
18. Current Under Servicer. This column indicates the current
Underlying Servicer with respect to each Underlying Security.
Listed below is the abbreviation used with respect to each
Underlying Servicer.
<TABLE>
<CAPTION>
----------------------------- ---------------------------------------------------
<S> <C>
ABBREVIATION FULL NAME OF UNDERLYING SERVICER
------------ --------------------------------
----------------------------- ---------------------------------------------------
Bank United Bank United of Texas
----------------------------- ---------------------------------------------------
Chase Home Chase Home Mortgage ______
----------------------------- ---------------------------------------------------
Countrywide Countrywide Home Loans Inc.
----------------------------- ---------------------------------------------------
Chase Manhattan Chase Manhattan Mortgage Corp.
----------------------------- ---------------------------------------------------
Citicorp Citicorp Mortgage, Inc.
----------------------------- ---------------------------------------------------
Capstead Capstead Mortgage Corporation
----------------------------- ---------------------------------------------------
GE Capital GE Capital Mortgage Services, Inc.
----------------------------- ---------------------------------------------------
Glendale Glendale Federal Bank, Federal Savings Bank
----------------------------- ---------------------------------------------------
Indymac Independent National Mortgage Corporation
----------------------------- ---------------------------------------------------
Headlands Headlands Mortgage Securities, Inc.
----------------------------- ---------------------------------------------------
Marine Marine Midland Bank, N.A.
----------------------------- ---------------------------------------------------
Norwest Bank Norwest Bank Minnesota, National Association
----------------------------- ---------------------------------------------------
Norwest Mortgage Norwest Mortgage, Inc.
----------------------------- ---------------------------------------------------
PNC Mortgage PNC Mortgage Securities Corp.
----------------------------- ---------------------------------------------------
RFC Residential Funding Corporation
----------------------------- ---------------------------------------------------
</TABLE>
19. Latest Ratings. This column shows the latest rating by Fitch
IBCA, Inc. ("FT"), Duff & Phelps Credit Rating Co. ("DP"),
Moody's ("MD") or Standard & Poor's Ratings Services ("SP"),
as applicable, if such rating agency rated such Underlying
Security on the related Issuance Date. If no current rating is
available, the abbreviation "N/R" appears in this column.
20. Original Rating. This column shows the original rating by
Fitch IBCA, Inc., Duff & Phelps Credit Rating Co., Moody's or
Standard & Poor's Ratings Services, as applicable, if such
rating is different from the latest rating by such rating
agency.
21. Payment Date. This column indicates the Pooled Security
Distribution Date for each Underlying Security and the
distribution date with respect to the Resecuritized
Certificates. The code "25th" or "29th means the 25th day or
29th (or, if in February, the last) day in each month (or, if
such date is not a business day, as defined in the related
Underlying Agreement, the following business day). The code
"2bd" or "3bd" means the second or third business day after
the 25th day in each month (or, if such date is not a business
day, as defined in the related Underlying Agreement, the
following business day).
22. Wire/Check. This column indicates whether, on the February
1998 Pooled Security Distribution Date, the holder of such
Pooled Security received the distribution thereon by wire
transfer or by check.
23. DTC/Physical. This column shows whether beneficial ownership
of the Underlying Security is held through the book-entry
system with DTC or physical certificates. The code "DTC" means
through book-entry and the code "Physical" means through
physical certificates.
24. Comp Interest. This column lists whether payments of
Compensating Interest are required to be made on each
Underlying Security. The Code "None" means that no such
payments are required.
I-4
<PAGE>
The Code "Serv Fee" means that Compensating Interest payments
are required to be made up to the related master servicing or
servicing fee, as applicable as shown in the Servicing Fee
column; and where a % is indicated, means Compensating
Interest payments are required to be made up to the indicated
percent of the related master servicing or servicing fee, as
applicable.
25. IOU. This column indicates whether the Underlying Security is
an IOU Security, in which case the Code "Y" is inserted and if
it is not an IOU Security, the Code "N" is inserted.
26. Clean Up %. This column indicates whether each Underlying
Security is subject to an optional termination at the option
of the entity listed under the Column "Call By," at the time
that the principal balance of the Underlying Mortgage Loans or
securities of the related Underlying Trust as a percentage of
the original principal balance of the Underlying Mortgage
Loans or securities on the related Issue Date falls below the
indicated percentage. The Code "None" means that the
Underlying Security is not subject to a clean up call.
27. Call By. This Column lists the entity if any that has the
clean-up call described above under Clean-Up %. The Codes
"Serv," "Resid" and "Sell" mean the Underlying Servicer, the
holder of the residual interest of the related Underlying
Trust, and the seller or depositor of the Mortgage Loans or
Resecuritized Certificates to the related Underlying Trust, as
applicable. The Code "None" means that the Underlying Security
is not subject to a clean up call.
28. Remain Special Hazard. This column lists the Special Hazard
Loss carve-out remaining with respect to each Underlying
Series, if available and if not available, the original
Special Hazard carve-out on the date of issuance of the
Underlying Series.
29. Remain Fraud. This column lists the Fraud Loss carve-out
remaining with respect to each Underlying Series, if available
and if not available, the original Fraud Loss carve-out on the
date of issuance of the Underlying Series.
30. Remain Bankruptcy. This column lists the Mortgagor Bankruptcy
Loss carve-out remaining with respect to each Underlying
Series, if available and if not available, the original
Bankruptcy Loss carve-out on the date of issuance of the
Underlying Series.
31. Total Delinq. Under the next group of columns are supplied the
percentages of the Underlying Mortgage Loans underlying each
Underlying Security (a) for which the related monthly payments
as of the Mortgage Loan Information Date are (i) 30 to 59 days
delinquent (under the "30+ Pct" Column), (ii) 60 to 89 days
delinquent (under the "60+ Pct" Column) and (iii) 90 or more
days delinquent (under the "90+ Pct" Column), (b) which are
currently the subject of foreclosure or other similar
proceedings against the related borrower (under the "F/C Pct"
Column), (c) the Mortgaged Properties for which are currently
held by the related Underlying Trust (or by the trust
underlying such Underlying Trust) as real estate owned (or
"REO") (under the "REO Pct" Column), and (d) the sum of the
percentages under the foregoing Columns (which may not total
due to rounding) (under the "Total Delinq" Column).
32. GWAC. Under this Column is the current approximate weighted
average of the per annum interest rates borne by the
Underlying Mortgage Loans underlying each Underlying Security.
33. Servicing Fee. Under this Column is the Servicing Fee or range
of Servicing Fees, expressed as a per annum percentage,
payable to the Underlying Servicer(s) with respect to each
Underlying Security.
34. NWAC. Under this Column is the current approximate weighted
average of the Mortgage Net Rates on the Underlying Mortgage
Loans underlying each Underlying Security.
I-5
<PAGE>
35. WAM. Under this Column is the current approximate weighted
average of the remaining terms to maturity of the Underlying
Mortgage Loans underlying each Underlying Security (in
months).
36. AGE. Under this Column is the approximate weighted average
months since origination for the Underlying Mortgage Loans
underlying each Underlying Security.
37. Number of Mtg Loans. Under this Column is the approximate
number of Underlying Mortgage Loans underlying each Underlying
Security.
38. Average Loan Balance. Under this Column is the approximate
average principal balance of the Underlying Mortgage Loans
underlying each Underlying Security.
39. %CAL. Under this Column is the approximate percentage of
Underlying Mortgage Loans underlying each Underlying Security
with respect to which the related Mortgaged Properties are
located in the state of California.
40. % Highest State. Under this Column is provided the name of the
state and the approximate percentage in which the most
Mortgaged Properties securing the related Underlying Mortgage
Loans are located.
41. WA Orig LTV. The information provided under this Column shows
the current weighted average (i.e. based on current balances)
of the original loan-to-value ratios of the Underlying
Mortgage Loans underlying each Underlying Security. Generally,
the "original loan-to-value ratio" of a Mortgage Loan is the
ratio, expressed as a percentage, obtained by dividing the
original principal balance of such Mortgage Loan by the lower
of the sales price or appraised value of the underlying
Mortgaged Property as of the date of origination of such
Mortgage Loan. None of the Seller, the Trust nor the
Underwriter have any information about the current
loan-to-value ratios of the Underlying Mortgage Loans.
42. % Call Bal Re. This Column shows for each Underlying Security
as of the Pooled Security Information Date, a fraction,
expressed as a percentage the numerator of which is the
aggregate scheduled principal balance of the Underlying
Mortgage Loans with respect to each Underlying Security as of
the Mortgage Loan Information Date, and the denomination of
which is the aggregate scheduled principal balance of the
Underlying Mortgage Loans with respect to such Underlying
Security as of the date of issuance of the related Underlying
Series.
I-6
<PAGE>
ANNEX I
COLLATERAL INFORMATION
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Pooled Resec. Issue
Sec Cert Shelf Series Des Date Coupon
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 AMERT 9303 3-B 1993/07 8.213
- ---------------------------------------------------------------------------------------
1-a PHMSC 9218 B-2 1992/06 8.500
- ---------------------------------------------------------------------------------------
1-b PHMSC 9222 B-2 1992/07 8.500
- ---------------------------------------------------------------------------------------
1-c PHMSC 9228 B-2 1992/08 8.000
- ---------------------------------------------------------------------------------------
1-d MARPTC 913 B-2 1991/11 8.000
- ---------------------------------------------------------------------------------------
1-e MARPTC 922 B-3 1992/06 8.000
- ---------------------------------------------------------------------------------------
1-f MARPTC 923 B-2 1992/09 8.000
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
2 BSMSI 9308 M 1993/08 7.500
- ---------------------------------------------------------------------------------------
3 CAPPTC 94C B-1 1994/02 6.750
- ---------------------------------------------------------------------------------------
4 CFC 9301 B-1 1993/09 7.125
- ---------------------------------------------------------------------------------------
5 CFC 9401 B-1 1994/01 6.875
- ---------------------------------------------------------------------------------------
6 CFC 9409 B-2 1994/03 6.500
- ---------------------------------------------------------------------------------------
7 CFC 9418 B-3 1994/07 8.000
- ---------------------------------------------------------------------------------------
8 CFC 9602 B-2 1996/07 7.750
- ---------------------------------------------------------------------------------------
9 CFC 9705 B-3 1997/07 7.500
- ---------------------------------------------------------------------------------------
10 CHASE 94E B-2 1994/04 6.250
- ---------------------------------------------------------------------------------------
11 CHEMPT 9601 B-3 1996/01 7.250
- ---------------------------------------------------------------------------------------
12 CITIMT 9016 B 1990/10 9.500
- ---------------------------------------------------------------------------------------
13 CITIMT 9205 B 1992/04 8.000
- ---------------------------------------------------------------------------------------
14 CITIMT 9219 B 1992/11 7.500
- ---------------------------------------------------------------------------------------
15 CITIMT 9401 B-1 1994/01 6.500
- ---------------------------------------------------------------------------------------
16 CITIMT 9405 B-1 1994/03 6.250
- ---------------------------------------------------------------------------------------
17 CITIMT 9407 B-1 1994/04 6.250
- ---------------------------------------------------------------------------------------
18 CITIMT 9410 B-1 1994/06 6.250
- ---------------------------------------------------------------------------------------
19 CITIMT 9411 B-1 1994/08 6.250
- ---------------------------------------------------------------------------------------
20 CITIMT 9413 B-2 1994/10 6.500
- ---------------------------------------------------------------------------------------
21 CITIMT 9502 B-3 1995/05 7.500
- ---------------------------------------------------------------------------------------
22 CITIMT 9601 B-1 1996/12 7.500
- ---------------------------------------------------------------------------------------
23 CITIMT 9703 B-1 1997/08 7.250
- ---------------------------------------------------------------------------------------
24 CITIMT 9703 B-2 1997/08 7.250
- ---------------------------------------------------------------------------------------
25 CITIMT 9707 B-1 1997/12 7.000
- ---------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Gross Gross
Coupon Pub/ Sen. Original Current
Type Resec Pri Pct Balance Balance
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
WAC RC Private (1) 27,631,144.73 24,797,425.91
- ---------------------------------------------------------------------------------------------------------
FIX ML Private 18.80 12,397,431.00 12,263,417.32
- ---------------------------------------------------------------------------------------------------------
FIX ML Private 37.60 12,044,978.00 11,826,968.52
- ---------------------------------------------------------------------------------------------------------
FIX ML Private 54.70 4,609,500.00 4,541,792.75
- ---------------------------------------------------------------------------------------------------------
FIX ML Private 0.00 6,522,410.00 2,924,574.04
- -----------------------------------------------------------------------------------------------------------
FIX ML Private 47.89 5,972,000.00 5,233,118.90
- -----------------------------------------------------------------------------------------------------------
FIX ML Private 47.02 8,721,649.00 7,974,183.24
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
FIX ML Public 91.47 19,978,507 18,976,086.54
- -----------------------------------------------------------------------------------------------------------
FIX ML Public 91.96 6,070,000 5,742,237.55
- -----------------------------------------------------------------------------------------------------------
FIX ML Public 91.97 20,000,194 18,976,449.94
- -----------------------------------------------------------------------------------------------------------
FIX ML Public 93.56 9,003,885 8,570,478.30
- -----------------------------------------------------------------------------------------------------------
FIX ML Public 93.98 3,373,659 3,221,688.52
- -----------------------------------------------------------------------------------------------------------
FIX ML Public 88.81 1,750,000 1,696,474.36
- -----------------------------------------------------------------------------------------------------------
FIX ML Public 92.47 2,847,000 2,808,563.12
- -----------------------------------------------------------------------------------------------------------
FIX ML Public 95.47 2,100,068 2,090,202.69
- -----------------------------------------------------------------------------------------------------------
FIX ML Private 96.15 2,001,000 1,665,768.02
- -----------------------------------------------------------------------------------------------------------
FIX ML Public 92.59 2,406,000 2,359,480.75
- -----------------------------------------------------------------------------------------------------------
FIX ML Private 0.00 15,673,663.93 15,673,663.93
- -----------------------------------------------------------------------------------------------------------
FIX ML Private 29.41 9,516,504 9,516,503.91
- -----------------------------------------------------------------------------------------------------------
FIX ML Private 77.34 10,109,557.98 10,109,557.98
- -----------------------------------------------------------------------------------------------------------
FIX ML Public 89.16 11,036,000.26 10,397,986.26
- ----------------------------------------------------------------------------------------------------------
FIX ML Public 91.54 16,828,704 15,965,171.18
- --------------------------------------------------------------------------------------------------------
FIX ML Public 90.91 9,938,740 9,472,008.16
- ---------------------------------------------------------------------------------------------------------
FIX ML Public 87.04 15,381,000 14,808,195.03
- ----------------------------------------------------------------------------------------------------------
FIX ML Public 90.47 1,228,437 1,183,772.45
- --------------------------------------------------------------------------------------------------------
FIX ML Public 88.34 1,320,000 1,283,259.41
- --------------------------------------------------------------------------------------------------------
FIX ML Public 93.22 2,500,680 2,475,645.92
- ----------------------------------------------------------------------------------------------------------
FIX ML Public 94.42 2,019. 437 2,010,900.63
- -----------------------------------------------------------------------------------------------------------
FIX ML Public --- 2,019,437 2,010,900.63
- --------------------------------------------------------------------------------------------------------
FIX ML Public 95.48 2,020,172 2,-17,186.16
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Under Sec Cum Jan 98 Current
Principal % Of Collateral Credit Realized Realized Under
Balance Coll Balance Enhanc Losses Losses Trustee
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
17,169,145.49 6.66% 257,629,309.62 5.25% 2,757,527.81 39,940.36 FTRUS
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
12,263,417.32 26.63% 46,049,421.73 7.67% 962,646.87 16,131.80 FTRUS
- --------------------------------------------------------------------------------------------------------------------------
11,826,968.52 18.99% 62,273,859.51 6.49% 716,153.37 16,775.90 FTRUS
- --------------------------------------------------------------------------------------------------------------------------
4,541,792.75 7.97% 57,019,766.49 3.57% 982,216.04 7,032.65 FTRUS
- --------------------------------------------------------------------------------------------------------------------------
2,924,574.04 30.63% 9,546,965.66 4.46% (2) 0.00 BKTRU
- --------------------------------------------------------------------------------------------------------------------------
5,233,118.90 14.10% 37,103,486.02 5.29% 215.37 0.00 BKTRU
- --------------------------------------------------------------------------------------------------------------------------
7,974,183.24 17.47% 45,635,810.21 3.33% 96,296.16 0.01 BKTRU
- --------------------------------------------------------------------------------------------------------------------------
18,976,086.54 7.86% 241,287,849.23 0.67% 292,479.78 428.34 STATE
- --------------------------------------------------------------------------------------------------------------------------
5,742,237.55 2.35% 244,407,365.26 2.46% 549,000.00 0.00 TEXAS
- --------------------------------------------------------------------------------------------------------------------------
18,976,449.94 6.78% 279,719,873.85 1.25% 256,885.15 0.00 BNY
- --------------------------------------------------------------------------------------------------------------------------
8,570,478.30 2.65% 323,394,429.13 1.14% 115,206.72 0.00 BNY
- --------------------------------------------------------------------------------------------------------------------------
3,221,688.52 0.87% 369,901,330.14 1.08% 306,822.01 1,047.65 BNY
- --------------------------------------------------------------------------------------------------------------------------
1,696,474.36 1.96% 86,631,785.57 1.81% 131,958.09 210.38 BNY
- --------------------------------------------------------------------------------------------------------------------------
2,808,563.12 2.29% 122,533,413.44 2.62% 0.00 0.00 BNY
- --------------------------------------------------------------------------------------------------------------------------
2,090,202.69 0.68% 307,649,327.56 1.02% 0.00 0.00 BNY
- --------------------------------------------------------------------------------------------------------------------------
1,665,768.02 1.18% 140,802,438.83 1.18% 0.00 0.00 CITIB
- --------------------------------------------------------------------------------------------------------------------------
2,359,480.75 1.23% 191,054,844.90 1.23% 0.00 0.00 FCHIC
- --------------------------------------------------------------------------------------------------------------------------
5,673,663.93 31.50% 18,011,596.57 7.19% 6,474,787.63 0.00 BKTRU
- --------------------------------------------------------------------------------------------------------------------------
9,516,503.91 62.60% 15,202,097.09 31.17% 462,717.15 0.00 BKTRU
- --------------------------------------------------------------------------------------------------------------------------
9,109,557.98 12.49% 72,943,862.95 11.55% 1,006,298.08 0.00 STATE
- --------------------------------------------------------------------------------------------------------------------------
10,397,986.26 10.05% 103,487,705.97 0.80% 220,333.19 0.00 STATE
- --------------------------------------------------------------------------------------------------------------------------
15,965,171.18 7.76% 205,628,868.85 0.70% 442,378.81 23,881.20 STATE
- --------------------------------------------------------------------------------------------------------------------------
9,472,008.16 8.21% 115,338,163.95 0.88% 41,515.42 0.00 STATE
- --------------------------------------------------------------------------------------------------------------------------
8,721,074.80 8.67% 100,537,509.95 0.86% 68,710.08 0.00 BNY
- --------------------------------------------------------------------------------------------------------------------------
14,808,195.03 11.63% 127,284,021.35 1.33% 48,710.71 48,710.71 STATE
- --------------------------------------------------------------------------------------------------------------------------
1,183,772.45 1.47% 80,600,581.93 1.82% 322,731.00 4,170.40 STATE
- --------------------------------------------------------------------------------------------------------------------------
1,283,259.41 2.01% 63,756,940.03 2.40% 10,725.03 0.00 STATE
- --------------------------------------------------------------------------------------------------------------------------
2,475,645.92 1.54% 160,601,911.69 2.77% 0.00 0.00 BNY
- --------------------------------------------------------------------------------------------------------------------------
2,010,900.63 1.12% 180,307,602.18 2.23% 0.00 0.00 STATE
- --------------------------------------------------------------------------------------------------------------------------
2,010,900.63 1.12% ---- 1.12% 0.00 0.00 ---
- --------------------------------------------------------------------------------------------------------------------------
2,017,186.16 1.00% 200,876,413.15 1.76% 0.00 0.00 STATE
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Current
Under Latest Original Payment Wire/ DTC/
Servicer Ratings Rating Date Check Physical
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(1) BBB- / FT NR 2bd Check Physical
- --------------------------------------------------------------------------------------------------------------------------
Citicorp NR NR 25th n/a Physical
- --------------------------------------------------------------------------------------------------------------------------
Citicorp NR NR 25th n/a Physical
- --------------------------------------------------------------------------------------------------------------------------
Citicorp NR NR 25th n/a Physical
- --------------------------------------------------------------------------------------------------------------------------
Marine NR NR 25th n/a Physical
- --------------------------------------------------------------------------------------------------------------------------
Marine NR NR 25th n/a Physical
- --------------------------------------------------------------------------------------------------------------------------
Marine NR NR 25th n/a Physical
- --------------------------------------------------------------------------------------------------------------------------
Countrywide Baa3 / MD Baa3 / MD 25th Wire Physical
- --------------------------------------------------------------------------------------------------------------------------
Capstead A / FT A / FT 25th Wire DTC
- --------------------------------------------------------------------------------------------------------------------------
Countrywide Baa2 / MD Baa2 / MD 25th Check Physical
- --------------------------------------------------------------------------------------------------------------------------
Countrywide BBB / FT BBB / FT 25th Check Physical
- --------------------------------------------------------------------------------------------------------------------------
Countrywide BBB / FT BBB / FT 25th Check Physical
- --------------------------------------------------------------------------------------------------------------------------
Countrywide BBB / FT BBB / FT 25th Check Physical
- --------------------------------------------------------------------------------------------------------------------------
Countrywide A / FT A / F T 25th Wire DTC
- --------------------------------------------------------------------------------------------------------------------------
Countrywide Baa2 / MD Baa2 / MD 25th Wire DTC
- --------------------------------------------------------------------------------------------------------------------------
Chase Home A / FT A / FT 25th Wire DTC
- --------------------------------------------------------------------------------------------------------------------------
Chase Manhattan BBB / FT BBB / FT 25th Check Physical
- --------------------------------------------------------------------------------------------------------------------------
Citicorp B / SP BBB / SP 25th Wire Physical
- --------------------------------------------------------------------------------------------------------------------------
Citicorp AA + / SP A / SP 25th Wire Physical
- --------------------------------------------------------------------------------------------------------------------------
Citicorp BBB / SP & Baa2/MD BBB / SP 25th Check Physical
- --------------------------------------------------------------------------------------------------------------------------
Citicorp Baa3 / MD Baa3 / MD 25th Wire Physical
- --------------------------------------------------------------------------------------------------------------------------
Citicorp Baa3 / MD Baa3 / MD 25th Check Physical
- --------------------------------------------------------------------------------------------------------------------------
Citicorp Baa3 / MD Baa3 / MD 25th Check Physical
- --------------------------------------------------------------------------------------------------------------------------
Citicorp Baa3 / MD Baa3 / MD 25th Check Physical
- --------------------------------------------------------------------------------------------------------------------------
Citicorp Baa3 / MD Baa3 / MD 25th Check Physical
- --------------------------------------------------------------------------------------------------------------------------
Citicorp BBB- / SP & BBB / FT BBB- / SP & BBB / FT 25th Check Physical
- --------------------------------------------------------------------------------------------------------------------------
Citicorp BBB / FT BBB / FT 25th Check Physical
- --------------------------------------------------------------------------------------------------------------------------
Citicorp A / FT A / FT 25th Check Physical
- --------------------------------------------------------------------------------------------------------------------------
Citicorp A / FT A / FT 25th Check Physical
- --------------------------------------------------------------------------------------------------------------------------
--- BBB / FT BBB / FT --- Wire -----
- --------------------------------------------------------------------------------------------------------------------------
Citicorp A / FT A / FT 25th Wire Physical
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
I-7
<PAGE>
ANNEX I
COLLATERAL INFORMATION
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Pooled Resec. Issue
Sec Cert Shelf Series Des Date Coupon
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
26 CWD 94A B-3 1994/01 6.750
- --------------------------------------------------------------------------------------------
27 CWD 94C B-2 1994/02 6.500
- --------------------------------------------------------------------------------------------
28 CWD 94G B-1 1994/03 6.500
- --------------------------------------------------------------------------------------------
29 DLJ 9403 B-1 1994/03 6.500
- --------------------------------------------------------------------------------------------
30 FBCS 9302R 1 1994/08 7.425
- --------------------------------------------------------------------------------------------
30-a FBCS 9302 B-3 1993/03 7.500
- --------------------------------------------------------------------------------------------
31 GECAP 9401 B-2 1994/01 6.500
- -------------------------------------------------------------------------------------------- ------
32 GECAP 9416 B-2 1994/05 6.500
- --------------------------------------------------------------------------------------------
33 GECAP 9427 B-2 1994/07 6.500
- --------------------------------------------------------------------------------------------
34 GECAP 9507 B-2 1995/09 7.500
- --------------------------------------------------------------------------------------------
35 GECAP 9615 B-1 1996/10 7.750
- --------------------------------------------------------------------------------------------
36 GECAP 9616 B-2 1996/11 7.750
- --------------------------------------------------------------------------------------------
37 GECAP 9701 B-1 1997/01 7.500
- --------------------------------------------------------------------------------------------
38 GECAP 9702 1-B-2 1997/02 7.500
- --------------------------------------------------------------------------------------------
39 GECAP 9709 1-B-1 1997/10 7.250
- --------------------------------------------------------------------------------------------
40 GECAP 9709 1-B-2 1997/10 7.250
- --------------------------------------------------------------------------------------------
41 GECAP 9709 2-B-2 1997/10 7.000
- --------------------------------------------------------------------------------------------
42 GECAP 9712 B-1 1997/12 7.000
- --------------------------------------------------------------------------------------------
43 GECAP 9712 B-2 1997/12 7.000
- --------------------------------------------------------------------------------------------
44 HMSI 9705 B-2 1997/10 7.250
- --------------------------------------------------------------------------------------------
45 MORSRV 9602 B-1 1996/08 7.250
- --------------------------------------------------------------------------------------------
46 MSCAP1 9601 B-2 1996/02 7.250
- --------------------------------------------------------------------------------------------
47 NSCOR 9604 B-1 1996/08 7.750
- --------------------------------------------------------------------------------------------
48 NSCOR 9605 B-1 1996/10 8.000
- --------------------------------------------------------------------------------------------
49 PHMSC 93E 2-B 1993/07 7.394
- --------------------------------------------------------------------------------------------
49-a PHMSC 9314 B 1993/04 7.500
- --------------------------------------------------------------------------------------------
49-b PHMSC 9319 B 1993/05 7.500
- --------------------------------------------------------------------------------------------
49-c PHMSC 9322 B 1993/06 7.000
- --------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Gross Gross
Coupon Pub/ Sen. Original Current
Type Resec Pri Pct Balance Balance
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
FIX ML Public 92.29 2,000,000 1,898,999.30
- --------------------------------------------------------------------------------------------------------
FIX ML Public 93.16 3,060,807 2,914,107.99
- --------------------------------------------------------------------------------------------------------
FIX ML Public 91.78 4,612,288 4,402,238.11
- --------------------------------------------------------------------------------------------------------
FIX ML Public 92.60 7,059,438 6,697,566.56
- --------------------------------------------------------------------------------------------------------
FIX RC Public 90.97 19,687,593.00 16,705,320.98
- --------------------------------------------------------------------------------------------------------
FIX ML Private 65.34 22,339,982.00 18,363,731.98
- --------------------------------------------------------------------------------------------------------
FIX ML Public 92.68 7,992,626 7,578,757.32
- --------------------------------------------------------------------------------------------------------
FIX ML Public 93.25 3,195,000 3,047,974.62
- --------------------------------------------------------------------------------------------------------
FIX ML Public 92.90 2,331,552 2,229,035.56
- --------------------------------------------------------------------------------------------------------
FIX ML Public 91.44 5,000,654 4,877,117.69
- --------------------------------------------------------------------------------------------------------
FIX ML Public 92.67 3,136,499 3,098,874.22
- --------------------------------------------------------------------------------------------------------
FIX ML Public 92.43 2,518,000 2,493,028.34
- --------------------------------------------------------------------------------------------------------
FIX ML Public 94.00 3,751,000 3,717,013.21
- --------------------------------------------------------------------------------------------------------
FIX ML Public 94.16 4,503,000 4,461,572.63
- --------------------------------------------------------------------------------------------------------
FIX ML Public 95.38 4,761,000 4,747,490.10
- --------------------------------------------------------------------------------------------------------
FIX ML Public --- 3,758,500 3,747,834.80
- --------------------------------------------------------------------------------------------------------
FIX ML Public 95.49 2,630,500 2,622,896.06
- --------------------------------------------------------------------------------------------------------
FIX ML Public 95.74 6,127,497 6,118,725.68
- --------------------------------------------------------------------------------------------------------
FIX ML Public --- 4,837,497 4,830,572.27
- --------------------------------------------------------------------------------------------------------
FIX ML Public 92.69 4,954,964 4,940,602.37
- --------------------------------------------------------------------------------------------------------
FIX ML Public 93.21 2,070,499 2,007,208.45
- --------------------------------------------------------------------------------------------------------
FIX ML Public 92.65 2,355,000 2,311,319.70
- --------------------------------------------------------------------------------------------------------
FIX ML Public 92.77 4,789,000 4,726,179.03
- --------------------------------------------------------------------------------------------------------
FIX ML Public 92.06 6,226,000.00 6,159,102.20
- --------------------------------------------------------------------------------------------------------
WAC RC Private (1) 39,207,000.00 38,548,677.43
- --------------------------------------------------------------------------------------------------------
FIX ML Private 82.36 51,575,412.94 48,982,071.62
- --------------------------------------------------------------------------------------------------------
FIX ML Private 85.84 34,533,027.03 32,387,694.01
- --------------------------------------------------------------------------------------------------------
FIX ML Private 88.76 18,002,134.17 16,844,343.12
- --------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Under Sec Cum Jan 98 Current
Principal % Of Collateral Credit Realized Realized Under
Balance Coll Balance Enhanc Losses Losses Trustee
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
1,898,999.30 1.29% 147,700,962.86 1.29% 0.00 0.00 BNY
- ---------------------------------------------------------------------------------------------------------------------------------
2,914,107.99 1.50% 194,821,665.73 2.05% 28,471.82 0.00 BNY
- ---------------------------------------------------------------------------------------------------------------------------------
4,402,238.11 1.76% 249,740,674.76 2.05% 8,689.23 0.00 BNY
- ---------------------------------------------------------------------------------------------------------------------------------
6,697,566.56 2.07% 323,059,628.11 2.36% 678,573.67 111,829.61 CHASE
- ---------------------------------------------------------------------------------------------------------------------------------
8,485,202.34 7.35% 115,432,731.50 1.87% 3,043,132.92 18,564.84 USBNK
- ---------------------------------------------------------------------------------------------------------------------------------
18,363,731.98 15.91% 115,432,731.50 0.00% 3,043,132.92 18,564.84 USBNK
- ---------------------------------------------------------------------------------------------------------------------------------
7,578,757.32 1.24% 611,922,527.89 1.13% 697,864.13 51,162.54 STATE
- ---------------------------------------------------------------------------------------------------------------------------------
3,047,974.62 1.14% 267,705,778.75 1.34% 237,133.65 0.00 STATE
- ---------------------------------------------------------------------------------------------------------------------------------
2,229,035.56 1.19% 186,951,080.27 1.14% 97,556.74 0.00 STATE
- ---------------------------------------------------------------------------------------------------------------------------------
4,877,117.69 1.79% 272,723,862.30 2.12% 62,954.94 0.00 STATE
- ---------------------------------------------------------------------------------------------------------------------------------
3,098,874.22 1.67% 186,050,002.84 3.33% 862.91 0.00 STATE
- ---------------------------------------------------------------------------------------------------------------------------------
2,493,028.34 1.72% 144,983,767.93 1.72% 0.00 0.00 STATE
- ---------------------------------------------------------------------------------------------------------------------------------
3,717,013.21 1.50% 247,813,213.10 2.70% 0.00 0.00 STATE
- ---------------------------------------------------------------------------------------------------------------------------------
4,461,572.63 1.17% 382,203,685.95 1.17% 0.00 0.00 STATE
- ---------------------------------------------------------------------------------------------------------------------------------
4,747,490.10 1.03% 459,799,121.62 1.90% 0.00 0.00 STATE
- ---------------------------------------------------------------------------------------------------------------------------------
3,747,834.80 0.82% ---- 1.09% 0.00 0.00 ---
- ---------------------------------------------------------------------------------------------------------------------------------
2,622,896.06 0.80% 329,484,902.66 1.06% 0.00 0.00 STATE
- ---------------------------------------------------------------------------------------------------------------------------------
6,118,725.68 0.99% 620,544,954.55 1.82% 0.00 0.00 STATE
- ---------------------------------------------------------------------------------------------------------------------------------
4,830,572.27 0.78% ---- 1.04% 0.00 0.00 ---
- ---------------------------------------------------------------------------------------------------------------------------------
4,940,602.37 1.83% 270,378,594.77 2.87% 0.00 0.00 BNY
- ---------------------------------------------------------------------------------------------------------------------------------
2,007,208.45 1.18% 169,902,877.24 2.95% 0.00 0.00 CITIB
- ---------------------------------------------------------------------------------------------------------------------------------
2,311,319.70 1.76% 130,996,094.16 2.65% 0.00 0.00 CHASE
- ---------------------------------------------------------------------------------------------------------------------------------
4,726,179.03 1.51% 314,000,073.34 2.71% 9,295.15 1,510.05 USBNK
- ---------------------------------------------------------------------------------------------------------------------------------
4,512,981.74 1.45% 310,417,577.18 2.98% 8,437.88 907.34 FSTAR
- ---------------------------------------------------------------------------------------------------------------------------------
20,850,914.47 2.33% 895,269,636.41 4.94% 3,999,679.99 113,209.98 FTRUS
- ---------------------------------------------------------------------------------------------------------------------------------
48,982,071.62 14.22% 344,534,113.41 0.00% 1,957,971.96 54,677.28 FTRUS
- ---------------------------------------------------------------------------------------------------------------------------------
32,387,694.01 10.82% 299,390,082.61 0.00% 1,484,636.85 37,573.20 FTRUS
- ---------------------------------------------------------------------------------------------------------------------------------
16,844,343.12 6.70% 251,345,440.39 0.00% 557,071.18 20,959.50 FTRUS
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Current
Under Latest Original Payment Wire/ DTC/
Servicer Ratings Rating Date Check Physical
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Indymac BBB / FT BBB / FT 25th Check Physical
- ----------------------------------------------------------------------------------------------------------------------
Indymac A / FT A / FT 25th Check Physical
- ----------------------------------------------------------------------------------------------------------------------
Indymac A / FT A / FT 25th Check Physical
- ----------------------------------------------------------------------------------------------------------------------
Indymac A / FT A / FT 25th Check Physical
- ----------------------------------------------------------------------------------------------------------------------
(1) Baa3 / MD Baa3 / MD 3bd Check Physical
- ----------------------------------------------------------------------------------------------------------------------
Bank United NR NR 25th n/a Physical
- ----------------------------------------------------------------------------------------------------------------------
GE Capital BBB / FT BBB / FT 25th Wire DTC
- ----------------------------------------------------------------------------------------------------------------------
GE Capital BBB / FT BBB / FT 25th Wire DTC
- ----------------------------------------------------------------------------------------------------------------------
GE Capital BBB / FT BBB / FT 25th Check Physical
- ----------------------------------------------------------------------------------------------------------------------
GE Capital BBB / FT BBB / FT 25th Wire DTC
- ----------------------------------------------------------------------------------------------------------------------
GE Capital A / FT BBB / FT 25th Wire DTC
- ----------------------------------------------------------------------------------------------------------------------
GE Capital BBB / FT BBB / FT 25th Wire DTC
- ----------------------------------------------------------------------------------------------------------------------
GE Capital A / FT A / FT 25th Wire DTC
- ----------------------------------------------------------------------------------------------------------------------
GE Capital BBB / FT BBB / FT 25th Wire DTC
- ----------------------------------------------------------------------------------------------------------------------
GE Capital A / FT A / FT 25th Wire DTC
- ----------------------------------------------------------------------------------------------------------------------
- ----- BBB / FT BBB / FT --- --- ---
- ----------------------------------------------------------------------------------------------------------------------
GE Capital BBB / FT BBB / FT 25th Wire DTC
- ----------------------------------------------------------------------------------------------------------------------
GE Capital A / FT A / FT 25th Wire DTC
- ----------------------------------------------------------------------------------------------------------------------
- ---- BBB / FT BBB / FT --- --- ---
- ----------------------------------------------------------------------------------------------------------------------
Headlands A / FT A / FT 25th Wire DTC
- ----------------------------------------------------------------------------------------------------------------------
Chase Manhattan A / SP A / SP 25th Wire Physical
- ----------------------------------------------------------------------------------------------------------------------
Norwest Bank A / FT A / FT 25th Wire DTC
- ----------------------------------------------------------------------------------------------------------------------
Norwest Bank A / FT A / FT 25th Check Physical
- ----------------------------------------------------------------------------------------------------------------------
Norwest Bank A / FT A / FT 25th Check Physical
- ----------------------------------------------------------------------------------------------------------------------
(1) A / FT A / FT 3bd Wire Physical
- ----------------------------------------------------------------------------------------------------------------------
Citicorp NR NR 25th n/a Physical
- ----------------------------------------------------------------------------------------------------------------------
Citicorp NR NR 25th n/a Physical
- ----------------------------------------------------------------------------------------------------------------------
Glendale NR NR 25th n/a Physical
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
I-8
<PAGE>
ANNEX I
COLLATERAL INFORMATION
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Pooled Resec. Issue
Sec Cert Shelf Series Des Date Coupon
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------
50 PHMSC 93L 3-B-3 1993/12 6.641
- ---------------------------------------------------------------------------------------
50-a PHMSC 9347 B 1993/11 6.750
- ---------------------------------------------------------------------------------------
50-b PHMSC 9351 B 1993/11 6.500
- -----------------------------------------------------------------------------------------
50-c PHMSC 9357 B 1993/11 6.500
- -----------------------------------------------------------------------------------------
50-d PHMSC 9360 B 1993/11 6.750
- -----------------------------------------------------------------------------------------
50-e PHMSC 9362 B 1993/11 6.750
- -----------------------------------------------------------------------------------------
51 PHMSC 94A 5-B 1994/04 6.803
- -----------------------------------------------------------------------------------------
51-a PHMSC 9354 B 1993/12 6.500
- -----------------------------------------------------------------------------------------
51-b PHMSC 9363 B 1993/12 6.750
- -----------------------------------------------------------------------------------------
51-c PHMSC 9402 B 1994/01 6.750
- -----------------------------------------------------------------------------------------
51-d PHMSC 9403 B 1994/01 6.500
- -----------------------------------------------------------------------------------------
51-e PHMSC 9405 B 1994/01 7.000
- -----------------------------------------------------------------------------------------
51-f PHMSC 9406 B 1994/01 6.500
- -----------------------------------------------------------------------------------------
51-g PHMSC 9408 B 1994/02 7.300
- -----------------------------------------------------------------------------------------
51-h PHMSC 9410 B 1994/02 7.550
- -----------------------------------------------------------------------------------------
51-i PHMSC 9411 B 1994/03 7.050
- -----------------------------------------------------------------------------------------
51-j PHMSC 9413 B 1994/03 7.425
- -----------------------------------------------------------------------------------------
51-k PHMSC 9417 B 1994/03 6.250
- -----------------------------------------------------------------------------------------
52 PHMSC 94E 2-B 1994/10 7.340
- -----------------------------------------------------------------------------------------
52-a PHMSC 9415 B-1 1994/04 6.800
- -----------------------------------------------------------------------------------------
52-b PHMSC 9418 B 1994/04 7.425
- -----------------------------------------------------------------------------------------
52-c PHMSC 9419 B 1994/04 7.050
- -----------------------------------------------------------------------------------------
52-d PHMSC 9421 B-1 1994/05 7.800
- -----------------------------------------------------------------------------------------
52-e PHMSC 9422 B 1994/05 7.300
- -----------------------------------------------------------------------------------------
52-f PHMSC 9425 B-1 1994/07 7.500
- -----------------------------------------------------------------------------------------
52-g PHMSC 9427 B 1994/08 8.250
- -----------------------------------------------------------------------------------------
53 PHMSC 95A 3-B 1995/03 8.981
- -----------------------------------------------------------------------------------------
53-a PHMSC 9430 B 1994/09 8.750
- -----------------------------------------------------------------------------------------
53-b PHMSC 9433 B-1 1994/11 8.625
- -----------------------------------------------------------------------------------------
53-c PHMSC 9501 B 1995/02 8.750
- -----------------------------------------------------------------------------------------
54 PNC 9502 B-3 1995/09 7.500
- -----------------------------------------------------------------------------------------
55 PNC 9702 B-2 1997/02 7.500
- -----------------------------------------------------------------------------------------
56 PNC 9705 B-2 1997/09 7.250
- -----------------------------------------------------------------------------------------
57 PNC 9705 B-3 1997/09 7.250
- -----------------------------------------------------------------------------------------
58 PWMAC 9307 M-3 1993/06 7.500
- -----------------------------------------------------------------------------------------
59 PWMAC 9402 M-2 1994/02 6.500
- -----------------------------------------------------------------------------------------
60 PWMAC 9402 M-3 1994/02 6.500
- -----------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Gross Gross
Coupon Pub/ Sen. Original Current
Type Resec Pri Pct Balance Balance
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
WAC RC Private (1) 11,600,000.00 11,600,000.00
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Private 92.24 54,029,665.07 51,397,785.18
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Private 92.26 33,046,655.41 31,387,269.58
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Private 91.98 25,008,245.17 23,726,368.00
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Private 91.23 34,150,232.20 32,174,497.19
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Private 92.31 17,462,836.22 16,609,056.13
- ---------------------------------------------------------------------------------------------------------------------
WAC RC Private (1) 34,675,000.00 33,467,543.17
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Private 92.85 52,906,655.34 50,295,513.77
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Private 92.53 24,124,727.47 22,969,790.24
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Private 92.30 20,099,246.76 19,023,975.25
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Private 92.69 28,761,080.20 27,383,702.87
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Private 81.33 23,006,470.04 21,932,075.42
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Private 92.72 17,480,276.85 16,607,802.58
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Private 92.71 20,288,728.46 19,406,877.73
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Private 93.05 15,050,949.60 14,309,134.96
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Private 93.02 17,152,072.82 16,395,652.30
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Private 94.40 18,091,911.80 17,342,051.57
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Private 92.37 7,705,388.89 7,316,784.38
- ---------------------------------------------------------------------------------------------------------------------
WAC RC Private (1) 32,343,000 31,578,899.74
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Private 92.72 22,483,639.36 21,468,216.23
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Private 92.12 14,297,375.72 13,710,665.98
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Private 92.01 10,807,192.59 10,331,339.29
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Private 90.15 10,549,415.50 10,157,204.93
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Private 91.88 11,870,924.25 11,395,165.77
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Private 90.64 11,068,762.90 10,661,656.18
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Private 86.82 10,503,118.57 10,165,388.31
- ---------------------------------------------------------------------------------------------------------------------
WAC RC Private (1) 6,452,000 6,283,935.20
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Private 80.98 14,632,120 14,135,724.35
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Private 81.77 13,480,633.27 13,051,485.74
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Private 85.11 8,670,630.96 8,356,128.31
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Public 92.21 2,700,018 2,637,368.10
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Public 93.04 1,774,000 1,758,667.44
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Public 93.77 2,626,078 2,617,251.19
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Public --- 3,501,438 3,489,668.91
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Public 90.64 1,967,570 1,860,517.59
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Public 93.12 4,464,869.00 4,251,651.12
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Public --- 2,551,354 2,429,515.17
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Under Sec Cum Jan 98 Current
Principal % Of Collateral Credit Realized Realized Under
Balance Coll Balance Enhanc Losses Losses Trustee
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
4,999,999.97 0.24% 2,125,459,836.34 1.40% 3,782,187.91 186,342.31 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------
51,397,785.18 7.45% 690,198,642.61 0.00% 1,145,414.85 58,534.62 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------
31,387,269.58 6.81% 460,973,108.15 0.00% 581,177.56 39,870.00 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------
23,726,368.00 7.71% 307,868,880.69 0.00% 441,970.03 29,150.94 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------
32,174,497.19 7.45% 431,621,659.50 0.00% 1,417,714.81 38,739.57 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------
16,609,056.13 7.07% 234,797,545.42 0.00% 195,910.66 20,047.18 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------
20,268,735.65 0.55% 3,701,560,776.11 1.32% 2,866,478.50 59,331.85 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------
50,295,513.77 6.25% 804,093,377.64 0.00% 679,127.19 699.93 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------
22,969,790.24 7.17% 320,178,457.01 0.00% 189,631.63 0.00 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------
19,023,975.25 7.08% 268,763,202.96 0.00% 704,770.95 22,246.66 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------
27,383,702.87 6.73% 406,930,467.92 0.00% 103,512.13 208.80 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------
21,932,075.42 7.15% 306,837,823.45 0.00% 312,009.87 25,622.33 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------
16,607,802.58 6.70% 247,857,378.52 0.00% 3,387.72 13.20 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------
19,406,877.73 5.47% 354,930,192.66 0.00% 130,820.20 -213.38 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------
14,309,134.96 6.91% 207,113,451.09 0.00% 237,118.30 10,689.39 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------
16,395,652.30 4.94% 331,657,749.87 0.00% 240,167.97 91.76 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------
17,342,051.57 5.60% 309,674,895.31 0.00% 264,817.21 -59.72 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------
7,316,784.38 5.10% 143,523,779.71 0.00% 1,115.33 32.88 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------
31,578,899.74 2.19% 1,441,946,523.87 2.73% 1,220,990.29 94,996.17 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------
21,468,216.23 5.24% 409,876,179.53 0.00% 354,499.96 25,603.41 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------
13,710,665.98 5.76% 238,205,651.53 0.00% 176,920.60 15,506.50 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------
10,331,339.29 5.62% 183,925,271.33 0.00% 73,901.71 21,683.03 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------
10,157,204.93 6.89% 147,418,020.82 0.00% 249,342.16 10,221.75 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------
11,395,165.77 6.01% 189,544,898.05 0.00% 185,829.92 12,493.18 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------
10,661,656.18 6.78% 157,221,105.69 0.00% 56,737.43 40.29 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------
10,165,388.31 8.78% 115,755,196.91 0.00% 123,758.51 9,448.01 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------
6,283,935.20 2.00% 314,078,197.67 3.24% 199,105.95 43,676.16 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------
14,135,724.35 12.17% 116,136,837.43 0.00% 72,708.01 0.00 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------
13,051,485.74 11.67% 111,824,129.49 0.00% 37,626.87 0.00 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------
8,356,128.31 9.70% 86,117,230.75 0.00% 88,771.07 43,676.16 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------
2,637,368.10 1.25% 211,733,837.86 1.56% 0.00 0.00 USBNK
- ------------------------------------------------------------------------------------------------------------------------------
1,758,667.44 1.21% 145,198,021.75 2.42% 0.00 0.00 USBNK
- ------------------------------------------------------------------------------------------------------------------------------
2,617,251.19 0.85% 308,119,304.27 2.27% 0.00 0.00 USBNK
- ------------------------------------------------------------------------------------------------------------------------------
3,489,668.91 1.13% ---- 1.13% 0.00 0.00 ---
- ------------------------------------------------------------------------------------------------------------------------------
1,860,517.59 1.80% 103,400,662.44 2.16% 0.00 0.00 BKTRU
- ------------------------------------------------------------------------------------------------------------------------------
3,299,405.67 1.56% 211,606,871.35 2.29% 0.00 0.00 BKTRU
- ------------------------------------------------------------------------------------------------------------------------------
2,429,515.17 1.15% ---- 1.14% 36,210.95 0.00 ---
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Current
Under Latest Original Payment Wire/ DTC/
Servicer Ratings Rating Date Check Physical
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
(1) BBB / FT BBB / FT 3bd Check Physical
- --------------------------------------------------------------------------------------------------------------------
Glendale NR NR 25th n/a Physical
- --------------------------------------------------------------------------------------------------------------------
Glendale NR NR 25th n/a Physical
- --------------------------------------------------------------------------------------------------------------------
Glendale NR NR 25th n/a Physical
- --------------------------------------------------------------------------------------------------------------------
Glendale NR NR 25th n/a Physical
- --------------------------------------------------------------------------------------------------------------------
Glendale NR NR 25th n/a Physical
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
(1) BBB / FT BBB / FT 3bd Wire Physical
- --------------------------------------------------------------------------------------------------------------------
Glendale NR NR 25th n/a Physical
- --------------------------------------------------------------------------------------------------------------------
Glendale NR NR 25th n/a Physical
- --------------------------------------------------------------------------------------------------------------------
Glendale NR NR 25th n/a Physical
- --------------------------------------------------------------------------------------------------------------------
Bank United NR NR 25th n/a Physical
- --------------------------------------------------------------------------------------------------------------------
Glendale NR NR 25th n/a Physical
- --------------------------------------------------------------------------------------------------------------------
Bank United NR NR 25th n/a Physical
- --------------------------------------------------------------------------------------------------------------------
Glendale NR NR 25th n/a Physical
- --------------------------------------------------------------------------------------------------------------------
Glendale NR NR 25th n/a Physical
- --------------------------------------------------------------------------------------------------------------------
Bank United NR NR 25th n/a Physical
- --------------------------------------------------------------------------------------------------------------------
Glendale NR NR 25th n/a Physical
- --------------------------------------------------------------------------------------------------------------------
Bank United NR NR 25th n/a Physical
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
(1) A / FT A / FT 3bd Wire Physical
- --------------------------------------------------------------------------------------------------------------------
Bank United NR NR 25th n/a Physical
- --------------------------------------------------------------------------------------------------------------------
Glendale NR NR 25th n/a Physical
- --------------------------------------------------------------------------------------------------------------------
Bank United NR NR 25th n/a Physical
- --------------------------------------------------------------------------------------------------------------------
Citicorp NR NR 25th n/a Physical
- --------------------------------------------------------------------------------------------------------------------
Glendale NR NR 25th n/a Physical
- --------------------------------------------------------------------------------------------------------------------
Bank United NR NR 25th n/a Physical
- --------------------------------------------------------------------------------------------------------------------
Citicorp NR NR 25th n/a Physical
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
(1) BBB / FT BBB / FT 3bd Wire Physical
- --------------------------------------------------------------------------------------------------------------------
Citicorp NR NR 25th n/a Physical
- --------------------------------------------------------------------------------------------------------------------
Citicorp NR NR 25th n/a Physical
- --------------------------------------------------------------------------------------------------------------------
Citicorp NR NR 25th n/a Physical
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Norwest Mortgage BBB / FT BBB / FT 25th Check Physical
- --------------------------------------------------------------------------------------------------------------------
PNC Mortgage A / FT A / FT 25th Check Physical
- --------------------------------------------------------------------------------------------------------------------
PNC Mortgage A / FT A / FT 25th Check Physical
- --------------------------------------------------------------------------------------------------------------------
----- BBB / FT BBB / FT --- --- ---
- --------------------------------------------------------------------------------------------------------------------
Norwest Bank Baa3 / MD & A+ / FT Baa3 / MD & BBB / FT 25th Wire Physical
- --------------------------------------------------------------------------------------------------------------------
Norwest Bank A / FT A / FT 25th Wire Physical
- --------------------------------------------------------------------------------------------------------------------
----- BBB / FT BBB / FT --- --- ---
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
I-9
<PAGE>
ANNEX I
COLLATERAL INFORMATION
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Pooled Resec. Issue
Sec Cert Shelf Series Des Date Coupon
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
61 RALI 97Q12 M-2 1997/11 7.250
- ---------------------------------------------------------------------------------------
62 RAST 96A3 B-1-B 1996/05 7.500
- ---------------------------------------------------------------------------------------
63 RAST 96A4 B-2 1996/06 7.500
- ---------------------------------------------------------------------------------------
64 RFC 93S10 M-2 1993/02 8.500
- ---------------------------------------------------------------------------------------
65 RFC 93S18 M-2 1993/05 7.500
- ---------------------------------------------------------------------------------------
66 RFC 93S18 M-3 1993/05 7.500
- ---------------------------------------------------------------------------------------
67 RFC 93S21 M-3 1993/06 7.500
- ---------------------------------------------------------------------------------------
68 RFC 93S22 M-2 1993/06 7.000
- ---------------------------------------------------------------------------------------
69 RFC 93S22 M-3 1993/06 7.000
- ---------------------------------------------------------------------------------------
70 RFC 93S24 M-3 1993/07 7.000
- ---------------------------------------------------------------------------------------
71 RFC 93S26 M-2 1993/07 7.500
- ---------------------------------------------------------------------------------------
72 RFC 93S26 M-3 1993/07 7.500
- ---------------------------------------------------------------------------------------
73 RFC 93S27 M-3 1993/06 7.500
- ---------------------------------------------------------------------------------------
74 RFC 93S28 M-2 1993/08 7.000
- ---------------------------------------------------------------------------------------
75 RFC 93S28 M-3 1993/08 7.000
- ---------------------------------------------------------------------------------------
76 RFC 93S34 M-3 1993/09 7.000
- ---------------------------------------------------------------------------------------
77 RFC 94S3 M-3 1994/02 6.739
- ---------------------------------------------------------------------------------------
78 RFC 95R20 M-3 1995/12 7.500
- ---------------------------------------------------------------------------------------
79 RFC 96S10 M-2 1996/05 7.500
- ---------------------------------------------------------------------------------------
80 RFC 96S14 M-2 1996/05 7.500
- ---------------------------------------------------------------------------------------
81 RFC 96S14 M-3 1996/05 7.500
- ---------------------------------------------------------------------------------------
82 RFC 96S16 M-2 1996/07 7.750
- ---------------------------------------------------------------------------------------
83 RFC 96S18 M-2 1996/08 8.000
- ---------------------------------------------------------------------------------------
84 RFC 96S23 M-2 1996/11 7.750
- ---------------------------------------------------------------------------------------
85 RFC 96S25 M-2 1996/12 7.750
- ---------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Gross Gross
Coupon Pub/ Sen. Original Current
Type Resec Pri Pct Balance Balance
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Public 92.08 4,471,600 4,463,224.20
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Public 87.18 7,010,900 6,907,227.16
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Public 88.54 5,098,000 5,027,207.47
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Public 72.61 2,016,155 1,833,799.78
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Public 85.09 6,257,900 5,886,813.16
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Public --- 3,754,700 3,546,124.62
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Public 86.65 2,692,006 2,572,254.97
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Public 91.69 4,333,550 4,102,206.32
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Public --- 2,600,140 2,461,333.26
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Public 91.54 3,739,700 3,587,645.22
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Public 87.58 5,640,445 5,338,218.34
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Public --- 3,760,297 3,630,616.61
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Public 86.25 2,059,280 1,968,943.81
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Public 91.66 3,210,000 3,049,350.79
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Public --- 2,141,000 2,033,850.45
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Public 92.06 2,139,566 2,030,033.78
- ---------------------------------------------------------------------------------------------------------------------
WAC ML Public 93.09 1,496,000 1,428,149.92
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Public 91.41 3,263,317 3,189,359.27
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Public 93.93 6,700,600 6,573,570.86
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Public 93.40 3,675,000 3,606,538.23
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Public --- 1,837,500 1,803,269.14
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Public 92.33 4,552,300 4,485,140.01
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Public 93.05 2,677,200 2,634,212.19
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Public 93.10 3,247,100 3,215,088.65
- ---------------------------------------------------------------------------------------------------------------------
FIX ML Public 93.16 3,188,300 3,158,716.44
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Under Sec Cum Jan 98 Current
Principal % Of Collateral Credit Realized Realized Under
Balance Coll Balance Enhanc Losses Losses Trustee
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
4,463,224.20 1.53% 291,246,693.96 2.81% 0.00 0.00 BKTRU
- ---------------------------------------------------------------------------------------------------------------------------------
6,907,227.16 2.65% 261,007,912.01 3.89% 213,289.62 19,150.58 BNY
- ---------------------------------------------------------------------------------------------------------------------------------
5,027,207.47 2.62% 191,876,746.83 3.93% 0.00 0.00 BNY
- ---------------------------------------------------------------------------------------------------------------------------------
1,833,799.78 6.18% 29,667,310.65 11.05% 787,221.17 1,947.17 FCHIC
- ---------------------------------------------------------------------------------------------------------------------------------
5,886,813.16 2.70% 218,280,762.77 6.32% 0.00 0.00 BKTRU
- ---------------------------------------------------------------------------------------------------------------------------------
3,546,124.62 1.62% ---- 4.70% 1,292,485.35 11,002.35 ---
- ---------------------------------------------------------------------------------------------------------------------------------
2,572,254.97 1.94% 132,765,095.08 3.73% 471,913.07 2,945.07 BKTRU
- ---------------------------------------------------------------------------------------------------------------------------------
4,102,206.32 1.67% 245,923,828.41 3.32% 0.00 0.00 BKTRU
- ---------------------------------------------------------------------------------------------------------------------------------
2,461,333.26 1.00% ---- 2.32% 114,685.00 0.00 ---
- ---------------------------------------------------------------------------------------------------------------------------------
3,587,645.22 1.38% 259,059,014.02 1.95% 659,774.38 2,912.38 FCHIC
- ---------------------------------------------------------------------------------------------------------------------------------
5,338,218.34 2.84% 188,028,918.60 4.40% 0.00 0.00 BKTRU
- ---------------------------------------------------------------------------------------------------------------------------------
3,630,616.61 1.93% ---- 2.47% 1,407,501.79 5,508.79 ---
- ---------------------------------------------------------------------------------------------------------------------------------
1,968,943.81 1.72% 114,607,020.39 3.61% 989,674.07 7,075.07 FCHIC
- ---------------------------------------------------------------------------------------------------------------------------------
3,049,350.79 2.02% 150,742,324.25 2.95% 0.00 0.00 FCHIC
- ---------------------------------------------------------------------------------------------------------------------------------
2,033,850.45 1.35% ---- 1.60% 129,712.51 0.00 ---
- ---------------------------------------------------------------------------------------------------------------------------------
2,030,033.78 1.30% 156,466,414.36 1.46% 261,165.00 0.00 FCHIC
- ---------------------------------------------------------------------------------------------------------------------------------
1,428,149.92 0.60% 237,673,100.22 1.80% 0.00 0.00 FCHIC
- ---------------------------------------------------------------------------------------------------------------------------------
3,189,359.27 1.33% 239,995,441.72 1.95% 108,337.39 0.00 FCHIC
- ---------------------------------------------------------------------------------------------------------------------------------
6,573,570.86 1.45% 453,671,870.48 2.59% 86,901.00 0.00 BKTRU
- ---------------------------------------------------------------------------------------------------------------------------------
3,606,538.23 1.10% 327,751,427.12 2.20% 0.00 0.00 FCHIC
- ---------------------------------------------------------------------------------------------------------------------------------
1,803,269.14 0.55% ---- 1.65% 0.00 0.00 ---
- ---------------------------------------------------------------------------------------------------------------------------------
4,485,140.01 1.76% 255,432,415.19 3.10% 150,207.10 150,207.10 BKTRU
- ---------------------------------------------------------------------------------------------------------------------------------
2,634,212.19 1.58% 166,854,953.76 2.84% 0.00 0.00 FCHIC
- ---------------------------------------------------------------------------------------------------------------------------------
3,215,088.65 1.57% 204,920,544.85 2.82% 0.00 0.00 BKTRU
- ---------------------------------------------------------------------------------------------------------------------------------
3,158,716.44 1.87% 169,290,034.97 2.49% 0.00 0.00 FCHIC
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Current
Under Latest Original Payment Wire/ DTC/
Servicer Ratings Rating Date Check Physical
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
RFC A / FT A / FT 25th Wire Physical
- ------------------------------------------------------------------------------------------------------------------------
Indymac A / FT A / FT 25th Wire DTC
- ------------------------------------------------------------------------------------------------------------------------
Indymac A / FT A / FT 25th Wire DTC
- ------------------------------------------------------------------------------------------------------------------------
RFC A / SP & AAA / FT A / SP & A / FT 25th Wire Physical
- ------------------------------------------------------------------------------------------------------------------------
RFC A / SP A / SP 25th Wire Physical
- ------------------------------------------------------------------------------------------------------------------------
- ---- BBB / SP BBB / SP --- --- ---
- ------------------------------------------------------------------------------------------------------------------------
RFC BBB / SP BBB / SP 25th Wire Physical
- ------------------------------------------------------------------------------------------------------------------------
RFC A / SP A / SP 25th Wire Physical
- ------------------------------------------------------------------------------------------------------------------------
- ---- BBB / SP BBB / SP --- --- ---
- ------------------------------------------------------------------------------------------------------------------------
RFC BBB / FT BBB / FT 25th Wire Physical
- ------------------------------------------------------------------------------------------------------------------------
RFC A / FT A / FT 25th Wire Physical
- ------------------------------------------------------------------------------------------------------------------------
- --- BBB / FT BBB / FT --- --- ---
- ------------------------------------------------------------------------------------------------------------------------
RFC BBB / SP BBB / SP 25th Wire Physical
- ------------------------------------------------------------------------------------------------------------------------
RFC A / FT A / FT 25th Wire Physical
- ------------------------------------------------------------------------------------------------------------------------
- --- BBB / FT BBB / FT --- --- ---
- ------------------------------------------------------------------------------------------------------------------------
RFC BBB / FT BBB / FT 25th Wire Physical
- ------------------------------------------------------------------------------------------------------------------------
RFC BBB / SP BBB / SP 25th Wire Physical
- ------------------------------------------------------------------------------------------------------------------------
Norwest Bank BBB / FT BBB / FT 25th Wire Physical
- ------------------------------------------------------------------------------------------------------------------------
RFC A / FT A / FT 25th Wire Physical
- ------------------------------------------------------------------------------------------------------------------------
RFC A / SP A / SP 25th Wire Physical
- ------------------------------------------------------------------------------------------------------------------------
- --- BBB / SP BBB / SP --- --- ---
- ------------------------------------------------------------------------------------------------------------------------
RFC A / SP & A / FT A / SP & A / FT 25th Wire Physical
- ------------------------------------------------------------------------------------------------------------------------
RFC A / FT A / FT 25th Wire Physical
- ------------------------------------------------------------------------------------------------------------------------
RFC A / FT A / FT 25th Wire Physical
- ------------------------------------------------------------------------------------------------------------------------
RFC A / FT A / FT 25th Wire Physical
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
I-10
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Pooled Resec. Issue
Sec Cert Shelf Series Des Date Coupon
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
86 RYLPT3 92A 1-B 1992/08 8.266
- -------------------------------------------------------------------------------------------------------------
86-a-1 RYLPT3 92C B-1 1992/08 7.741
- -------------------------------------------------------------------------------------------------------------
86-a-2 RYLPT3 92C B-2 1992/08 8.200
- -------------------------------------------------------------------------------------------------------------
86-a-3 RYLPT3 92C B-3 1992/08 11.720
- -------------------------------------------------------------------------------------------------------------
86-b-1 RYLPT3 92D B-1 1992/08 7.969
- -------------------------------------------------------------------------------------------------------------
86-b-2 RYLPT3 92D B-2 1992/08 8.200
- -------------------------------------------------------------------------------------------------------------
86-c MIGHTS 9101 B-2 1991/02 9.127
- -------------------------------------------------------------------------------------------------------------
86-d-1 RYLPTC 9118 3-B 1991/11 8.250
- -------------------------------------------------------------------------------------------------------------
86-d-2 RYLPTC 9118 3-C 1991/11 8.250
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
87 RYLPTC 9304 B-2 1993/08 7.500
- -------------------------------------------------------------------------------------------------------------
88 SASCO 9601 B-1 1996/04 7.250
- -------------------------------------------------------------------------------------------------------------
89 SASCO 9601 B-2 1996/04 7.250
- -------------------------------------------------------------------------------------------------------------
90 SASCO 9602 B-2 1996/05 7.000
- -------------------------------------------------------------------------------------------------------------
91 SASI 93J 3-B 1993/11 6.808
- -------------------------------------------------------------------------------------------------------------
93-a PHMSC 9336 B 1993/09 7.250
- -------------------------------------------------------------------------------------------------------------
93-b PHMSC 9343 B 1993/09 6.750
- -------------------------------------------------------------------------------------------------------------
93-c PHMSC 9344 B 1993/10 6.750
- -------------------------------------------------------------------------------------------------------------
93-d PHMSC 9350 B 1993/10 6.500
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
92 SASI 9405 B-2 1994/05 7.000
- -------------------------------------------------------------------------------------------------------------
93 SASI 9405 B-3 1994/05 7.000
- -------------------------------------------------------------------------------------------------------------
94 SASI 9504 B-2 1995/10 7.500
- -------------------------------------------------------------------------------------------------------------
95 SBMSI 92D B-4 1992/10 8.015
- -------------------------------------------------------------------------------------------------------------
95-a RFC 92S26 B-1 1992/08 8.500
- -------------------------------------------------------------------------------------------------------------
95-b RFC 92S28 B-1 1992/08 8.000
- -------------------------------------------------------------------------------------------------------------
95-c RFC 92S30 B-1 1992/09 8.000
- -------------------------------------------------------------------------------------------------------------
95-d RFC 92S32 B-1 1992/09 7.750
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
96 SBMSI 9409 B-2 1994/07 7.000
- -------------------------------------------------------------------------------------------------------------
Totals / Weighted Averages: 7.213
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Gross Gross
Coupon Pub/ Sen. Original Current
Type Resec Pri Pct Balance Balance
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
WAC RC Public (1) 11,916,000.00 11,916,000.00
- -------------------------------------------------------------------------------------------------------
WAC ML Private 33.30 5,043,853.03 3,232,315.09
- -------------------------------------------------------------------------------------------------------
WAC ML Private 33.30 24,564,784.50 17,692,215.02
- -------------------------------------------------------------------------------------------------------
WAC ML Private 33.30 5,008,513.27 2,058,824.91
- -------------------------------------------------------------------------------------------------------
WAC ML Private 57.14 1,558,380.02 1,297,251.99
- -------------------------------------------------------------------------------------------------------
WAC ML Private 57.14 26,135,251.38 21,194,852.04
- -------------------------------------------------------------------------------------------------------
WAC ML Private 69.71 1,947,399.00 1,639,365.89
- -------------------------------------------------------------------------------------------------------
FIX ML Private 42.02 25,179,717.00 15,659,783.25
- -------------------------------------------------------------------------------------------------------
FIX ML Private --- 20,458,520.00 20,457,598.58
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
FIX ML Private 91.16 5,405,000 5,135,340.09
- -------------------------------------------------------------------------------------------------------
FIX ML Public 92.84 3,214,000 3,156,155.68
- -------------------------------------------------------------------------------------------------------
FIX ML Public --- 1,653,000 1,623,249.94
- -------------------------------------------------------------------------------------------------------
FIX ML Public 91.79 2,509,000 2,455,002.07
- -------------------------------------------------------------------------------------------------------
WAC RC Public (1) 26,492,000.00 25,740,672.50
- -------------------------------------------------------------------------------------------------------
FIX ML Private 90.01 34,533,018.80 32,893,621.34
- -------------------------------------------------------------------------------------------------------
FIX ML Private 90.76 33,034,492.89 31,416,993.49
- -------------------------------------------------------------------------------------------------------
FIX ML Private 91.19 49,257,898.29 46,862,227.60
- -------------------------------------------------------------------------------------------------------
FIX ML Private 91.89 24,994,993.84 23,716,039.11
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
FIX ML Public 80.27 4,987,697 4,779,332.42
- -------------------------------------------------------------------------------------------------------
FIX ML Public --- 3,740,773 3,584,499.55
- -------------------------------------------------------------------------------------------------------
FIX ML Public 91.21 4,386,789 4,292,282.41
- -------------------------------------------------------------------------------------------------------
WAC RC Private (1) 7,444,133.00 6,858,984.65
- -------------------------------------------------------------------------------------------------------
FIX ML Private 62.30 17,878,926.36 14,630,119.52
- -------------------------------------------------------------------------------------------------------
FIX ML Private 65.41 16,432,384.46 14,636,767.29
- -------------------------------------------------------------------------------------------------------
FIX ML Private 76.36 14,467,386.02 12,921,714.58
- -------------------------------------------------------------------------------------------------------
FIX ML Private 73.76 20,436,665.48 18,388,704.71
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
FIX ML Public 88.26 4,265,000 4,095,482.42
- -------------------------------------------------------------------------------------------------------
628,648,985.03 605,577,810.78
- --------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Under Sec Cum Jan 98 Current
Principal % Of Collateral Credit Realized Realized Under
Balance Coll Balance Enhanc Losses Losses Trustee
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
1,500,000.00 0.83% 179,678,759.73 19.10% 8,812,949.96 236,234.97 STATE
- ------------------------------------------------------------------------------------------------------------------------------------
3,232,315.09 32.32% 10,001,362.37 0.00% 379,192.91 385.20 STATE
- ------------------------------------------------------------------------------------------------------------------------------------
17,692,215.02 47.58% 37,181,144.34 0.00% 2,409,630.08 217,913.15 STATE
- ------------------------------------------------------------------------------------------------------------------------------------
2,058,824.91 40.12% 5,131,802.81 0.00% 1,791,975.48 453.84 STATE
- ------------------------------------------------------------------------------------------------------------------------------------
1,297,251.99 25.82% 5,024,475.64 0.00% 58,837.70 0.00 STATE
- ------------------------------------------------------------------------------------------------------------------------------------
21,194,852.04 44.67% 47,452,283.90 0.00% 2,641,085.33 0.00 STATE
- ------------------------------------------------------------------------------------------------------------------------------------
1,639,365.89 29.66% 5,527,782.87 0.63% 577,717.86 17,482.78 STATE
- ------------------------------------------------------------------------------------------------------------------------------------
15,659,783.25 22.58% 69,359,907.80 0.00% 0.00 0.00 STATE
- ------------------------------------------------------------------------------------------------------------------------------------
20,457,598.58 ---- ---- 0.00% 954,510.60 0.00 STATE
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
5,135,340.09 1.57% 328,102,095.25 1.40% 540,199.14 0.00 BNY
- ------------------------------------------------------------------------------------------------------------------------------------
3,156,155.68 2.01% 157,070,692.49 2.28% 0.00 0.00 CHASE
- ------------------------------------------------------------------------------------------------------------------------------------
1,623,249.94 1.03% ---- 1.24% 29,261.36 29,261.36 ---
- ------------------------------------------------------------------------------------------------------------------------------------
2,455,002.07 1.47% 167,461,222.09 3.52% 0.00 0.00 NORWB
- ------------------------------------------------------------------------------------------------------------------------------------
16,199,173.04 0.87% 1,860,429,279.96 1.96% 2,786,229.88 67,537.82 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------------
32,893,621.34 8.51% 386,648,007.12 0.00% 1,034,537.81 38,574.64 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------------
31,416,993.49 7.82% 401,701,513.06 0.00% 765,315.99 203.61 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------------
46,862,227.60 6.10% 768,110,931.00 0.00% 800,084.34 28,724.94 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------------
23,716,039.11 7.80% 303,968,828.78 0.00% 186,291.74 34.63 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
4,779,332.42 1.22% 391,211,554.04 2.93% 0.00 0.00 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------------
3,584,499.55 0.92% ---- 2.01% 509,574.31 368.81 ---
- ------------------------------------------------------------------------------------------------------------------------------------
4,292,282.41 1.30% 329,560,889.73 2.61% 9,248.59 234.13 FSTAR
- ------------------------------------------------------------------------------------------------------------------------------------
4,146,276.11 1.43% 289,487,335.89 11.05% 7,206,867.00 0.00 FCHIC
- ------------------------------------------------------------------------------------------------------------------------------------
14,630,119.52 25.92% 56,448,470.19 0.00% 3,458,482.00 0.00 FCHIC
- ------------------------------------------------------------------------------------------------------------------------------------
14,636,767.29 24.65% 59,369,955.86 0.00% 1,065,593.00 0.00 BKTRU
- ------------------------------------------------------------------------------------------------------------------------------------
12,921,714.58 16.76% 77,120,181.11 0.00% 1,356,361.00 0.00 BKTRU
- ------------------------------------------------------------------------------------------------------------------------------------
18,388,704.71 19.05% 96,548,728.73 0.00% 1,326,431.00 0.00 FCHIC
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
4,095,482.42 2.71% 151,377,498.03 3.28% 154,330.97 35,455.98 FTRUS
- ------------------------------------------------------------------------------------------------------------------------------------
515,964,267.32 27,554,237,845.62 2.61%
- --------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Current
Under Latest Original Payment Wire/ DTC/
Servicer Ratings Rating Date Check Physical
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
(1) BBB / SP & BBB / FT BBB / SP & BBB / FT 29th Wire DTC
- ------------------------------------------------------------------------------------------------------------------------------------
Norwest Bank NR NR 25th n/a Physical
- ------------------------------------------------------------------------------------------------------------------------------------
Norwest Bank NR NR 25th n/a Physical
- ------------------------------------------------------------------------------------------------------------------------------------
Norwest Bank NR NR 25th n/a Physical
- ------------------------------------------------------------------------------------------------------------------------------------
Norwest Bank NR NR 25th n/a Physical
- ------------------------------------------------------------------------------------------------------------------------------------
Norwest Bank NR NR 25th n/a Physical
- ------------------------------------------------------------------------------------------------------------------------------------
Norwest Bank NR NR 25th n/a Physical
- ------------------------------------------------------------------------------------------------------------------------------------
Norwest Bank NR NR 25th n/a Physical
- ------------------------------------------------------------------------------------------------------------------------------------
- ---- NR NR --- --- ---
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Norwest Bank BBB / FT BBB / FT 25th Check Physical
- ------------------------------------------------------------------------------------------------------------------------------------
Norwest Bank A / FT A / FT 25th Wire Physical
- ------------------------------------------------------------------------------------------------------------------------------------
- ---- BBB / FT BBB / FT --- --- ---
- ------------------------------------------------------------------------------------------------------------------------------------
Chase Manhattan A / SP A / SP 25th Check Physical
- ------------------------------------------------------------------------------------------------------------------------------------
(1) BBB / FT BBB / FT 3bd Check Physical
- ------------------------------------------------------------------------------------------------------------------------------------
Glendale NR NR 25th n/a Physical
- ------------------------------------------------------------------------------------------------------------------------------------
Glendale NR NR 25th n/a Physical
- ------------------------------------------------------------------------------------------------------------------------------------
Glendale NR NR 25th n/a Physical
- ------------------------------------------------------------------------------------------------------------------------------------
Glendale NR NR 25th n/a Physical
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Norwest Bank A / SP A / SP 25th Check Physical
- ------------------------------------------------------------------------------------------------------------------------------------
- --- BBB / SP BBB / SP --- --- ---
- ------------------------------------------------------------------------------------------------------------------------------------
Norwest Bank BBB / SP & BBB / FT BBB / SP & BBB / FT 25th Check Physical
- ------------------------------------------------------------------------------------------------------------------------------------
(1) BBB / SP BBB / SP 3bd Check Physical
- ------------------------------------------------------------------------------------------------------------------------------------
RFC NR NR 25th n/a Physical
- ------------------------------------------------------------------------------------------------------------------------------------
RFC NR NR 25th n/a Physical
- ------------------------------------------------------------------------------------------------------------------------------------
RFC NR NR 25th n/a Physical
- ------------------------------------------------------------------------------------------------------------------------------------
RFC NR NR 25th n/a Physical
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Norwest Mortgage A / FT A / FT 25th Check Physical
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
I-11
<PAGE>
ANNEX I
COLLATERAL INFORMATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Pooled Resec. Comp
Sec Cert Shelf Series Des Interest IOU
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 AMERT 9303 3-B (1) Y
- --------------------------------------------------------------------------------------------------------------------
1-a PHMSC 9218 B-2 Serv Fee Y
- --------------------------------------------------------------------------------------------------------------------
1-b PHMSC 9222 B-2 Serv Fee Y
- --------------------------------------------------------------------------------------------------------------------
1-c PHMSC 9228 B-2 Serv Fee Y
- --------------------------------------------------------------------------------------------------------------------
1-d MARPTC 913 B-2 Serv Fee Y
- --------------------------------------------------------------------------------------------------------------------
1-e MARPTC 922 B-3 Serv Fee Y
- --------------------------------------------------------------------------------------------------------------------
1-f MARPTC 923 B-2 Serv Fee Y
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
2 BSMSI 9308 M Serv Fee N
- --------------------------------------------------------------------------------------------------------------------
3 CAPPTC 94C B-1 Serv Fee N
- --------------------------------------------------------------------------------------------------------------------
4 CFC 9301 B-1 Serv Fee N
- --------------------------------------------------------------------------------------------------------------------
5 CFC 9401 B-1 0.125% N
- --------------------------------------------------------------------------------------------------------------------
6 CFC 9409 B-2 0.125% N
- --------------------------------------------------------------------------------------------------------------------
7 CFC 9418 B-3 0.125% N
- --------------------------------------------------------------------------------------------------------------------
8 CFC 9602 B-2 0.125% N
- --------------------------------------------------------------------------------------------------------------------
9 CFC 9705 B-3 0.125% N
- --------------------------------------------------------------------------------------------------------------------
10 CHASE 94E B-2 Serv Fee Y
- --------------------------------------------------------------------------------------------------------------------
11 CHEMPT 9601 B-3 Serv Fee N
- --------------------------------------------------------------------------------------------------------------------
12 CITIMT 9016 B Serv Fee Y
- --------------------------------------------------------------------------------------------------------------------
13 CITIMT 9205 B Serv Fee Y
- --------------------------------------------------------------------------------------------------------------------
14 CITIMT 9219 B Serv Fee Y
- --------------------------------------------------------------------------------------------------------------------
15 CITIMT 9401 B-1 Serv Fee N
- --------------------------------------------------------------------------------------------------------------------
16 CITIMT 9405 B-1 Serv Fee N
- --------------------------------------------------------------------------------------------------------------------
17 CITIMT 9407 B-1 Serv Fee N
- --------------------------------------------------------------------------------------------------------------------
18 CITIMT 9410 B-1 Serv Fee N
- --------------------------------------------------------------------------------------------------------------------
19 CITIMT 9411 B-1 Serv Fee N
- --------------------------------------------------------------------------------------------------------------------
20 CITIMT 9413 B-2 Serv Fee N
- --------------------------------------------------------------------------------------------------------------------
21 CITIMT 9502 B-3 Serv Fee N
- --------------------------------------------------------------------------------------------------------------------
22 CITIMT 9601 B-1 0.125% N
- --------------------------------------------------------------------------------------------------------------------
23 CITIMT 9703 B-1 0.125% N
- --------------------------------------------------------------------------------------------------------------------
24 CITIMT 9703 B-2 --- ---
- --------------------------------------------------------------------------------------------------------------------
25 CITIMT 9707 B-1 0.125% N
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Remain
Clean Up Call Special Remain Remain
% By Hazard Fraud Bankruptcy 30+ Pct
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10% Seller 6,246,041 2,020,706 312,528 1.27%
- --------------------------------------------------------------------------------------------------------------------------------
10% Servicer 2,891,596 592,172 150,000 2.79%
- --------------------------------------------------------------------------------------------------------------------------------
10% Servicer 1,746,870 766,662 160,930 1.56%
- --------------------------------------------------------------------------------------------------------------------------------
10% Servicer 1,607,575 661,872 1,598 1.03%
- --------------------------------------------------------------------------------------------------------------------------------
5% Seller NONE NONE NONE 0.00%
- --------------------------------------------------------------------------------------------------------------------------------
5% Seller NONE NONE NONE 0.00%
- --------------------------------------------------------------------------------------------------------------------------------
5% Seller NONE NONE NONE 0.96%
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
10% Servicer NONE NONE NONE 0.88%
- --------------------------------------------------------------------------------------------------------------------------------
10% Seller 3,035,369 (3) 6,070,738 (3) 100,000 (3) 0.83%
- --------------------------------------------------------------------------------------------------------------------------------
10% Servicer 2,000,393 2,900,731 125,000 0.76%
- --------------------------------------------------------------------------------------------------------------------------------
10% Servicer 3,247,026 4,001,727 125,790 0.49%
- --------------------------------------------------------------------------------------------------------------------------------
10% Servicer 1,956,492 4,498,212 117,980 0.40%
- --------------------------------------------------------------------------------------------------------------------------------
10% Servicer 1,962,374 2,800,943 100,000 2.31%
- --------------------------------------------------------------------------------------------------------------------------------
10% Servicer 1,444,436 3,253,766 100,000 0.40%
- --------------------------------------------------------------------------------------------------------------------------------
10% Servicer 3,164,946 7,000,224 50,000 1.17%
- --------------------------------------------------------------------------------------------------------------------------------
10% Servicer NONE NONE NONE 0.84%
- --------------------------------------------------------------------------------------------------------------------------------
10% Servicer 3,714,454 4,810,475 100,000 0.15%
- --------------------------------------------------------------------------------------------------------------------------------
5% Seller NONE NONE NONE 3.01%
- --------------------------------------------------------------------------------------------------------------------------------
5% Seller NONE NONE NONE 2.80%
- --------------------------------------------------------------------------------------------------------------------------------
5% Seller NONE NONE NONE 1.52%
- --------------------------------------------------------------------------------------------------------------------------------
5% Seller 1,500,000 (3) 3,000,000 (3) 105,000 (3) 1.30%
- --------------------------------------------------------------------------------------------------------------------------------
5% Seller 2,588,914 (3) 5,177,828 (3) 103,557 (3) 0.56%
- --------------------------------------------------------------------------------------------------------------------------------
5% Seller 1,638,500 (3) 2,900,000 (3) 101,500 (3) 1.16%
- --------------------------------------------------------------------------------------------------------------------------------
5% Seller 2,391,388 (3) 2,599,335 (3) 103,973 (3) 0.89%
- --------------------------------------------------------------------------------------------------------------------------------
5% Seller 1,925,000 (3) 3,500,000 (3) 105,000 (3) 1.99%
- --------------------------------------------------------------------------------------------------------------------------------
5% Seller 732,000 (3) 2,400,000 (3) 96,000 (3) 1.35%
- --------------------------------------------------------------------------------------------------------------------------------
5% Seller 944,898 761,484 115,000 1.30%
- --------------------------------------------------------------------------------------------------------------------------------
5% Seller 1,981,839 1,714,611 100,000 0.74%
- --------------------------------------------------------------------------------------------------------------------------------
5% Seller 2,125,808 4,038,876 100,000 0.00%
- --------------------------------------------------------------------------------------------------------------------------------
--- --- ---- ---- ---- ----
- --------------------------------------------------------------------------------------------------------------------------------
5% Seller 2,548,982 2,020,173 100,000 0.36%
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Servicing
60+ Pct 90+ Pct F/C Pct REO Pct Delinq GWAC Fee NWAC
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
0.52% 1.16% 1.11% 0.44% 4.50% 8.986% (1) 8.623%
- ----------------------------------------------------------------------------------------------------------------------------------
0.00% 2.31% 0.75% 1.63% 7.49% 9.255% 0.250% 9.005%
- ---------------------------------------------------------------------------------------------------------------------------------
1.05% 0.77% 1.04% 0.23% 4.65% 9.176% 0.200% 8.976%
- ---------------------------------------------------------------------------------------------------------------------------------
0.00% 0.08% 1.31% 0.41% 2.83% 8.837% 0.200% 8.637%
- ---------------------------------------------------------------------------------------------------------------------------------
2.51% 0.00% 0.00% 0.00% 2.51% 9.723% 0.250% 9.473%
- ---------------------------------------------------------------------------------------------------------------------------------
0.00% 0.00% 0.00% 0.00% 0.00% 8.665% 0.250% 8.001%
- ---------------------------------------------------------------------------------------------------------------------------------
1.00% 3.04% 2.44% 0.00% 7.44% 8.750% 0.250% 8.067%
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
0.00% 0.00% 0.24% 0.18% 1.30% 7.579% 0.250% 7.299%
- ---------------------------------------------------------------------------------------------------------------------------------
0.32% 0.00% 0.13% 0.12% 1.40% 7.169% .250 % + 6.838%
- ---------------------------------------------------------------------------------------------------------------------------------
0.12% 0.38% 0.00% 0.00% 1.27% 7.420% 0.250% 7.157%
- ---------------------------------------------------------------------------------------------------------------------------------
0.08% 0.00% 0.00% 0.00% 0.56% 7.151% 0.250% 6.888%
- ---------------------------------------------------------------------------------------------------------------------------------
0.13% 0.06% 0.00% 0.08% 0.68% 7.288% 0.250% 7.025%
- ---------------------------------------------------------------------------------------------------------------------------------
0.28% 0.00% 0.73% 0.52% 3.84% 8.217% 0.250% 7.966%
- ---------------------------------------------------------------------------------------------------------------------------------
0.19% 0.66% 0.22% 0.19% 1.67% 8.335% 0.250% 8.034%
- ---------------------------------------------------------------------------------------------------------------------------------
0.00% 0.09% 0.06% 0.00% 1.32% 8.165% 0.250% 7.906%
- ---------------------------------------------------------------------------------------------------------------------------------
0.00% 0.21% 0.00% 0.00% 1.04% 6.839% 0.125% - 0.270% 6.587%
- ---------------------------------------------------------------------------------------------------------------------------------
0.12% 0.00% 0.16% 0.00% 0.43% 7.964% 0.125% - 1.750% 7.250%
- ---------------------------------------------------------------------------------------------------------------------------------
1.42% 4.14% 7.79% 3.33% 19.69% 10.655% 0.250% 10.405%
- ---------------------------------------------------------------------------------------------------------------------------------
0.24% 0.00% 4.96% 0.00% 8.00% 9.539% 0.250% 9.230%
- ---------------------------------------------------------------------------------------------------------------------------------
0.76% 0.55% 1.59% 0.59% 5.01% 8.737% 0.250% 8.484%
- ---------------------------------------------------------------------------------------------------------------------------------
0.08% 0.00% 0.16% 0.24% 1.78% 7.463% 0.250% 7.213%
- ---------------------------------------------------------------------------------------------------------------------------------
0.16% 0.10% 0.28% 0.15% 1.25% 7.336% 0.250% 7.086%
- ---------------------------------------------------------------------------------------------------------------------------------
0.19% 0.12% 0.05% 0.00% 1.52% 7.352% 0.250% 7.102%
- ---------------------------------------------------------------------------------------------------------------------------------
0.49% 0.00% 0.06% 0.00% 1.44% 7.511% 0.250% 7.261%
- ---------------------------------------------------------------------------------------------------------------------------------
0.16% 0.00% 0.10% 0.62% 2.87% 7.938% 0.250% 7.688%
- ---------------------------------------------------------------------------------------------------------------------------------
0.32% 0.00% 0.30% 0.00% 1.97% 8.011% 0.250% 7.761%
- ---------------------------------------------------------------------------------------------------------------------------------
0.20% 0.50% 0.11% 0.06% 2.17% 8.249% 0.250% 7.999%
- ---------------------------------------------------------------------------------------------------------------------------------
0.00% 0.00% 0.00% 0.00% 0.74% 8.210% 0.250% 7.960%
- ---------------------------------------------------------------------------------------------------------------------------------
0.00% 0.00% 0.00% 0.00% 0.00% 8.017% 0.250% 7.767%
- ---------------------------------------------------------------------------------------------------------------------------------
---- ---- ---- ---- ---- ---- --- ----
- ---------------------------------------------------------------------------------------------------------------------------------
0.00% 0.00% 0.00% 0.00% 0.36% 7.623% 0.250% 7.373%
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Number Average % WA
of Mtg Loan Highest Orig % Call
WAM AGE Loans Balance %CAL State LTV Bal Re
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
274 79 1,272 202,539 n/a n/a n/a 11.99%
- ------------------------------------------------------------------------------------------------------------------------------------
281 70 271 169,924 CA 45% CA 45% 73.64% 10.21%
- ------------------------------------------------------------------------------------------------------------------------------------
280 69 339 183,699 CA 52% CA 52% 73.71% 12.93%
- ------------------------------------------------------------------------------------------------------------------------------------
283 67 284 200,774 CA 52% CA 52% 73.29% 18.56%
- ------------------------------------------------------------------------------------------------------------------------------------
279 76 41 232,853 n/a n/a n/a 3.64%
- ------------------------------------------------------------------------------------------------------------------------------------
264 96 148 250,699 n/a n/a n/a 12.42%
- ------------------------------------------------------------------------------------------------------------------------------------
256 104 189 241,459 n/a n/a n/a 13.08%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
289 55 814 296,422 CA 77% CA 77% 70.91% 60.39%
- ------------------------------------------------------------------------------------------------------------------------------------
294 51 861 283,865 CA 25% CA 25% 73.86% 80.52%
- ------------------------------------------------------------------------------------------------------------------------------------
305 54 946 295,687 CA 70% CA 70% 70.21% 69.93%
- ------------------------------------------------------------------------------------------------------------------------------------
300 50 1,075 300,832 CA 63% CA 63% 72.20% 80.81%
- ------------------------------------------------------------------------------------------------------------------------------------
311 48 1,237 299,031 CA 61% CA 61% 70.33% 82.23%
- ------------------------------------------------------------------------------------------------------------------------------------
304 44 366 236,699 CA 20% CA 20% 79.07% 61.86%
- ------------------------------------------------------------------------------------------------------------------------------------
333 21 438 279,757 CA 46% CA 46% 77.09% 75.32%
- ------------------------------------------------------------------------------------------------------------------------------------
341 8 1,316 233,776 CA 36% CA 36% 78.29% 87.90%
- ------------------------------------------------------------------------------------------------------------------------------------
139 47 409 344,260 CA 41% CA 41% 63.82% 70.37%
- ------------------------------------------------------------------------------------------------------------------------------------
325 27 645 296,209 CA 56% CA 56% 76.83% 79.43%
- ------------------------------------------------------------------------------------------------------------------------------------
257 98 138 130,519 CA 21% NY 63% 71.70% 10.34%
- ------------------------------------------------------------------------------------------------------------------------------------
269 87 142 107,057 CA 19% NY 42% 72.00% 10.38%
- ------------------------------------------------------------------------------------------------------------------------------------
271 87 478 152,602 CA 23% NY 37% 65.50% 28.86%
- ------------------------------------------------------------------------------------------------------------------------------------
290 73 585 176,902 CA 21% NY 39% 64.40% 70.33%
- ------------------------------------------------------------------------------------------------------------------------------------
297 64 957 214,868 CA 19% CA 19% 67.80% 79.43%
- ------------------------------------------------------------------------------------------------------------------------------------
304 58 520 221,804 CA 22% CA 22% 68.90% 78.33%
- ------------------------------------------------------------------------------------------------------------------------------------
309 51 457 219,995 CA 12% NY 20% 70.10% 77.36%
- ------------------------------------------------------------------------------------------------------------------------------------
310 49 584 217,952 CA 14% NY 26% 71.90% 70.34%
- ------------------------------------------------------------------------------------------------------------------------------------
306 55 381 211,550 CA 16% NY 37% 69.90% 65.61%
- ------------------------------------------------------------------------------------------------------------------------------------
337 22 302 211,116 CA 9% NY 29% 71.90% 60.35%
- ------------------------------------------------------------------------------------------------------------------------------------
337 17 558 287,817 CA 25% CA 25% 75.81% 80.28%
- ------------------------------------------------------------------------------------------------------------------------------------
348 8 588 306,646 CA 25% CA 25% 75.42% 89.29%
- ------------------------------------------------------------------------------------------------------------------------------------
---- ---- ---- ---- ---- ---- ----
- ------------------------------------------------------------------------------------------------------------------------------------
356 3 602 333,682 CA 45% CA 45% 72.88% 99.44%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
I-12
<PAGE>
ANNEX I
COLLATERAL INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Pooled Resec. Comp
Sec Cert Shelf Series Des Interest IOU
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
26 CWD 94A B-3 0.125% N
- ------------------------------------------------------------------------------------------------------------
27 CWD 94C B-2 0.125% N
- ------------------------------------------------------------------------------------------------------------
28 CWD 94G B-1 0.125% N
- ------------------------------------------------------------------------------------------------------------
29 DLJ 9403 B-1 Serv Fee N
- ------------------------------------------------------------------------------------------------------------
30 FBCS 9302R 1 (1) Y
- ------------------------------------------------------------------------------------------------------------
30-a FBCS 9302 B-3 Serv Fee Y
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
31 GECAP 9401 B-2 NONE N
- ------------------------------------------------------------------------------------------------------------
32 GECAP 9416 B-2 NONE N
- ------------------------------------------------------------------------------------------------------------
33 GECAP 9427 B-2 0.125% N
- ------------------------------------------------------------------------------------------------------------
34 GECAP 9507 B-2 0.125% N
- ------------------------------------------------------------------------------------------------------------
35 GECAP 9615 B-1 0.125% N
- ------------------------------------------------------------------------------------------------------------
36 GECAP 9616 B-2 0.125% N
- ------------------------------------------------------------------------------------------------------------
37 GECAP 9701 B-1 0.125% N
- ------------------------------------------------------------------------------------------------------------
38 GECAP 9702 1-B-2 0.125% N
- ------------------------------------------------------------------------------------------------------------
39 GECAP 9709 1-B-1 0.125% N
- ------------------------------------------------------------------------------------------------------------
40 GECAP 9709 1-B-2 --- ---
- ------------------------------------------------------------------------------------------------------------
41 GECAP 9709 2-B-2 0.125% N
- ------------------------------------------------------------------------------------------------------------
42 GECAP 9712 B-1 0.125% N
- ------------------------------------------------------------------------------------------------------------
43 GECAP 9712 B-2 --- ---
- ------------------------------------------------------------------------------------------------------------
44 HMSI 9705 B-2 0.125% N
- ------------------------------------------------------------------------------------------------------------
45 MORSRV 9602 B-1 Serv Fee N
- ------------------------------------------------------------------------------------------------------------
46 MSCAP1 9601 B-2 Serv Fee N
- ------------------------------------------------------------------------------------------------------------
47 NSCOR 9604 B-1 0.200% N
- ------------------------------------------------------------------------------------------------------------
48 NSCOR 9605 B-1 0.200% N
- ------------------------------------------------------------------------------------------------------------
49 PHMSC 93E 2-B (1) Y
- ------------------------------------------------------------------------------------------------------------
49-a PHMSC 9314 B Serv Fee Y
- ------------------------------------------------------------------------------------------------------------
49-b PHMSC 9319 B Serv Fee Y
- ------------------------------------------------------------------------------------------------------------
49-c PHMSC 9322 B Serv Fee Y
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Remain
Clean Up Call Special Remain Remain
% By Hazard Fraud Bankruptcy 30+ Pct
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 1,780,206 NONE 100,000 0.78%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 1,964,991 2,448,645 100,000 1.76%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 2,535,824 5,071,649 100,000 1.46%
- ------------------------------------------------------------------------------------------------------------------------------------
5% Servicer 5,216,573 8,067,929 132,117 0.37%
- ------------------------------------------------------------------------------------------------------------------------------------
NONE NONE 1,595,713 1,154,327 843,878 6.30%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Seller 1,595,713 1,154,327 843,878 6.30%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 7,992,626 (3) 15,985,252 (3) 253,435 (3) 0.72%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 3,191,489 (3) 6,382,979 (3) 114,828 (3) 0.49%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 2,331,553 (3) 4,663,105 (3) 100,000 (3) 0.78%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 4,188,733 (3) 8,001,047 (3) 173,726 (3) 0.88%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 2,509,200 (3) 5,018,399 (3) 117,042 (3) 0.90%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 2,014,593 (3) 4,029,186 (3) 100,000 (3) 1.57%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 3,692,000 (3) 6,001,383 (3) 100,000 (3) 0.89%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 4,503,535 (3) 9,007,070 (3) 192,052 (3) 0.91%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 5,011,575 (3) 5,011,575 (3) 204,439 (3) 0.55%
- ------------------------------------------------------------------------------------------------------------------------------------
--- --- ---- ---- ---- ----
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 4,479,428 (3) 3,507,322 (3) 136,917 (3) 0.65%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 6,449,997 (3) 6,449,997 (3) 243,977 (3) 1.07%
- ------------------------------------------------------------------------------------------------------------------------------------
--- --- ---- ---- ---- ----
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 2,831,408 (3) 5,662,817 (3) 100,000 (3) 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
5% Servicer NONE NONE NONE 1.81%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Seller or Servicer 1,963,316 1,309,961 100,000 2.56%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Seller 3,898,940 7,663,339 150,000 0.99%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Seller 4,150,622 8,301,245 169,705 1.19%
- ------------------------------------------------------------------------------------------------------------------------------------
NONE NONE 11,754,353 9,906,725 2,149,764 0.88%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 5,292,922 3,843,312 848,488 0.84%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 3,734,685 3,336,666 748,774 1.26%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 2,726,747 2,726,747 552,502 0.49%
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Servicing
60+ Pct 90+ Pct F/C Pct REO Pct Delinq GWAC Fee NWAC
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.46% 0.25% 0.25% 0.00% 1.74% 7.302% 0.250% - 1.155% 6.866%
- ----------------------------------------------------------------------------------------------------------------------------------
0.27% 0.57% 0.00% 0.00% 2.61% 7.443% 0.250% - 1.315% 7.050%
- ----------------------------------------------------------------------------------------------------------------------------------
0.08% 0.23% 0.16% 0.08% 2.01% 7.651% 0.250% - 0.375% 7.263%
- ----------------------------------------------------------------------------------------------------------------------------------
0.13% 0.35% 0.40% 0.46% 1.70% 7.426% 0.293% 7.133%
- ----------------------------------------------------------------------------------------------------------------------------------
1.68% 1.27% 0.99% 0.39% 10.64% 9.544% (1) 7.479%
- ----------------------------------------------------------------------------------------------------------------------------------
1.68% 1.27% 0.99% 0.39% 10.64% 9.544% 0.500% 7.479%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
0.08% 0.15% 0.32% 0.09% 1.36% 7.244% 0.125% - 1.250% 6.989%
- ----------------------------------------------------------------------------------------------------------------------------------
0.00% 0.00% 0.50% 0.10% 1.08% 7.054% 0.200% - 0.560% 6.825%
- ----------------------------------------------------------------------------------------------------------------------------------
0.14% 0.14% 0.13% 0.00% 1.19% 7.117% 0.200% - 2.250% 6.817%
- ----------------------------------------------------------------------------------------------------------------------------------
0.28% 0.08% 0.19% 0.09% 1.52% 8.132% 0.200% - 0.290% 7.915%
- ----------------------------------------------------------------------------------------------------------------------------------
0.00% 0.16% 0.39% 0.00% 1.45% 8.417% 0.200% - 0.290 % 8.166%
- ----------------------------------------------------------------------------------------------------------------------------------
0.00% 0.19% 0.30% 0.00% 2.06% 8.439% 0.200% - 0.290% 8.182%
- ----------------------------------------------------------------------------------------------------------------------------------
0.12% 0.00% 0.68% 0.00% 1.70% 8.107% 0.200% - 0.920% 7.849%
- ----------------------------------------------------------------------------------------------------------------------------------
0.00% 0.29% 0.21% 0.00% 1.41% 7.995% 0.200% - 0.290% 7.748%
- ----------------------------------------------------------------------------------------------------------------------------------
0.00% 0.00% 0.00% 0.00% 0.55% 7.839% 0.200% - 0.290% 7.584%
- ----------------------------------------------------------------------------------------------------------------------------------
---- ---- ---- ---- ---- ---- --- ----
- ----------------------------------------------------------------------------------------------------------------------------------
0.09% 0.00% 0.00% 0.00% 0.74% 7.738% 0.200% - 0.290% 7.482%
- ----------------------------------------------------------------------------------------------------------------------------------
0.08% 0.00% 0.00% 0.00% 1.15% 7.733% 0.200% - 0.290% 7.473%
- ----------------------------------------------------------------------------------------------------------------------------------
---- ---- ---- ---- ---- ---- --- ----
- ----------------------------------------------------------------------------------------------------------------------------------
0.00% 0.00% 0.00% 0.00% 0.00% 8.486% 0.250% 8.227%
- ----------------------------------------------------------------------------------------------------------------------------------
0.37% 0.00% 0.00% 0.00% 2.18% 8.137% 0.200% - 0.250% 7.896%
- ----------------------------------------------------------------------------------------------------------------------------------
0.22% 0.61% 0.18% 0.00% 3.57% 8.032% 0.250% 7.244%
- ----------------------------------------------------------------------------------------------------------------------------------
0.26% 0.94% 0.14% 0.27% 2.60% 8.261% 0.250% 7.991%
- ----------------------------------------------------------------------------------------------------------------------------------
0.08% 0.00% 0.00% 0.00% 1.27% 8.436% 0.250% 8.166%
- ----------------------------------------------------------------------------------------------------------------------------------
0.08% 0.33% 0.28% 0.18% 1.75% 8.019% (1) 7.819%
- ----------------------------------------------------------------------------------------------------------------------------------
0.12% 0.36% 0.40% 0.21% 1.93% 8.242% 0.200% 8.042%
- ----------------------------------------------------------------------------------------------------------------------------------
0.11% 0.41% 0.19% 0.28% 2.26% 8.047% 0.200% 7.847%
- ----------------------------------------------------------------------------------------------------------------------------------
0.00% 0.18% 0.22% 0.00% 0.88% 7.679% 0.200% 7.479%
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Number Average % WA
of Mtg Loan Highest Orig % Call
WAM AGE Loans Balance %CAL State LTV Bal Re
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
309 51 555 266,128 CA 36% CA 36% 72.17% 73.85%
- ------------------------------------------------------------------------------------------------------------------------------------
308 50 789 246,922 CA 79% CA 79% 68.81% 79.56%
- ------------------------------------------------------------------------------------------------------------------------------------
305 48 1,090 229,120 CA 94% CA 94% 70.47% 81.22%
- ------------------------------------------------------------------------------------------------------------------------------------
302 49 1,121 288,189 CA 47% CA 47% 74.21% 80.08%
- ------------------------------------------------------------------------------------------------------------------------------------
185 159 3,613 31,949 CA 1% TX 84% 87.38% 36.17%
- ------------------------------------------------------------------------------------------------------------------------------------
185 159 3,613 31,949 CA 1% TX 84% 87.38% 36.17%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
297 51 2,249 272,086 CA 45% CA 45% 73.75% 76.56%
- ------------------------------------------------------------------------------------------------------------------------------------
302 47 967 276,842 CA 33% CA 33% 75.02% 83.77%
- ------------------------------------------------------------------------------------------------------------------------------------
299 49 692 270,161 CA 24% CA 24% 75.23% 80.18%
- ------------------------------------------------------------------------------------------------------------------------------------
321 31 1,024 266,332 CA 33% CA 33% 80.69% 68.17%
- ------------------------------------------------------------------------------------------------------------------------------------
336 18 682 272,801 CA 26% CA 26% 81.11% 74.15%
- ------------------------------------------------------------------------------------------------------------------------------------
338 17 517 280,433 CA 26% CA 26% 81.00% 71.97%
- ------------------------------------------------------------------------------------------------------------------------------------
342 15 877 282,569 CA 32% CA 32% 80.11% 82.59%
- ------------------------------------------------------------------------------------------------------------------------------------
343 13 1,328 287,804 CA 37% CA 37% 79.60% 84.87%
- ------------------------------------------------------------------------------------------------------------------------------------
353 5 1,518 302,898 CA 47% CA 47% 77.68% 91.75%
- ------------------------------------------------------------------------------------------------------------------------------------
-- ---- ---- ---- ---- ---- ---- ----
- ------------------------------------------------------------------------------------------------------------------------------------
353 5 1,106 297,907 CA 48% CA 48% 76.92% 93.94%
- ------------------------------------------------------------------------------------------------------------------------------------
355 4 2,040 304,189 CA 49% CA 49% 76.37% 96.21%
- ------------------------------------------------------------------------------------------------------------------------------------
-- ---- ---- ---- ---- ---- ---- ----
- ------------------------------------------------------------------------------------------------------------------------------------
346 5 1,836 147,265 CA 56% CA 56% 75.25% 95.49%
- ------------------------------------------------------------------------------------------------------------------------------------
266 57 574 295,998 CA 12% NY 43% 71.88% 82.06%
- ------------------------------------------------------------------------------------------------------------------------------------
325 27 477 274,625 CA 41% CA 41% 78.75% 83.44%
- ------------------------------------------------------------------------------------------------------------------------------------
332 21 1,139 275,680 CA 27% CA 27% 76.93% 81.95%
- ------------------------------------------------------------------------------------------------------------------------------------
336 18 1,113 278,902 CA 26% CA 26% 78.04% 74.79%
- ------------------------------------------------------------------------------------------------------------------------------------
289 59 3,756 238,357 CA 62% CA 62% 72.69% 49.03%
- ------------------------------------------------------------------------------------------------------------------------------------
288 60 1,466 235,016 CA 60% CA 60% 73.20% 41.75%
- ------------------------------------------------------------------------------------------------------------------------------------
290 58 1,316 227,500 CA 63% CA 63% 72.92% 49.85%
- ------------------------------------------------------------------------------------------------------------------------------------
289 58 974 258,055 CA 62% CA 62% 71.73% 62.83%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
I-13
<PAGE>
ANNEX I
COLLATERAL INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Pooled Resec. Comp
Sec Cert Shelf Series Des Interest IOU
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
50 PHMSC 93L 3-B-3 (1) Y
- ------------------------------------------------------------------------------------------------------------------
50-a PHMSC 9347 B Serv Fee Y
- ------------------------------------------------------------------------------------------------------------------
50-b PHMSC 9351 B Serv Fee Y
- ------------------------------------------------------------------------------------------------------------------
50-c PHMSC 9357 B Serv Fee Y
- ------------------------------------------------------------------------------------------------------------------
50-d PHMSC 9360 B Serv Fee Y
- ------------------------------------------------------------------------------------------------------------------
50-e PHMSC 9362 B Serv Fee Y
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
51 PHMSC 94A 5-B (1) Y
- ------------------------------------------------------------------------------------------------------------------
51-a PHMSC 9354 B Serv Fee Y
- ------------------------------------------------------------------------------------------------------------------
51-b PHMSC 9363 B Serv Fee Y
- ------------------------------------------------------------------------------------------------------------------
51-c PHMSC 9402 B Serv Fee Y
- ------------------------------------------------------------------------------------------------------------------
51-d PHMSC 9403 B Serv Fee Y
- ------------------------------------------------------------------------------------------------------------------
51-e PHMSC 9405 B Serv Fee Y
- ------------------------------------------------------------------------------------------------------------------
51-f PHMSC 9406 B Serv Fee Y
- ------------------------------------------------------------------------------------------------------------------
51-g PHMSC 9408 B Serv Fee Y
- ------------------------------------------------------------------------------------------------------------------
51-h PHMSC 9410 B Serv Fee Y
- ------------------------------------------------------------------------------------------------------------------
51-i PHMSC 9411 B Serv Fee Y
- ------------------------------------------------------------------------------------------------------------------
51-j PHMSC 9413 B Serv Fee Y
- ------------------------------------------------------------------------------------------------------------------
51-k PHMSC 9417 B Serv Fee Y
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
52 PHMSC 94E 2-B (1) Y
- ------------------------------------------------------------------------------------------------------------------
52-a PHMSC 9415 B-1 Serv Fee Y
- ------------------------------------------------------------------------------------------------------------------
52-b PHMSC 9418 B Serv Fee Y
- ------------------------------------------------------------------------------------------------------------------
52-c PHMSC 9419 B Serv Fee Y
- ------------------------------------------------------------------------------------------------------------------
52-d PHMSC 9421 B-1 Serv Fee Y
- ------------------------------------------------------------------------------------------------------------------
52-e PHMSC 9422 B Serv Fee Y
- ------------------------------------------------------------------------------------------------------------------
52-f PHMSC 9425 B-1 Serv Fee Y
- ------------------------------------------------------------------------------------------------------------------
52-g PHMSC 9427 B Serv Fee Y
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
53 PHMSC 95A 3-B (1) N
- ------------------------------------------------------------------------------------------------------------------
53-a PHMSC 9430 B Serv Fee N
- ------------------------------------------------------------------------------------------------------------------
53-b PHMSC 9433 B-1 Serv Fee N
- ------------------------------------------------------------------------------------------------------------------
53-c PHMSC 9501 B Serv Fee N
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
54 PNC 9502 B-3 Serv Fee N
- ------------------------------------------------------------------------------------------------------------------
55 PNC 9702 B-2 .045% -0.100% N
- ------------------------------------------------------------------------------------------------------------------
56 PNC 9705 B-2 .043% -0.100% N
- ------------------------------------------------------------------------------------------------------------------
57 PNC 9705 B-3 --- ---
- ------------------------------------------------------------------------------------------------------------------
58 PWMAC 9307 M-3 .0450% - 1.625% Y
- ------------------------------------------------------------------------------------------------------------------
59 PWMAC 9402 M-2 .0275% - 1.250% N
- ------------------------------------------------------------------------------------------------------------------
60 PWMAC 9402 M-3 --- ---
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Remain
Clean Up Call Special Remain Remain
% By Hazard Fraud Bankruptcy 30+ Pct
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
NONE NONE 33,303,076 21,664,367 548,763 0.57%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 12,042,036 7,029,122 118,700 0.42%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 7,512,650 4,709,896 126,400 0.49%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 3,754,819 3,123,272 93,138 0.96%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 5,494,738 4,408,848 110,025 0.80%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 4,498,832 2,393,228 100,500 0.21%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NONE NONE 41,511,777 38,389,574 5,758,284 0.41%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 10,731,104 8,121,308 1,661,800 0.31%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 5,753,544 3,243,343 702,316 0.07%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 1,917,093 2,694,872 594,624 0.32%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 1,907,135 4,085,443 875,658 0.28%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 1,922,639 3,085,966 697,288 0.37%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 1,787,478 2,487,406 531,098 0.21%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 4,799,014 3,912,746 148,000 0.79%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 2,890,875 2,300,059 189,000 0.87%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 3,571,775 3,571,775 134,000 0.80%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 4,321,190 3,368,069 144,000 0.50%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 1,909,930 1,518,587 80,500 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NONE NONE 25,614,496 15,972,971 663,400 0.35%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 9,421,905 4,671,176 113,600 0.12%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 4,237,880 2,590,370 124,800 0.51%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 3,132,855 1,970,627 130,000 0.26%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 1,895,301 1,630,434 130,000 0.21%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 2,853,155 2,027,201 110,000 0.54%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 2,212,258 1,755,365 50,000 0.34%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 1,861,141 1,327,800 5,000 0.87%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NONE NONE 5,364,034 4,025,519 331,000 1.13%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 1,673,451 1,619,406 50,000 1.07%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 1,676,659 1,218,617 131,000 1.40%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 2,013,924 1,187,496 150,000 0.85%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
10% Seller 1,968,338 2,339,767 109,818 2.12%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Seller 2,786,869 3,547,527 100,000 1.52%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Seller or Servicer 5,838,756 7,002,876 127,085 0.52%
- ------------------------------------------------------------------------------------------------------------------------------------
--- --- ---- ---- ---- ----
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 3,021,923 1,200,074 76,164 1.31%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 2,551,353 2,254,463 115,000 1.26%
- ------------------------------------------------------------------------------------------------------------------------------------
--- --- ---- ---- ---- ----
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Servicing
60+ Pct 90+ Pct F/C Pct REO Pct Delinq GWAC Fee NWAC
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
0.06% 0.12% 0.21% 0.06% 1.02% 7.333% (1) 7.133%
- ------------------------------------------------------------------------------------------------------------------------------------
0.08% 0.20% 0.05% 0.00% 0.75% 7.314% 0.200% 7.114%
- ------------------------------------------------------------------------------------------------------------------------------------
0.05% 0.09% 0.30% 0.00% 0.93% 7.243% 0.200% 7.043%
- ------------------------------------------------------------------------------------------------------------------------------------
0.03% 0.00% 0.00% 0.00% 0.99% 7.369% 0.200% 7.169%
- ------------------------------------------------------------------------------------------------------------------------------------
0.10% 0.08% 0.63% 0.29% 1.89% 7.446% 0.200% 7.246%
- ------------------------------------------------------------------------------------------------------------------------------------
0.00% 0.18% 0.04% 0.00% 0.44% 7.314% 0.200% 7.114%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
0.10% 0.14% 0.16% 0.10% 0.90% 7.312% (1) 7.112%
- ------------------------------------------------------------------------------------------------------------------------------------
0.03% 0.00% 0.18% 0.06% 0.57% 7.093% 0.200% 6.893%
- ------------------------------------------------------------------------------------------------------------------------------------
0.24% 0.11% 0.43% 0.00% 0.85% 7.276% 0.200% 7.076%
- ------------------------------------------------------------------------------------------------------------------------------------
0.17% 0.22% 0.16% 0.00% 0.88% 7.341% 0.200% 7.141%
- ------------------------------------------------------------------------------------------------------------------------------------
0.02% 0.00% 0.18% 0.16% 0.64% 7.144% 0.200% 6.944%
- ------------------------------------------------------------------------------------------------------------------------------------
0.21% 0.24% 0.00% 0.14% 0.97% 7.524% 0.200% 7.324%
- ------------------------------------------------------------------------------------------------------------------------------------
0.08% 0.20% 0.14% 0.00% 0.64% 6.906% 0.200% 6.706%
- ------------------------------------------------------------------------------------------------------------------------------------
0.02% 0.05% 0.15% 0.16% 1.19% 7.582% 0.200% 7.382%
- ------------------------------------------------------------------------------------------------------------------------------------
0.19% 0.05% 0.29% 0.17% 1.56% 7.876% 0.200% 7.676%
- ------------------------------------------------------------------------------------------------------------------------------------
0.00% 0.15% 0.08% 0.12% 1.15% 7.372% 0.200% 7.172%
- ------------------------------------------------------------------------------------------------------------------------------------
0.21% 0.69% 0.07% 0.22% 1.70% 7.797% 0.200% 7.597%
- ------------------------------------------------------------------------------------------------------------------------------------
0.00% 0.00% 0.00% 0.00% 0.00% 6.624% 0.200% 6.424%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
0.17% 0.25% 0.32% 0.07% 1.16% 7.684% (1) 7.484%
- ------------------------------------------------------------------------------------------------------------------------------------
0.00% 0.09% 0.46% 0.05% 0.72% 7.249% 0.200% 7.049%
- ------------------------------------------------------------------------------------------------------------------------------------
0.43% 0.62% 0.17% 0.00% 1.72% 7.742% 0.200% 7.542%
- ------------------------------------------------------------------------------------------------------------------------------------
0.00% 0.25% 0.00% 0.00% 0.51% 7.408% 0.200% 7.208%
- ------------------------------------------------------------------------------------------------------------------------------------
0.00% 0.36% 0.61% 0.30% 1.48% 8.229% 0.200% 8.029%
- ------------------------------------------------------------------------------------------------------------------------------------
0.14% 0.21% 0.19% 0.00% 1.08% 7.708% 0.200% 7.508%
- ------------------------------------------------------------------------------------------------------------------------------------
0.10% 0.06% 0.41% 0.00% 0.91% 7.866% 0.200% 7.666%
- ------------------------------------------------------------------------------------------------------------------------------------
0.83% 0.27% 0.32% 0.33% 2.62% 8.564% 0.200% 8.364%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
0.67% 1.11% 0.93% 0.08% 3.91% 8.860% (1) 8.660%
- ------------------------------------------------------------------------------------------------------------------------------------
1.60% 0.98% 1.86% 0.00% 5.51% 8.950% 0.200% 8.750%
- ------------------------------------------------------------------------------------------------------------------------------------
0.22% 1.71% 0.51% 0.22% 4.06% 8.858% 0.200% 8.658%
- ------------------------------------------------------------------------------------------------------------------------------------
0.00% 0.49% 0.23% 0.00% 1.57% 8.739% 0.200% 8.539%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
0.26% 0.00% 0.26% 0.00% 2.65% 7.979% 0.250% 7.704%
- ------------------------------------------------------------------------------------------------------------------------------------
0.21% 0.00% 0.51% 0.00% 2.24% 8.044% 0.150% - 0.375% 7.753%
- ------------------------------------------------------------------------------------------------------------------------------------
0.00% 0.00% 0.00% 0.00% 0.52% 8.193% 0.150% - 0.250% 7.905%
- ------------------------------------------------------------------------------------------------------------------------------------
---- ---- ---- ---- ---- ---- --- ----
- ------------------------------------------------------------------------------------------------------------------------------------
0.25% 0.21% 0.00% 0.00% 1.77% 7.576% 0.250% - 1.625% 7.189%
- ------------------------------------------------------------------------------------------------------------------------------------
0.00% 0.00% 0.10% 0.26% 1.61% 7.173% 0.250% - 1.250% 6.754%
- ------------------------------------------------------------------------------------------------------------------------------------
---- ---- ---- ---- ---- ---- --- ----
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Number Average % WA
of Mtg Loan Highest Orig % Call
WAM AGE Loans Balance %CAL State LTV Bal Re
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
297 52 8,188 259,582 CA 72% CA 72% 72.18% 75.94%
- -----------------------------------------------------------------------------------------------------------------------------
298 52 2,702 255,440 CA 73% CA 73% 72.14% 76.65%
- -----------------------------------------------------------------------------------------------------------------------------
296 52 1,734 265,844 CA 72% CA 72% 71.93% 76.72%
- -----------------------------------------------------------------------------------------------------------------------------
296 52 1,168 263,586 CA 72% CA 72% 72.23% 76.94%
- -----------------------------------------------------------------------------------------------------------------------------
296 52 1,693 254,945 CA 70% CA 70% 72.78% 72.67%
- -----------------------------------------------------------------------------------------------------------------------------
298 52 891 263,521 CA 75% CA 75% 71.66% 77.33%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
300 50 14,493 255,403 CA 68% CA 68% 72.51% 79.13%
- -----------------------------------------------------------------------------------------------------------------------------
299 51 2,961 271,561 CA 75% CA 75% 71.80% 79.79%
- -----------------------------------------------------------------------------------------------------------------------------
299 51 1,237 258,835 CA 72% CA 72% 72.19% 79.63%
- -----------------------------------------------------------------------------------------------------------------------------
301 50 1,042 257,930 CA 70% CA 70% 72.29% 76.89%
- -----------------------------------------------------------------------------------------------------------------------------
300 50 1,506 270,206 CA 61% CA 61% 72.34% 81.36%
- -----------------------------------------------------------------------------------------------------------------------------
299 50 1,243 246,853 CA 74% CA 74% 72.39% 76.69%
- -----------------------------------------------------------------------------------------------------------------------------
300 50 927 267,376 CA 53% CA 53% 72.15% 81.53%
- -----------------------------------------------------------------------------------------------------------------------------
301 49 1,453 244,274 CA 72% CA 72% 73.01% 78.72%
- -----------------------------------------------------------------------------------------------------------------------------
300 49 914 226,601 CA 73% CA 73% 74.60% 72.24%
- -----------------------------------------------------------------------------------------------------------------------------
302 49 1,322 250,876 CA 59% CA 59% 72.26% 82.18%
- -----------------------------------------------------------------------------------------------------------------------------
301 49 1,355 228,542 CA 70% CA 70% 73.09% 77.03%
- -----------------------------------------------------------------------------------------------------------------------------
301 50 533 269,275 CA 41% CA 41% 74.02% 83.83%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
303 47 6,079 237,201 CA 54% CA 54% 73.47% 77.18%
- -----------------------------------------------------------------------------------------------------------------------------
303 48 1,632 251,150 CA 58% CA 58% 72.84% 82.04%
- -----------------------------------------------------------------------------------------------------------------------------
302 48 1,000 238,206 CA 68% CA 68% 72.55% 79.14%
- -----------------------------------------------------------------------------------------------------------------------------
303 47 702 262,002 CA 44% CA 44% 73.39% 80.85%
- -----------------------------------------------------------------------------------------------------------------------------
305 46 708 208,218 CA 59% CA 59% 74.22% 73.37%
- -----------------------------------------------------------------------------------------------------------------------------
304 46 795 238,421 CA 57% CA 57% 73.44% 79.84%
- -----------------------------------------------------------------------------------------------------------------------------
304 46 685 229,520 CA 36% CA 36% 74.56% 74.57%
- -----------------------------------------------------------------------------------------------------------------------------
304 44 557 207,819 CA 42% CA 42% 75.33% 60.62%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
305 42 1,617 194,235 CA 27% CA 27% 75.85% 48.04%
- -----------------------------------------------------------------------------------------------------------------------------
304 43 647 179,501 CA 27% NY 28% 74.48% 49.61%
- -----------------------------------------------------------------------------------------------------------------------------
303 42 570 196,183 CA 26% CA 26% 76.24% 51.85%
- -----------------------------------------------------------------------------------------------------------------------------
309 40 400 215,293 CA 29% CA 29% 77.20% 42.22%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
318 33 738 286,902 CA 23% CA 23% 77.65% 78.42%
- -----------------------------------------------------------------------------------------------------------------------------
306 15 480 302,496 CA 38% CA 38% 75.31% 81.86%
- -----------------------------------------------------------------------------------------------------------------------------
312 7 1,296 237,746 CA 49% CA 49% 75.48% 88.00%
- -----------------------------------------------------------------------------------------------------------------------------
---- ---- ---- ---- ---- ---- ---- ----
- -----------------------------------------------------------------------------------------------------------------------------
289 57 352 293,752 CA 50% CA 50% 70.07% 65.69%
- -----------------------------------------------------------------------------------------------------------------------------
297 52 741 285,569 CA 44% CA 44% 73.66% 82.94%
- -----------------------------------------------------------------------------------------------------------------------------
---- ---- ---- ---- ---- ---- ---- ----
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
I-14
<PAGE>
ANNEX I
COLLATERAL INFORMATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Pooled Resec. Comp
Sec Cert Shelf Series Des Interest IOU
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
61 RALI 97Q12 M-2 0.125% N
- ---------------------------------------------------------------------------------------------------------------------
62 RAST 96A3 B-1-B 0.125% N
- ---------------------------------------------------------------------------------------------------------------------
63 RAST 96A4 B-2 0.125% N
- ---------------------------------------------------------------------------------------------------------------------
64 RFC 93S10 M-2 NONE Y
- ---------------------------------------------------------------------------------------------------------------------
65 RFC 93S18 M-2 NONE Y
- ---------------------------------------------------------------------------------------------------------------------
66 RFC 93S18 M-3 --- ---
- ---------------------------------------------------------------------------------------------------------------------
67 RFC 93S21 M-3 NONE Y
- ---------------------------------------------------------------------------------------------------------------------
68 RFC 93S22 M-2 NONE Y
- ---------------------------------------------------------------------------------------------------------------------
69 RFC 93S22 M-3 --- ---
- ---------------------------------------------------------------------------------------------------------------------
70 RFC 93S24 M-3 NONE Y
- ---------------------------------------------------------------------------------------------------------------------
71 RFC 93S26 M-2 NONE Y
- ---------------------------------------------------------------------------------------------------------------------
72 RFC 93S26 M-3 --- ---
- ---------------------------------------------------------------------------------------------------------------------
73 RFC 93S27 M-3 NONE Y
- ---------------------------------------------------------------------------------------------------------------------
74 RFC 93S28 M-2 NONE N
- ---------------------------------------------------------------------------------------------------------------------
75 RFC 93S28 M-3 --- ---
- ---------------------------------------------------------------------------------------------------------------------
76 RFC 93S34 M-3 NONE N
- ---------------------------------------------------------------------------------------------------------------------
77 RFC 94S3 M-3 NONE N
- ---------------------------------------------------------------------------------------------------------------------
78 RFC 95R20 M-3 0.250% N
- ---------------------------------------------------------------------------------------------------------------------
79 RFC 96S10 M-2 0.125% N
- ---------------------------------------------------------------------------------------------------------------------
80 RFC 96S14 M-2 0.125% N
- ---------------------------------------------------------------------------------------------------------------------
81 RFC 96S14 M-3 --- ---
- ---------------------------------------------------------------------------------------------------------------------
82 RFC 96S16 M-2 0.125% N
- ---------------------------------------------------------------------------------------------------------------------
83 RFC 96S18 M-2 0.125% N
- ---------------------------------------------------------------------------------------------------------------------
84 RFC 96S23 M-2 0.125% N
- ---------------------------------------------------------------------------------------------------------------------
85 RFC 96S25 M-2 0.125% N
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Remain
Clean Up Call Special Remain Remain
% By Hazard Fraud Bankruptcy 30+ Pct
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
10% Seller or Servicer 2,981,040 5,962,080 175,592 2.37%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 3,075,569 6,282,761 125,000 2.72%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 2,467,931 5,097,789 125,000 3.38%
- ------------------------------------------------------------------------------------------------------------------------------------
10%(4) Servicer 1,590,842 374,095 100,000 6.21%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 2,643,092 2,476,275 177,436 0.74%
- ------------------------------------------------------------------------------------------------------------------------------------
--- --- ---- ---- ---- ----
- ------------------------------------------------------------------------------------------------------------------------------------
10%(4) Servicer 2,507,700 1,440,380 140,181 1.20%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 4,592,358 2,637,700 109,526 0.64%
- ------------------------------------------------------------------------------------------------------------------------------------
--- --- ---- ---- ---- ----
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 3,169,865 2,942,536 100,000 0.73%
- ------------------------------------------------------------------------------------------------------------------------------------
10%(4) Servicer 2,825,981 2,286,900 100,000 1.96%
- ------------------------------------------------------------------------------------------------------------------------------------
--- --- ---- ---- ---- ----
- ------------------------------------------------------------------------------------------------------------------------------------
10%(4) Servicer 3,285,286 690,012 100,000 1.97%
- ------------------------------------------------------------------------------------------------------------------------------------
10%(4) Servicer 2,224,721 1,582,358 100,000 0.68%
- ------------------------------------------------------------------------------------------------------------------------------------
--- --- ---- ---- ---- ----
- ------------------------------------------------------------------------------------------------------------------------------------
10%(4) Seller or Servicer 1,996,394 1,627,345 100,000 0.88%
- ------------------------------------------------------------------------------------------------------------------------------------
10%(4) Seller or Servicer 2,727,444 2,598,606 100,000 0.80%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Servicer 3,263,316 6,526,634 126,853 0.10%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Seller or Servicer 5,102,211 5,102,211 175,406 1.22%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Seller or Servicer 3,503,977 3,503,977 100,000 1.42%
- ------------------------------------------------------------------------------------------------------------------------------------
--- --- ---- ---- ---- ----
- ------------------------------------------------------------------------------------------------------------------------------------
10%(4) Seller or Servicer 3,643,213 7,283,666 140,078 1.11%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Seller or Servicer 1,985,257 1,937,666 106,710 2.27%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Seller or Servicer 2,597,670 5,195,340 102,894 2.17%
- ------------------------------------------------------------------------------------------------------------------------------------
10% Seller or Servicer 2,145,061 1,804,840 100,000 1.00%
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Servicing
60+ Pct 90+ Pct F/C Pct REO Pct Delinq GWAC Fee NWAC
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
0.46% 0.00% 0.19% 0.00% 3.02% 8.481% 0.250% - 0.500% 8.150%
- ----------------------------------------------------------------------------------------------------------------------------------
0.55% 0.53% 0.69% 0.36% 4.84% 8.916% 0.250% - 0 .850% 8.531%
- ----------------------------------------------------------------------------------------------------------------------------------
0.76% 0.96% 0.75% 0.34% 6.19% 8.922% 0.250% - 0.595% 8.536%
- ----------------------------------------------------------------------------------------------------------------------------------
0.00% 0.00% 1.11% 0.99% 8.31% 9.077% 0.250 % - 0.875% 8.646%
- ----------------------------------------------------------------------------------------------------------------------------------
0.32% 0.17% 0.50% 0.45% 2.18% 8.068% 0.250 % - 2.125% 7.629%
- ----------------------------------------------------------------------------------------------------------------------------------
---- ---- ---- ---- ---- ---- --- ----
- ----------------------------------------------------------------------------------------------------------------------------------
0.43% 0.16% 1.47% 0.00% 3.26% 8.027% 0.250 % - 2.000% 7.580%
- ----------------------------------------------------------------------------------------------------------------------------------
0.13% 0.00% 0.30% 0.10% 1.17% 7.646% 0.250 % - 1.125% 7.209%
- ----------------------------------------------------------------------------------------------------------------------------------
---- ---- ---- ---- ---- ---- --- ----
- ----------------------------------------------------------------------------------------------------------------------------------
0.07% 0.00% 0.38% 0.09% 1.28% 7.587% 0.250 % - 2.125% 7.190%
- ----------------------------------------------------------------------------------------------------------------------------------
0.20% 0.00% 0.35% 0.23% 2.73% 7.984% 0.250 % - 2.000% 7.568%
- ----------------------------------------------------------------------------------------------------------------------------------
---- ---- ---- ---- ---- ---- --- ----
- ----------------------------------------------------------------------------------------------------------------------------------
0.00% 0.00% 0.64% 0.00% 2.61% 8.085% 0.250 % - 2.000% 7.608%
- ----------------------------------------------------------------------------------------------------------------------------------
0.00% 0.00% 0.48% 0.11% 1.28% 7.580% 0.250 % - 1.750% 7.105%
- ----------------------------------------------------------------------------------------------------------------------------------
---- ---- ---- ---- ---- ---- --- ----
- ----------------------------------------------------------------------------------------------------------------------------------
0.00% 0.27% 0.50% 0.00% 1.65% 7.532% 0.250 % - 0.625% 7.147%
- ----------------------------------------------------------------------------------------------------------------------------------
0.06% 0.00% 0.38% 0.00% 1.25% 7.312% 0.250 % - 0.625% 6.924%
- ----------------------------------------------------------------------------------------------------------------------------------
0.09% 0.10% 1.00% 0.00% 1.29% 8.020% 0.250% 7.749%
- ----------------------------------------------------------------------------------------------------------------------------------
0.15% 0.07% 0.44% 0.00% 1.87% 7.888% 0.205 % - 1.380% 7.595%
- ----------------------------------------------------------------------------------------------------------------------------------
0.01% 0.00% 0.16% 0.07% 1.65% 7.816% 0.280 % - 0.330% 7.487%
- ----------------------------------------------------------------------------------------------------------------------------------
---- ---- ---- ---- ---- ---- --- ----
- ----------------------------------------------------------------------------------------------------------------------------------
0.23% 0.33% 1.30% 0.09% 3.05% 8.536% 0.280 % - 1.780% 8.248%
- ----------------------------------------------------------------------------------------------------------------------------------
0.04% 0.00% 0.08% 0.00% 2.39% 8.487% 0.280% - 0.955% 8.180%
- ----------------------------------------------------------------------------------------------------------------------------------
0.25% 0.16% 0.82% 0.00% 3.40% 8.441% 0.280% - 0.580% 8.146%
- ----------------------------------------------------------------------------------------------------------------------------------
0.58% 0.00% 0.47% 0.26% 2.32% 8.415% 0.280 % - 1.205% 8.110%
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Number Average % WA
of Mtg Loan Highest Orig % Call
WAM AGE Loans Balance %CAL State LTV Bal Re
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
354 4 2,599 112,061 CA 20% CA 20% 78.71% 97.70%
- -----------------------------------------------------------------------------------------------------------------------------------
333 22 2,247 116,158 CA 35% CA 35% 71.79% 74.46%
- -----------------------------------------------------------------------------------------------------------------------------------
334 21 1,357 141,398 CA 36% CA 36% 73.99% 75.28%
- -----------------------------------------------------------------------------------------------------------------------------------
291 62 124 239,253 CA 81% CA 81% 74.52% 22.07%
- -----------------------------------------------------------------------------------------------------------------------------------
288 58 790 276,305 CA 55% CA 55% 72.20% 43.60%
- -----------------------------------------------------------------------------------------------------------------------------------
---- ---- ---- ---- ---- ---- ---- ----
- -----------------------------------------------------------------------------------------------------------------------------------
294 57 474 280,095 CA 56% CA 56% 73.04% 49.32%
- -----------------------------------------------------------------------------------------------------------------------------------
290 57 870 282,671 CA 65% CA 65% 70.47% 70.94%
- -----------------------------------------------------------------------------------------------------------------------------------
---- ---- ---- ---- ---- ---- ---- ----
- -----------------------------------------------------------------------------------------------------------------------------------
292 56 916 282,816 CA 62% CA 62% 71.29% 69.27%
- -----------------------------------------------------------------------------------------------------------------------------------
290 56 667 281,902 CA 67% CA 67% 72.08% 50.00%
- -----------------------------------------------------------------------------------------------------------------------------------
---- ---- ---- ---- ---- ---- ---- ----
- -----------------------------------------------------------------------------------------------------------------------------------
292 57 420 272,874 CA 82% CA 82% 71.05% 41.74%
- -----------------------------------------------------------------------------------------------------------------------------------
293 55 540 279,152 CA 70% CA 70% 71.67% 70.44%
- -----------------------------------------------------------------------------------------------------------------------------------
---- ---- ---- ---- ---- ---- ---- ----
- -----------------------------------------------------------------------------------------------------------------------------------
296 54 545 287,094 CA 68% CA 68% 71.45% 73.13%
- -----------------------------------------------------------------------------------------------------------------------------------
301 50 897 264,964 CA 34% CA 34% 71.66% 79.44%
- -----------------------------------------------------------------------------------------------------------------------------------
316 36 861 278,740 CA 41% CA 41% 76.77% 73.54%
- -----------------------------------------------------------------------------------------------------------------------------------
332 22 1,620 280,044 CA 52% CA 52% 75.79% 84.63%
- -----------------------------------------------------------------------------------------------------------------------------------
318 30 1,312 249,811 CA <1% NY 49% 72.33% 89.18%
- -----------------------------------------------------------------------------------------------------------------------------------
---- ---- ---- ---- ---- ---- ---- ----
- -----------------------------------------------------------------------------------------------------------------------------------
334 20 992 257,492 CA 52% CA 52% 77.18% 70.14%
- -----------------------------------------------------------------------------------------------------------------------------------
335 20 658 253,579 CA 35% CA 35% 76.46% 77.90%
- -----------------------------------------------------------------------------------------------------------------------------------
339 16 780 262,719 CA 46% CA 46% 77.64% 78.89%
- -----------------------------------------------------------------------------------------------------------------------------------
340 15 705 240,128 CA 42% CA 42% 76.44% 79.65%
- -----------------------------------------------------------------------------------------------------------------------------------
I-15
<PAGE>
ANNEX I
COLLATERAL INFORMATION
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Pooled Resec. Comp
Sec Cert Shelf Series Des Interest IOU
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
86 RYLPT3 92A 1-B (1) Y
- -------------------------------------------------------------------------------------------------------------------
86-a-1 RYLPT3 92C B-1 Serv Fee N
- -------------------------------------------------------------------------------------------------------------------
86-a-2 RYLPT3 92C B-2 Serv Fee N
- -------------------------------------------------------------------------------------------------------------------
86-a-3 RYLPT3 92C B-3 Serv Fee N
- -------------------------------------------------------------------------------------------------------------------
86-b-1 RYLPT3 92D B-1 Serv Fee N
- -------------------------------------------------------------------------------------------------------------------
86-b-2 RYLPT3 92D B-2 Serv Fee N
- -------------------------------------------------------------------------------------------------------------------
86-c MIGHTS 9101 B-2 Serv Fee Y
- -------------------------------------------------------------------------------------------------------------------
86-d-1 RYLPTC 9118 3-B Serv Fee Y
- -------------------------------------------------------------------------------------------------------------------
86-d-2 RYLPTC 9118 3-C --- ---
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
87 RYLPTC 9304 B-2 Serv Fee N
- -------------------------------------------------------------------------------------------------------------------
88 SASCO 9601 B-1 Serv Fee N
- -------------------------------------------------------------------------------------------------------------------
89 SASCO 9601 B-2 --- ---
- -------------------------------------------------------------------------------------------------------------------
90 SASCO 9602 B-2 Serv Fee N
- -------------------------------------------------------------------------------------------------------------------
91 SASI 93J 3-B (1) Y
- -------------------------------------------------------------------------------------------------------------------
93-a PHMSC 9336 B Serv Fee Y
- -------------------------------------------------------------------------------------------------------------------
93-b PHMSC 9343 B Serv Fee Y
- -------------------------------------------------------------------------------------------------------------------
93-c PHMSC 9344 B Serv Fee Y
- -------------------------------------------------------------------------------------------------------------------
93-d PHMSC 9350 B Serv Fee Y
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
92 SASI 9405 B-2 Serv Fee N
- -------------------------------------------------------------------------------------------------------------------
93 SASI 9405 B-3 --- ---
- -------------------------------------------------------------------------------------------------------------------
94 SASI 9504 B-2 Serv Fee N
- -------------------------------------------------------------------------------------------------------------------
95 SBMSI 92D B-4 (1) Y
- -------------------------------------------------------------------------------------------------------------------
95-a RFC 92S26 B-1 NONE Y
- -------------------------------------------------------------------------------------------------------------------
95-b RFC 92S28 B-1 NONE Y
- -------------------------------------------------------------------------------------------------------------------
95-c RFC 92S30 B-1 NONE Y
- -------------------------------------------------------------------------------------------------------------------
95-d RFC 92S32 B-1 NONE Y
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
96 SBMSI 9409 B-2 Serv Fee N
- -------------------------------------------------------------------------------------------------------------------
Totals / Weighted Averages:
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Remain
Clean Up Call Special Remain Remain
% By Hazard Fraud Bankruptcy 30+ Pct
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10% Seller 1,766,818 NONE 500,000 5.04%
- ----------------------------------------------------------------------------------------------------------------------------------
10% Seller NONE NONE NONE 4.05%
- ----------------------------------------------------------------------------------------------------------------------------------
10% Seller NONE NONE NONE 5.86%
- ----------------------------------------------------------------------------------------------------------------------------------
10% Seller NONE NONE NONE 5.37%
- ----------------------------------------------------------------------------------------------------------------------------------
10% Seller NONE NONE NONE 0.43%
- ----------------------------------------------------------------------------------------------------------------------------------
10% Seller NONE NONE NONE 4.45%
- ----------------------------------------------------------------------------------------------------------------------------------
25% Trustee 882,061 n/a n/a 4.90%
- ----------------------------------------------------------------------------------------------------------------------------------
10% Trustee 884,757 NONE 500,000 5.46%
- ----------------------------------------------------------------------------------------------------------------------------------
--- --- ---- ---- ---- ----
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
10% Residual or Servicer 9,212,361 3,281,021 96,550 0.36%
- ----------------------------------------------------------------------------------------------------------------------------------
5% Seller 2,503,949 1,746,789 100,000 1.44%
- ----------------------------------------------------------------------------------------------------------------------------------
--- --- ---- ---- ---- ----
- ----------------------------------------------------------------------------------------------------------------------------------
5% Seller or Servicer 4,014,480 2,668,261 100,000 0.00%
- ----------------------------------------------------------------------------------------------------------------------------------
NONE NONE 25,908,035 19,273,716 2,665,091 0.32%
- ----------------------------------------------------------------------------------------------------------------------------------
10% Servicer 5,668,451 4,027,279 143,000 0.54%
- ----------------------------------------------------------------------------------------------------------------------------------
10% Servicer 5,811,325 4,197,362 132,000 0.24%
- ----------------------------------------------------------------------------------------------------------------------------------
10% Servicer 9,349,227 7,923,610 1,737,202 0.34%
- ----------------------------------------------------------------------------------------------------------------------------------
10% Servicer 5,079,032 3,125,466 652,888 0.10%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
10% Residual or Servicer 4,605,467 4,557,549 161,144 1.14%
- ----------------------------------------------------------------------------------------------------------------------------------
--- --- ---- ---- ---- ----
- ----------------------------------------------------------------------------------------------------------------------------------
10% Servicer 4,386,789 8,773,578 158,345 1.00%
- ----------------------------------------------------------------------------------------------------------------------------------
NONE NONE 8,287,369 2,383,062 938,567 2.39%
- ----------------------------------------------------------------------------------------------------------------------------------
10% Master Servicer 2,033,730 NONE 323,353 2.27%
- ----------------------------------------------------------------------------------------------------------------------------------
10% Master Servicer 1,900,420 667,523 233,273 2.34%
- ----------------------------------------------------------------------------------------------------------------------------------
10% Master Servicer 1,873,624 484,204 266,095 2.90%
- ----------------------------------------------------------------------------------------------------------------------------------
10% Master Servicer 2,479,595 1,231,335 115,846 2.10%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
10% Master Servicer 1,863,541 1,839,187 50,000 1.60%
- ----------------------------------------------------------------------------------------------------------------------------------
0.90%
-----
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total Servicing
60+ Pct 90+ Pct F/C Pct REO Pct Delinq GWAC Fee NWAC
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
1.29% 3.11% 1.70% 0.14% 11.28% 9.568% (1) 8.751%
- ------------------------------------------------------------------------------------------------------------------------------------
1.03% 0.76% 1.94% 0.00% 7.78% 9.597% 0.330% 8.584%
- ------------------------------------------------------------------------------------------------------------------------------------
1.69% 3.19% 1.13% 0.16% 12.02% ---- 0.330% ----
- ------------------------------------------------------------------------------------------------------------------------------------
0.80% 7.14% 2.45% 0.00% 15.76% ---- 0.330% ----
- ------------------------------------------------------------------------------------------------------------------------------------
0.28% 2.43% 0.00% 0.00% 3.13% 9.485% 0.395% 8.178%
- ------------------------------------------------------------------------------------------------------------------------------------
1.56% 3.12% 0.46% 0.00% 9.59% ---- 0.395% ----
- ------------------------------------------------------------------------------------------------------------------------------------
1.86% 3.19% 4.07% 0.00% 14.02% 9.719% 0.457% 9.122%
- ------------------------------------------------------------------------------------------------------------------------------------
1.00% 3.14% 2.69% 0.28% 12.57% 9.597% 0.250% - 2.375% 9.280%
- ------------------------------------------------------------------------------------------------------------------------------------
- --- ---- ---- ---- ---- ---- --- ----
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
0.10% 0.28% 0.00% 0.00% 0.74% 7.606% 0.250% 7.336%
- ------------------------------------------------------------------------------------------------------------------------------------
0.00% 0.74% 0.18% 0.00% 2.36% 7.774% 0.250% - 0.300% 7.518%
- ------------------------------------------------------------------------------------------------------------------------------------
- --- ---- ---- ---- ---- ---- --- ----
- ------------------------------------------------------------------------------------------------------------------------------------
1.29% 0.00% 0.12% 0.00% 1.41% 7.774% 0.250% 7.524%
- ------------------------------------------------------------------------------------------------------------------------------------
0.14% 0.16% 0.21% 0.10% 0.93% 7.502% (1) 7.302%
- ------------------------------------------------------------------------------------------------------------------------------------
0.30% 0.19% 0.44% 0.10% 1.56% 7.779% 0.200% 7.579%
- ------------------------------------------------------------------------------------------------------------------------------------
0.11% 0.26% 0.30% 0.19% 1.10% 7.560% 0.200% 7.360%
- ------------------------------------------------------------------------------------------------------------------------------------
0.07% 0.15% 0.11% 0.10% 0.77% 7.457% 0.200% 7.257%
- ------------------------------------------------------------------------------------------------------------------------------------
0.13% 0.00% 0.10% 0.00% 0.33% 7.189% 0.200% 6.989%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
0.00% 0.28% 0.00% 0.13% 1.55% 7.398% 0.250% 7.103%
- ------------------------------------------------------------------------------------------------------------------------------------
--- ---- ---- ---- ---- ---- --- ----
- ------------------------------------------------------------------------------------------------------------------------------------
0.68% 0.37% 0.58% 0.17% 2.79% 8.187% 0.200% - 0.375% 7.954%
- ------------------------------------------------------------------------------------------------------------------------------------
0.23% 0.11% 1.16% 0.36% 4.26% 8.683% (1) 8.231%
- ------------------------------------------------------------------------------------------------------------------------------------
0.52% 0.00% 0.92% 0.00% 3.71% 9.039% 0.250% - 1.500% 8.591%
- ------------------------------------------------------------------------------------------------------------------------------------
0.25% 0.00% 2.29% 0.00% 4.88% 8.697% 0.250% - 1.750% 8.274%
- ------------------------------------------------------------------------------------------------------------------------------------
0.00% 0.00% 1.37% 0.42% 4.68% 8.559% 0.250% - 0.875% 8.124%
- ------------------------------------------------------------------------------------------------------------------------------------
0.23% 0.34% 0.45% 0.75% 3.87% 8.564% 0.250% - 1.750% 8.080%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
0.14% 0.00% 0.00% 0.00% 1.73% 7.819% 0.225% - 0.250% 7.000%
- ------------------------------------------------------------------------------------------------------------------------------------
0.17% 0.20% 0.29% 0.10% 1.66% 7.756% 7.475%
----- ----- ----- ----- ----- ------ ------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Number Average % WA
of Mtg Loan Highest Orig % Call
WAM AGE Loans Balance %CAL State LTV Bal Re
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
198 140 4,574 39,283 CA 3% TX 38% 88.63% 10.55%
- ------------------------------------------------------------------------------------------------------------------------------------
177 138 1,540 33,970 CA 2% LA 37% 87.81% 4.48%
- ------------------------------------------------------------------------------------------------------------------------------------
---- ---- ---- ---- ---- ---- ---- 16.65%
- ------------------------------------------------------------------------------------------------------------------------------------
---- ---- ---- ---- ---- ---- ---- 2.30%
- ------------------------------------------------------------------------------------------------------------------------------------
215 139 857 61,233 CA 1% TX 93% 92.95% 2.95%
- ------------------------------------------------------------------------------------------------------------------------------------
---- ---- ---- ---- ---- ---- ---- 27.84%
- ------------------------------------------------------------------------------------------------------------------------------------
187 166 172 32,138 CA 0% TX 63% 92.42% 8.74%
- ------------------------------------------------------------------------------------------------------------------------------------
202 139 2,005 34,593 CA 3% TX 32% 88.13% 22.04%
- ------------------------------------------------------------------------------------------------------------------------------------
---- ---- ---- ---- ---- ---- ---- ----
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
293 55 1,121 292,687 CA 83% CA 83% 70.60% 60.69%
- ------------------------------------------------------------------------------------------------------------------------------------
327 25 536 293,042 CA 46% CA 46% 76.65% 85.53%
- ------------------------------------------------------------------------------------------------------------------------------------
---- ---- ---- ---- ---- ---- ---- ----
- ------------------------------------------------------------------------------------------------------------------------------------
304 56 541 309,540 n/a n/a n/a 83.43%
- ------------------------------------------------------------------------------------------------------------------------------------
296 54 7,194 258,608 CA 67% CA 67% 72.73% 69.01%
- ------------------------------------------------------------------------------------------------------------------------------------
295 55 1,530 252,711 CA 65% CA 65% 73.11% 64.38%
- ------------------------------------------------------------------------------------------------------------------------------------
295 54 1,571 255,698 CA 68% CA 68% 72.83% 66.88%
- ------------------------------------------------------------------------------------------------------------------------------------
296 53 2,950 260,377 CA 68% CA 68% 72.52% 70.17%
- ------------------------------------------------------------------------------------------------------------------------------------
297 53 1,143 265,939 CA 66% CA 66% 72.64% 76.01%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
311 48 1,537 254,529 CA 36% CA 36% 73.93% 78.44%
- ------------------------------------------------------------------------------------------------------------------------------------
---- ---- ---- ---- ---- ---- ---- ----
- ------------------------------------------------------------------------------------------------------------------------------------
320 31 1,440 228,862 CA 38% CA 38% 75.98% 75.13%
- ------------------------------------------------------------------------------------------------------------------------------------
283 66 1,117 259,165 CA 71% CA 71% 73.93% 19.39%
- ------------------------------------------------------------------------------------------------------------------------------------
285 67 217 260,131 CA 76% CA 76% 75.82% 15.00%
- ------------------------------------------------------------------------------------------------------------------------------------
280 68 236 251,568 CA 61% CA 61% 74.51% 16.26%
- ------------------------------------------------------------------------------------------------------------------------------------
284 66 297 259,664 CA 74% CA 74% 71.77% 23.99%
- ------------------------------------------------------------------------------------------------------------------------------------
283 66 367 263,076 CA 72% CA 72% 74.18% 22.44%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
311 44 548 276,236 n/a n/a n/a 71.00%
- ------------------------------------------------------------------------------------------------------------------------------------
308 42 116,700.00 $236,112 CA 51% 72.38%
--- -- ---------- -------- ------ ------
</TABLE>
I-16
<PAGE>
ANNEX I FOOTNOTES
1. See information relating to Resecuritized Certificates below.
2. The amount of cumulative Realized Losses was not available, however,
Realized Losses have been allocated to certain Subordinated Certificates of
this Underlying Series.
3. Current carve-out amounts remaining are not available; the original
carve-out information has been provided.
4. In connection with a resecuritization (the "Related Resecuritization") of
certain classes of securities with respect to this Underlying Series, and
for so long as the Related Resecuritization remains outstanding, the Seller
believes that Residential Funding Corporation has agreed to restrict its
right of optional termination (the "RFC Optional Termination") until the
outstanding principal balance of the related Underlying Mortgage Loans has
declined to the greater of $5 million or 5% of the principal balance of
such Underlying Mortgage Loans of the date of issuance of the Underlying
Series. If an optional termination right becomes triggered with respect to
any of the other securities backing the Related Resecuritization, the
Seller believes that Residential Funding Corporation has agreed that it
will never exercise the RFC Optional Termination.
<PAGE>
<TABLE>
<CAPTION>
ANNEX II
- ------------- --------------- ------------------------------------------------------------------ -------------------------
<S> <C> <C> <C> <C> <C> <C>
Pooled Resec.
Security Security Full Name of Series Abbreviation
-------- -------- ------------------- ------------
- ------------- --------------- ------------------------------------------------------------------ -------------------------
1. American Mortgage Trust 1993-3,
Subordinated Mortgage Securities,
Series 1993-3, Class 3B AMERT 9303, 3-B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company Inc.,
Mortgage Pass-Through Certificates,
a. Series 1992-18, Class B2 PHMSC 9218, B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
b. Series 1992-22, Class B2 PHMSC 9222, B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
c. Series 1992-28, Class B2 PHMSC 9228, B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
Marine Midland Bank N.A.,
Mortgage Pass-Through Certificates,
d. Series 1991-3, Class B-2 MARPTC 913, B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
Marine Midland Bank N.A.,
Mortgage Pass-Through Certificates,
e. Series 1992-2, Class B-3 MARPTC 922, B-3
- ------------- --------------- ------------------------------------------------------------------ -------------------------
Marine Midland Bank N.A.,
Mortgage Pass-Through Certificates,
f. Series 1992-3, Class B-2 MARPTC 923, B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
2. Bear Stearns Mortgage Securities Inc.,
Mortgage Pass-Through Certificates,
Series 1993-8, Class M BSMSI 9308, M
- ------------- --------------- ------------------------------------------------------------------ -------------------------
3. CMC Securities Corporation III,
Collaterized Mortgage Obligations,
Series 1994-C, Class C-B1 CAPPTC 94C, B-1
- ------------- --------------- ------------------------------------------------------------------ -------------------------
4. Countywide Funding Corporation,
Mortgage Pass-Through Certificates,
Series 1993-1, Class B-1 CFC 9301, B-1
- ------------- --------------- ------------------------------------------------------------------ -------------------------
5. Countywide Funding Corporation,
Mortgage Pass-Through Certificates,
Series 1994-1, Class B-1 CFC 9401, B-1
- ------------- --------------- ------------------------------------------------------------------ -------------------------
6. Countywide Home Loans,
Mortgage Pass-Through Certificates,
Series 1994-9, Class B-2 CFC 9409, B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
7. Countywide Funding Corporation,
Mortgage Pass-Through Certificates,
Series 1994-18, Class B-3 CFC 9418, B-3
- ------------- --------------- ------------------------------------------------------------------ -------------------------
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
<S><C> <C> <C> <C>
Pooled Reser.
Security Security Full Name of Series Abbreviation
- -------- -------- ------------------- -------------
- --------------------------------------------------------------------------------------------------------------------------
8. Countywide Home Loans,
Mortgage Pass-Through Certificates,
Series 1996-2, Class B-2 CFC 9602, B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
9. Countywide Home Loans
Mortgage Pass-Through Certificates,
Series 1997-5, Class B-3 CFC 9705, B-3
- ------------- --------------- ------------------------------------------------------------------ -------------------------
10. Chase Mortgage Finance Corporation,
Multi-Class Mortgage Pass-Through Certificates,
Series 1994-E, Class B-2 CHASE 94E, B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
11. Chemical Mortgage Securities, Inc.,
Multi-Class Mortgage Securities, Inc.,
Series 1996-1, Class B-3 CHEMPT 9601, B-3
- ------------- --------------- ------------------------------------------------------------------ -------------------------
12. Citicorp Mortgage Securities, Inc.,
REMIC Pass-Through Certificates,
Series 1990-16, Class B CITIMT 9016, B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
13. Citicorp Mortgage Securities, Inc.,
REMIC Pass-Through Certificates,
Series 1992-5, Class B CITIMT 9205, B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
14. Citicorp Mortgage Securities, Inc.,
REMIC Pass-Through Certificates,
Series 1992-19, Class B CITIMT 9219, B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
15. Citicorp Mortgage Securities, Inc.,
REMIC Pass-Through Certificates,
Series 1994-1, Class B-1 CITIMT 9401, B-1
- ------------- --------------- ------------------------------------------------------------------ -------------------------
16. Citicorp Mortgage Securities, Inc.,
REMIC Pass-Through Certificates,
Series 1994-5, Class B-1 CITIMT 9405, B-1
- ------------- --------------- ------------------------------------------------------------------ -------------------------
17. Citicorp Mortgage Securities, Inc.,
REMIC Pass-Through Certificates,
Series 1994-7, Class B-1 CITIMT 9407, B-1
- ------------- --------------- ------------------------------------------------------------------ -------------------------
18. Citicorp Mortgage Securities, Inc.,
REMIC Pass-Through Certificates,
Series 1994-10, Class B-1 CITIMT 9410, B-1
- ------------- --------------- ------------------------------------------------------------------ -------------------------
19. Citicorp Mortgage Securities, Inc.,
REMIC Pass-Through Certificates,
Series 1994-11, Class B-1 CITIMT 9411, B-1
- ------------- --------------- ------------------------------------------------------------------ -------------------------
20. Citicorp Mortgage Securities, Inc.,
REMIC Pass-Through Certificates,
Series 1994-13, Class B-2 CITIMT 9413, B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
21. Citicorp Mortgage Securities, Inc.,
REMIC Pass-Through Certificates,
Series 1995-2, Class B-3 CITIMT 9502, B-3
- ------------- --------------- ------------------------------------------------------------------ -------------------------
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Pooled Reser.
Security Security Full Name of Series Abbreviation
- --------- -------- ---------------- ------------
- --------------------------------------------------------------------------------------------------------------------------
<S><C> <C> <C>
22. Citicorp Mortgage Securities, Inc.,
REMIC Pass-Through Certificates,
Series 1996-1, Class B-1 CITIMT 9601, B-1
- ------------- --------------- ------------------------------------------------------------------ -------------------------
23. Citicorp Mortgage Securities, Inc.,
REMIC Pass-Through Certificates,
Series 1997-3, Class B-1 CITIMT 9703, B-1
- ------------- --------------- ------------------------------------------------------------------ -------------------------
24. Citicorp Mortgage Securities, Inc.,
REMIC Pass-Through Certificates,
Series 1997-3, Class B-2 CITIMT 9703, B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
25. Citicorp Mortgage Securities, Inc.,
REMIC Pass-Through Certificates,
Series 1997-7, Class B-1 CITIMT 9707, B-1
- ------------- --------------- ------------------------------------------------------------------ -------------------------
26. CWMBS, Inc.,
Mortgage Pass-Through Certificates,
Series 1994-A, Class B-3 CWD, 94A, B-3
- ------------- --------------- ------------------------------------------------------------------ -------------------------
27. CWMBS, Inc.,
Mortgage Pass-Through Certificates,
Series 1994-C, Class B-2 CWD 94C, B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
28. CWMBS, Inc.,
Mortgage Pass-Through Certificates,
Series 1994-G, Class B-1 CWD 94G, B-1
- ------------- --------------- ------------------------------------------------------------------ -------------------------
29. DLJ Mortgage Acceptance Corp.,
Mortgage Pass-Through Certificates,
Series 1994-3, Class B-1 DLJ 9403, B-1
- ------------- --------------- ------------------------------------------------------------------ -------------------------
30. Credit Suisse First Boston Mortgage Securities Corp.,
WMC Mortgage Loan Pass-Through Pass-Through Certificates, Series
1993-2R, Class 1 FBCS 9302R, 1
- ------------- --------------- ------------------------------------------------------------------ -------------------------
a. First Boston Mortgage Securities Corp.,
Conduit Mortgage Pass-Through Certificates,
Series 1993-2, Class B-3 FBCS 9302, B-3
- ------------- --------------- ------------------------------------------------------------------ -------------------------
31. GE Capital Mortgage Services, Inc.,
REMIC Multi-Class Pass-Through Certificates,
Series 1994-1, Class B2 GECAP 9401, B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
32. GE Capital Mortgage Services, Inc.,
REMIC Multi-Class Pass-Through Certificates,
Series 1994-16, Class B2 GECAP 9416, B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
33. GE Capital Mortgage Services, Inc.,
REMIC Multi-Class Pass-Through Certificates,
Series 1994-27, Class B2 GECAP 9427, B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
34. GE Capital Mortgage Services, Inc.,
REMIC Multi-Class Pass-Through Certificates,
Series 1995-7, Class B2 GECAP 9507, B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Pooled Resec.
Security Security Full Name of Series Abbreviation
- -------- -------- ------------------- ------------
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
35. GE Capital Mortgage Services, Inc.,
REMIC Multi-Class Pass-Through Certificates,
Series 1996-15, Class B1 GECAP 9615, B-1
- ------------- --------------- ------------------------------------------------------------------ -------------------------
36. GE Capital Mortgage Services, Inc.,
REMIC Multi-Class Pass-Through Certificates,
Series 1996-16, Class B2 GECAP 9616, B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
37. GE Capital Mortgage Services, Inc.,
REMIC Multi-Class Pass-Through Certificates,
Series 1997-1, Class B1 GECAP 9701, B-1
- ------------- --------------- ------------------------------------------------------------------ -------------------------
38. GE Capital Mortgage Services, Inc.,
REMIC Multi-Class Pass-Through Certificates,
Series 1997-2, Class 1-B2 GECAP 9702, 1-B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
39. GE Capital Mortgage Services, Inc.,
REMIC Multi-Class Pass-Through Certificates,
Series 1997-9, Class 1-B1 GECAP 9709, 1-B-1
- ------------- --------------- ------------------------------------------------------------------ -------------------------
40. GE Capital Mortgage Services, Inc.,
REMIC Multi-Class Pass-Through Certificates,
Series 1997-9, Class 1-B2 GECAP 9709, 1-B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
41. GE Capital Mortgage Services, Inc.,
REMIC Multi-Class Pass-Through Certificates,
Series 1997-9, Class 2-B2 GECAP 9709, 2-B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
42. GE Capital Mortgage Services, Inc.,
REMIC Multi-Class Pass-Through Certificates,
Series 1997-12, Class B1 GECAP 9712, B-1
- ------------- --------------- ------------------------------------------------------------------ -------------------------
43. GE Capital Mortgage Services, Inc.,
REMIC Multi-Class Pass-Through Certificates,
Series 1997-12, Class B2 GECAP 9712, B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
44. Headlands Mortgage Securities Inc.,
Mortgage Pass-Through Certificates,
Series 1997-5, Class B-2 HMSI 9705, B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
45. Morserv, Inc.,
Multi-Class Mortgage Pass-Through Certificates,
Series 1996-2, Class B-1 MORSRV 9602, B-1
- ------------- --------------- ------------------------------------------------------------------ -------------------------
46. Morgan Stanley Capital I Inc.,
Subordinated Mortgage Securities,
Series 1996-1, Class B2 MSCAP1 9601, B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
47 Norwest Asset Securities Corporation,
Mortgage Pass-Through Certificates,
Series 1996-4, Class B-1 NSCOR 9604, B-1
- ------------- --------------- ------------------------------------------------------------------ -------------------------
48. Norwest Asset Securities Corporation,
Mortgage Pass-Through Certificates,
Series 1996-5, Class B-1 NSCOR 9605, B-1
- ------------- --------------- ------------------------------------------------------------------ -------------------------
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Pooled Reser.
Security Security Full Name of Series Abbreviation
- -------- -------- ------------------- ------------
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
49. The Prudential Home Mortgage Securities Company, Inc.,
Subordinated Mortgage Securities,
Series 1993-E, Class B2 PHMSC 93E, 2-B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
a. Series 1993-14, Class B PHMSC 9314, B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
b. Series 1993-19, Class B PHMSC 9319, B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
c. Series 1993-22, Class B PHMSC 9322, B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
50. The Prudential Home Mortgage Securities Company, Inc.,
Subordinated Mortgage Certificate-Backed Certificates,
Series 1993-L, Class B3-3 PHMSC 93L, 3-B-3
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
a. Series 1993-47, Class B PHMSC 9347, B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
b. Series 1993-51, Class B PHMSC 9351, B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
c. Series 1993-57, Class B PHMSC 9357, B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
d. Series 1993-60, Class B PHMSC 9360, B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
e. Series 1993-62, Class B PHMSC 9362, B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
51. The Prudential Home Mortgage Securities Company, Inc.,
Subordinated Mortgage Certificate-Backed Certificate,
Series 1994-A, Class B5 PHMSC 94A, 5-B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
a. Series 1993-54, Class B PHMSC 9354, B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
b. Series 1993-63, Class B PHMSC 9363, B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
c. Series 1994-2, Class B PHMSC 9402, B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Pooled Resec.
Security Security Full Name of Series Abbreviation
- -------- -------- ------------------- ------------
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
d. Series 1994-3, Class B PHMSC 9403, B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
e. Series 1994-5, Class B PHMSC 9405, B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
f. Series 1994-6, Class B PHMSC 9406, B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
g. Series 1994-8, Class B PHMSC 9408, B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
h. Series 1994-10, Class B PHMSC 9410, B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
i. Series 1994-11, Class B PHMSC 9411, B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
j. Series 1994-13, Class B PHMSC 9413, B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
k. Series 1994-17, Class B PHMS 9417, B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
52. The Prudential Home Mortgage Securities Company, Inc.,
Subordinated Mortgage Certificate-Backed Certificates,
Series 1994-E, Class B2 PHMSC 94E, 2-B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
a. Series 1994-15, Class B-1 PHMSC 9415, B-1
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
b. Series 1994-18, Class B PHMS 9418, B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
c. Series 1994-19, Class B PHMS 9419, B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
d. Series 1994-21, Class B-1 PHMS 9421, B-1
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
e. Series 1994-22, Class B PHMS 9422, B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Pooled Resec.
Security Security Full Name of Series Abbreviation
- -------- --------- ------------------- ------------
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
f. Series 1994-25, Class B PHMS 9425, B-1
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
g. Series 1994-27, Class B PHMS 9427, B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
53. The Prudential Home Mortgage Securities Company, Inc.,
Subordinated Mortgage Certificate-Backed Certificates,
Series 1995-A, Class B3 PHMS 95A, 3-B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
a. Series 1994-30, Class B PHMS 9430, B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
b. Series 1994-33, Class B-1 PHMSC 9433, B-1
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
c. Series 1995-1, Class B PHMS 9501, B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
54. PNC Mortgage Securities Corp.,
Mortgage Pass-Through Certificates,
Series 1995-2, Class B-3 PNC 9502, B-3
- ------------- --------------- ------------------------------------------------------------------ -------------------------
55. PNC Mortgage Securities Corp.,
Mortgage Pass-Through Certificates,
Series 1997-2, Class B-2 PNC 9702, B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
56. PNC Mortgage Securities Corp.,
Mortgage Pass-Through Certificates,
Series 1997-5, Class B-2 PNC 9705, B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
57. PNC Mortgage Securities Corp.,
Mortgage Pass-Through Certificates,
Series 1997-5, Class B-3 PNC 9705, B-3
- ------------- --------------- ------------------------------------------------------------------ -------------------------
58. PaineWebber Mortgage Acceptance Corporation IV,
Mortgage Pass-Through Certificates,
Series 1993-7, Class M-3 PWMAC 9307, M-3
- ------------- --------------- ------------------------------------------------------------------ -------------------------
59. PaineWebber Mortgage Acceptance Corporation IV,
Mortgage Pass-Through Certificates,
Series 1994-2, Class M-2 PWMAC 9402, M-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
60. PaineWebber Mortgage Acceptance Corporation IV,
Mortgage Pass-Through Certificates,
Series 1994-2, Class M-3 PWMAC 9402, M-3
- ------------- --------------- ------------------------------------------------------------------ -------------------------
61. Residential Accredit Loans, Inc.,
Mortgage Asset-Backed Pass-Through Certificates,
Series 1997-QS12, Class M-2 RALI 97Q12, M-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Pooled Resec.
Security Security Full Name of Series Abbreviation
- -------- -------- ------------------- ------------
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
62. CWMBS, Inc.,
Mortgage Pass-Through Certificates,
Series 1996-G, Class B-1b RAST 96A3, B-1-B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
63. CWMBS, Inc.,
Mortgage Pass-Through Certificates,
Series 1996-H, Class B-2 RAST 96A4, B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
64. Residential Funding Mortgage Securities I, Inc.,
Mortgage Pass-Through Certificates,
Series 1993-S10, Class M-2 RFC 93S10, M-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
65. Residential Funding Mortgage Securities I, Inc.,
Mortgage Pass-Through Certificates,
Series 1993-S18, Class M-2 RFC 93S18, M-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
66. Residential Funding Mortgage Securities I, Inc.,
Mortgage Pass-Through Certificates,
Series 1993-S18, Class M-3 RFC 93S18, M-3
- ------------- --------------- ------------------------------------------------------------------ -------------------------
67. Residential Funding Mortgage Securities I, Inc.,
Mortgage Pass-Through Certificates,
Series 1993-S21, Class M-3 RFC 93S21, M-3
- ------------- --------------- ------------------------------------------------------------------ -------------------------
68. Residential Funding Mortgage Securities I, Inc.,
Mortgage Pass-Through Certificates,
Series 1993-S22, Class M-2 RFC 93S22, M-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
69. Residential Funding Mortgage Securities I, Inc.,
Mortgage Pass-Through Certificates,
Series 1993-S22, Class M-3 RFC 93S22, M-3
- ------------- --------------- ------------------------------------------------------------------ -------------------------
70. Residential Funding Mortgage Securities I, Inc.,
Mortgage Pass-Through Certificates,
Series 1993-S24, Class M-3 RFC 93S24, M-3
- ------------- --------------- ------------------------------------------------------------------ -------------------------
71. Residential Funding Mortgage Securities I, Inc.,
Mortgage Pass-Through Certificates,
Series 1993-S26, Class M-2 RFC 93S26, M-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
72. Residential Funding Mortgage Securities I, Inc.,
Mortgage Pass-Through Certificates,
Series 1993-S26, Class M-3 RFC 93S26, M-3
- ------------- --------------- ------------------------------------------------------------------ -------------------------
73. Residential Funding Mortgage Securities I, Inc.,
Mortgage Pass-Through Certificates,
Series 1993-S27, Class M-3 RFC 93S27, M-3
- ------------- --------------- ------------------------------------------------------------------ -------------------------
74. Residential Funding Mortgage Securities I, Inc.,
Mortgage Pass-Through Certificates,
Series 1993-S28, Class M-2 RFC 93S28, M-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
75. Residential Funding Mortgage Securities I, Inc.,
Mortgage Pass-Through Certificates,
Series 1993-S28, Class M-3 RFC 93S28, M-3
- ------------- --------------- ------------------------------------------------------------------ -------------------------
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Pooled Resec.
Security Security Full Name of Series Abbreviation
- -------- -------- ------------------- ------------
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
76. Residential Funding Mortgage Securities I, Inc.,
Mortgage Pass-Through Certificates,
Series 1993-S34, Class M-3 RFC 93S34, M-3
- ------------- --------------- ------------------------------------------------------------------ -------------------------
77. Residential Funding Mortgage Securities I, Inc.,
Mortgage Pass-Through Certificates,
Series 1994-S3, Class M-3 RFC 94S3, M-3
- ------------- --------------- ------------------------------------------------------------------ -------------------------
78. Residential Funding Mortgage Securities I, Inc.,
Mortgage Pass-Through Certificates,
Series 1995-R20, Class M-3 RFC 95R20, M-3
- ------------- --------------- ------------------------------------------------------------------ -------------------------
79. Residential Funding Mortgage Securities I, Inc.,
Mortgage Pass-Through Certificates,
Series 1996-S10, Class M-2 RFC 96S10, M-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
80. Residential Funding Mortgage Securities I, Inc.,
Mortgage Pass-Through Certificates,
Series 1996-S14, Class M-2 RFC 96S14, M-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
81. Residential Funding Mortgage Securities I, Inc.,
Mortgage Pass-Through Certificates,
Series 1996-S14, Class M-3 RFC 96S14, M-3
- ------------- --------------- ------------------------------------------------------------------ -------------------------
82. Residential Funding Mortgage Securities I, Inc.,
Mortgage Pass-Through Certificates,
Series 1996-S16, Class M-2 RFC 96S16, M-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
83. Residential Funding Mortgage Securities I, Inc.,
Mortgage Pass-Through Certificates,
Series 1996-S18, Class M-2 RFC 96S18, M-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
84. Residential Funding Mortgage Securities I, Inc.,
Mortgage Pass-Through Certificates,
Series 1996-S23, Class M-2 RFC 96S23, M-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
85. Residential Funding Mortgage Securities I, Inc.,
Mortgage Pass-Through Certificates,
Series S25, Class M-2 RFC 96S25, M-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
86. Ryland Mortgage Securities Corporation Three,
Mortgage Credit Bonds,
Series 1992-A, Class 1B RYLPT3 92A, 1-B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
Ryland Mortgage Securities Corporation Three,
Collateralized Mortgage Bonds,
a. Series 1992-C, Class B-1 RYLPT3 92C, B-1
- ------------- --------------- ------------------------------------------------------------------ -------------------------
Ryland Mortgage Securities Corporation Three,
Collateralized Mortgage Bonds,
b. Series 1992-C, Class B-2 RYLPT3 92C, B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
Ryland Mortgage Securities Corporation Three,
Collateralized Mortgage Bonds,
c. Series 1992-C, Class B-3 RYLPT3 92C, B-3
- ------------- --------------- ------------------------------------------------------------------ -------------------------
</TABLE>
II-9
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Pooled Resec.
Security Security Full Name of Series Abbreviation
- -------- -------- -------------------- ------------
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ryland Mortgage Securities Corporation Three,
Collateralized Mortgage Bonds,
d. Series 1992-D, Class B-1 RYLPT3 92D, B-1
- ------------- --------------- ------------------------------------------------------------------ -------------------------
Ryland Mortgage Securities Corporation Three,
Collateralized Mortgage Bonds,
e. Series 1992-D, Class B-2 RYLPT3 92D, B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
Mortgage Investment Grade Highly-Structured
Trust Securities, Grantor Trust,
f. Series 1991-1, Class B-2 MIGHTS 9101, B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
Ryland Mortgage Securities Corporation,
Mortgage Participation Securities,
g. Series 1991-18, Class 3-B RYLPTC 9118, 3-B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
Ryland Mortgage Securities Corporation,
Mortgage Participation Securities,
h. Series 1991-18, Class 3-C RYLPTC 9118, 3-C
- ------------- --------------- ------------------------------------------------------------------ -------------------------
87. Ryland Mortgage Securities Corporation,
Mortgage Pass-Through Certificates,
Series 1993-4, Class B2 RYLPTC 9304, B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
88. Structured Asset Securities Corporation,
Mortgage Pass-Through Certificates,
Series 1996-1, Class B1 SASCO 9601, B-1
- ------------- --------------- ------------------------------------------------------------------ -------------------------
89. Structured Asset Securities Corporation,
Mortgage Pass-Through Certificates,
Series 1996-1, Class B2 SASCO 9601, B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
90. Structured Asset Securities Corporation,
Mortgage Pass-Through Certificate,
Series 1996-2, Class B2 SASCO 9602, B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
91. Securitized Asset Sales, Inc.,
Mortgage Pass-Through Certificates,
Series 1994-5, Class B2 SASI 9405, B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
92. Securitized Asset Sales, Inc.,
Mortgage Pass-Through Certificates,
Series 1994-5, Class B3 SASI 9405, B-3
- ------------- --------------- ------------------------------------------------------------------ -------------------------
93. Securitized Asset Sales, Inc.,
Mortgage Pass-Through Certificates,
Series 1995-4, Class B-2 SASI 9504, B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
94. Securitized Asset Sales, Inc.,
Subordinated Mortgage Certificates,
Series PHM/1993-J, Class 3B SASI 93J, 3-B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
a. Series 1993-36, Class B PHMS 9336, B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
</TABLE>
II-10
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Pooled Resec.
Security Security Full Name of Series Abbreviation
- -------- -------- -------------------- ------------
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
b. Series 1993-43, Class B PHMS 9343, B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
c. Series 1993-44, Class B PHMS 9344, B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
- ------------- --------------- ------------------------------------------------------------------ -------------------------
The Prudential Home Mortgage Securities Company, Inc.,
Mortgage Pass-Through Certificates,
d. Series 1993-50, Class B PHMS 9350, B
- ------------- --------------- ------------------------------------------------------------------ -------------------------
95. Salomon Brothers Mortgage Securities VII, Inc.,
Mortgage Pass-Through Certificates,
Series 1992-D, Class B-4 SBMSI 92D, B-4
- ------------- --------------- ------------------------------------------------------------------ -------------------------
Residential Funding Mortgage Securities I Inc.,
Mortgage Pass-Through Certificates,
a. Series 1992-S26, Class B-1 RFC 92S26, B-1
- ------------- --------------- ------------------------------------------------------------------ -------------------------
Residential Funding Mortgage Securities I Inc.,
Mortgage Pass-Through Certificates,
b. Series 1992-S28, Class B-1 RFC 92S28, B-1
- ------------- --------------- ------------------------------------------------------------------ -------------------------
Residential Funding Mortgage Securities I Inc.,
Mortgage Pass-Through Certificates,
c. Series 1992-S30, Class B-1 RFC 92S30, B-1
- ------------- --------------- ------------------------------------------------------------------ -------------------------
Residential Funding Mortgage Securities I Inc.,
Mortgage Pass-Through Certificates,
d. Series 1992-S32, Class B-1 RFC 92S32, B-1
- ------------- --------------- ------------------------------------------------------------------ -------------------------
96. Salomon Brothers Mortgage Securities VII, Inc.,
Mortgage Pass-Through Certificates,
Series 1994-9, Class B-2 SBMSI 9409, B-2
- ------------- --------------- ------------------------------------------------------------------ -------------------------
</TABLE>
II-11
<PAGE>
ANNEX III
UNDERLYING SERVICER INFORMATION
CITICORP MORTGAGE, INC.
As used in this section, the following capitalized terms have the
following meanings:
Affiliated Originators: Citibank Mortgage, Inc., Citibank, N.A.,
Citibank, Federal Savings Bank or their affiliates.
Buydown Mortgage Loans: Loans pursuant to which the monthly payments
made by the Mortgagor during the early years of the Buydown Mortgage
Loan will be less than the scheduled monthly payments on the Buydown
Mortgage Loan, the resulting difference to be made up from buydown
funds contributed by the Mortgagor, the Mortgagor's employer, the
seller or the builder of the related Mortgaged Property or another
source.
Certificates: One or more series (each, a "Series") of certificates
(the "Certificates") consisting of one or more classes (each, a
"Class") evidencing ownership interests in a trust (the "Trust"), to be
created by the Issuer, with respect to which one or more elections will
be made to treat such Trust, or one or more segregated pools of assets
within such Trust, as one or more real estate mortgage investment
conduits (each, a "REMIC") under the Internal Revenue Code of 1986, as
it may be amended from time to time (the "Code").
CitiMae: CitiMae, Inc.
CitiMortgage Certificates: Certificates consisting of: (i)
mortgage-backed certificates previously issued by the Issuer or an
affiliate of the Issuer and described in the applicable Prospectus
Supplement ("Issuer Certificates") and (ii) certificates backed by
Mortgage Loans (together with Issuer Certificates,
"CitiMortgageCertificates").
CFSB: Citibank, Federal Savings Bank.
CMI: Citibank Mortgage, Inc.
Issuer: Citicorp Mortgage Securities, Inc.
Mortgage Loans: 20- to 30-year fixed rate conventional one- to
four-family mortgage loans originated or acquired by Citicorp Mortgage,
Inc.
Mortgaged Property: One-to four-family residences and the shares issued
by cooperatives.
Originator: Collectively, the Third-Party originators, the Affiliated
originators and the CitiMae Originators.
Third Party Originator: Unaffiliated Seller-Servicers experienced in
originating mortgage loans of the type contained in the related Pool in
accordance with accepted practices and prudent guidelines. Each Third
Party Originator must be a savings and loan association, savings bank,
commercial bank, credit union, insurance company or a mortgagee
approved by the Secretary of Housing and Urban Development.
III-1
<PAGE>
DELINQUENCY, FORECLOSURE AND LOSS CONSIDERATIONS AND EXPERIENCE
DELINQUENCY AND FORECLOSURE EXPERIENCE OF
AFFILIATED ORIGINATORS' SERVICED PORTFOLIO
The delinquency and foreclosure experience on the portfolio of one- to
four- family conventional residential first mortgage loans originated or
acquired by the Affiliated Originators and certain other affiliates of CMI and
serviced by CMI for the periods indicated is set forth in the following table.
During the period covered in the table, this portfolio increased from $35.6
billion on December 31, 1994 to $36.0 billion on December 31, 1997. CMI's total
serviced portfolio includes both fixed and adjustable interest rate mortgage
loans, including Buydown Mortgage Loans, tiered-payment mortgage loans, loans
with stated maturities of 15 to 30 years and other types of mortgage loans
having a variety of payment characteristics, and includes mortgage loans secured
by mortgaged properties in geographic locations that may not be representative
of the geographic distribution or concentration of the Mortgaged Properties
securing the Mortgage Loans. There can be no assurance that the delinquency and
foreclosure experience set forth below with respect to CMI's total serviced
portfolio will be similar to the results that may be experienced with respect to
the Mortgage Loans underlying the CitiMortgage Certificates or the Certificates.
<TABLE>
<CAPTION>
DELINQUENCY AND FORECLOSURE EXPERIENCE OF
SERVICED PORTFOLIO OF ONE- TO FOUR- FAMILY
RESIDENTIAL MORTGAGE LOANS (1)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AS OF AS OF AS OF AS OF
DECEMBER 31, 1994 DECEMBER 31, 1995 DECEMBER 31, 1996 DECEMBER 31, 1997
------------------ -------------------- --------------------- ---------------------
By
Dollar By Dollar
By Amount Amount of By
By No. Dollar of Loans Dollar
of Loans Amount By No. of Loans By No. (in By No. of Amount
-------- of Loans Loans of Loans millions) Loans of Loans
(in --------- (in -------- -------- -------- (in
millions) millions) millions)
--------- --------- ---------
Total Portfolio......... 350,751 $35,590.9 330,529 $34,880.5 309,754 $34,084.8 303,896 $35,955.8
Period of Delinquency(2)
30-59 Days......... 12,309 1,237.3 12,216 1,213.7 10,487 1,014.9 9,368 906.9
60-89 Days......... 3,847 412.3 4,098 431.7 2,444 253.1 1,947 194.3
90 Days or more.... 5,967 740.4 5,724 676.2 3,291 371.8 2,646 286.1
Total Loans Delinquent.. 22,123 2,390.0 22,038 2,321.6 16,222 1,639.8 13,961 1,387.3
Delinquency Ratio....... 6.31% 6.72% 6.67% 6.66% 5.24% 4.81% 4.59% 3.86%
Foreclosures(3)......... 6,245 835.7 6,067 793.2 5,822 696.0 3,539 406.3
Foreclosure Ratio....... 1.78% 2.35% 1.84% 2.27% 1.88% 2.04% 1.16% 1.13%
</TABLE>
(1) The table includes mortgage loans serviced by CMI and held by an
Originator, in its own portfolio, and certain affiliates' portfolios.
The table also includes mortgage loans serviced by CMI which have been
packaged and sold to FNMA and FHLMC, in transactions pursuant to
registration statements under the Securities Act and in transactions
exempt from the registration requirements of the Securities Act. The
table does not include loans purchased strictly for servicing revenue
or, in the case of the Florida branches of CFSB, loans originated prior
to the acquisition by the Citicorp group of the Florida branches of
CFSB in January 1984. The portfolio includes cooperative loans. Since
June 20, 1997, CMI has transferred the servicing of 803 delinquent
loans and loans in foreclosure totaling $106.0 million.
(2) The Period of Delinquency is based upon the number of days past due on
a contractual basis. No mortgage loan is considered delinquent for
purposes of this table until 30 days past due on a contractual basis.
(3) The table shows mortgage loans for which foreclosure proceedings had
been instituted at the dates indicated.
III-2
<PAGE>
DELINQUENCY, FORECLOSURE AND LOSS EXPERIENCE OF
AFFILIATED ORIGINATORS' SECURITIZED PORTFOLIO
The delinquency, foreclosure and loss experience on the one- to
four-family conventional residential first mortgage loans that were originated
or acquired and subsequently sold by the Affiliated Originators, CMSI and
certain other affiliates of CMI pursuant to registration statements under the
Securities Act and serviced by CMI is set forth in the following tables for the
periods indicated. During the period covered in the tables, this group of
securitized mortgage loans decreased from $7.4 billion on December 31, 1994 to
$5.7 billion on December 31, 1997. CMI's total securitized portfolio includes
both fixed and adjustable interest rate mortgage loans, including Buydown
Mortgage Loans, tiered-payment mortgage loans, loans with stated maturities of
15 to 30 years and other types of mortgage loans having a variety of payment
characteristics, and includes mortgage loans secured by mortgaged properties in
geographic locations that may not be representative of the geographic
distribution or concentration of the Mortgaged Properties securing the Mortgage
Loans.
<TABLE>
<CAPTION>
DELINQUENCY AND FORECLOSURE EXPERIENCE OF SECURITIZED
ONE- TO FOUR- FAMILY RESIDENTIAL MORTGAGE LOANS
AS OF AS OF AS OF AS OF
DECEMBER 31, 1994 DECEMBER 31, 1995 DECEMBER 31, 1996 DECEMBER 31, 1997
------------------ ----------------- ----------------- -----------------
By By By Dollar By
Dollar Dollar Amount of Dollar
By No. Amount Amount Loans Amount
of Loans of Loans By No. of of Loans By No. (in By No. of Loans
Loans of Loans millions) of Loans (in
in millions) millions) millions)
--------- ------------ -------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Portfolio......... 53,693 $7,376.5 48,182 $6,579.9 40,489 $5,503.2 37,050 $5,738.4
Period of Delinquency(2)
30-59 Days......... 1,885 235.2 1,768 206.9 1,339 151.6 1,073 126.0
60-89 Days......... 578 80.1 578 73.2 321 40.3 237 26.7
90 Days or more.... 1,044 182.9 889 138.6 411 58.7 313 45.8
Total Loans Delinquent.. 3,507 498.2 3,235 418.7 2,071 250.6 1,623 198.5
Delinquency Ratio....... 6.53% 6.75% 6.71% 6.36% 5.11% 4.55% 4.38% 3.46%
Foreclosures(3)......... 1,621 288.3 1,302 17.8 993 146.6 653 90.5
Foreclosure Ratio....... 3.02% 3.91% 2.70% 3.31% 2.45% 2.66% 1.76% 1.58%
</TABLE>
(1) The Period of Delinquency is based upon the number of days past due on
a contractual basis. No mortgage loan is considered delinquent for
purposes of this table until 30 days past due on a contractual basis.
(2) The table shows mortgage loans for which foreclosure proceedings had
been instituted at the dates indicated.
The following table indicates the level of cumulative net losses with
respect to securities sold pursuant to the registration statements. The amount
of net losses was computed by aggregating the amount of draws for net losses
against applicable credit enhancement and the amount of net losses not covered
by credit enhancement, as indicated in the reports to certificateholders for the
securities sold under the registration statements.
III-3
<PAGE>
LOSS EXPERIENCE OF SECURITIES ISSUED
PURSUANT TO THE REGISTRATION STATEMENTS
<TABLE>
<CAPTION>
AGGREGATE STATED AMOUNT
OF SECURITIES ISSUED
CUMULATIVE NET (MILLIONS)(1)(2)
LOSSES (MILLIONS)(1) LOSS RATIO(3)
-------------------- --------------------- -------------
<S> <C> <C> <C>
As of December 31, 1994..................... 215.6 25,470.6 .85%
As of December 31, 1995..................... 331.1 25,857.4 1.28%
As of December 31, 1996..................... 413.8 25,857.4 1.60%
As of December 31, 1997..................... 469.8 27,214.6 1.73%
</TABLE>
(1) Rounded to the nearest hundred thousand.
(2) The Aggregate Stated Amount of securities issued represents securities
issued which have had at least one Distribution Date.
(3) Loss Ratio represents cumulative net losses as a percentage of the
aggregate Stated Amount of securities issued under the Registration
Statements.
There can be no assurance that the delinquency, foreclosure or
historical loss experience indicated in the preceding tables with respect to
CMI's total securitized portfolio will be similar to the results that may be
experienced with respect to the Mortgage Loans underlying the
CitiMortgageCertificates or the Certificates.
DELINQUENCY AND FORECLOSURE EXPERIENCE OF CITIMAE
ORIGINATORS' PORTFOLIO
Historically, a variety of factors including the appreciation of real
estate values have limited CitiMae's loss and delinquency experience on its
portfolio of master serviced mortgage loans. There can be no assurance that
factors beyond CitiMae's control, such as national or local economic conditions
or downturns in the real estate markets of its lending areas, will not result in
increased rates of delinquencies and foreclosure losses in the future.
III-4
<PAGE>
GE CAPITAL MORTGAGE SERVICES, INC.
As used in this section, the following capitalized terms have the
following meanings:
Company: GE Capital Mortgage Services, Inc.
Home Equity Loans: Closed-end, home equity loans secured by first or
second liens on Mortgaged Properties.
Mortgage Loans: Conventional, fixed-rate, fully-amortizing mortgage
loans secured by mortgages, deeds of trust or other security interests
(each, a "Mortgage") creating a first lien on one-to-four-family
residential properties.
Mortgage Pool: A pool of the Mortgage Loans.
DELINQUENCY AND FORECLOSURE EXPERIENCE OF THE COMPANY
The following delinquency tables set forth certain information
concerning the delinquency and foreclosure experience on one- to four-family
conventional residential mortgage loans serviced directly by the Company,
excluding Home Equity Loans and special loan portfolios which, upon the
Company's commencement of servicing responsibilities, consisted of significant
numbers of mortgage loans that were seriously delinquent or in foreclosure (the
"Servicing Portfolio"). The Servicing Portfolio does not include mortgage loans
that were serviced or sub-serviced by others.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF DECEMBER 31, AS OF DECEMBER 31,
1995 1996 1997
------------------- ------------------ -------------------
BY DOLLAR BY DOLLAR BY DOLLAR
BY NO. OF AMOUNT OF BY NO. OF AMOUNT OF BY NO. OF AMOUNT OF
LOANS LOANS LOANS LOANS LOANS LOANS
---------------------------------------------------------------------------------------
(DOLLAR AMOUNT IN THOUSANDS)
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total portfolio 821,839 $91,977,411 785,928 $88,188,662 726,869 $83,535,531
======= =========== ======= =========== ======= ===========
Period of delinquency(1)
30 to 59 days........... 3,813 $ 408,131 3,362 $ 353,209 2,687 $ 281,657
60 to 89 days........... 1,788 202,503 1,177 135,668 632 71,245
90 days or more(2)...... 6,437 919,526 6,867 892,643 5,442 662,342
----- ------- ----- ------- ----- -------
Total delinquent loans....... 12,038 $1,530,160 11,406 $1,381,520 8,761 $ 1,015,244
====== ========== ====== ========== ===== ===========
Percent of portfolio......... 1.46% 1.66% 1.45% 1.57% 1.21% 1.22%
</TABLE>
(1) The indicated periods of delinquency are based on the number of days
past due on a contractual basis, based on a 30-day month. No mortgage
loan is considered delinquent for these purposes until the monthly
anniversary of its contractual due date (e.g., a mortgage loan with a
payment due on January 1 would first be considered delinquent on
February 1). The delinquencies reported above were determined as of the
dates indicated.
(2) Includes pending foreclosures.
III-5
<PAGE>
AS OF DECEMBER 31,
----------------------------------------------
1995 1996 1997
(DOLLAR AMOUNTS IN THOUSANDS)
---------------------------------------------
Total portfolio.............. $91,977,411 $88,188,662 $83,535,531
Foreclosures(1).............. 268,478 372,800 271,046
Foreclosure ratio............ 0.29% 0.42% 0.32%
- ----------------
(1) Foreclosures represent the principal balance of mortgage loans secured
by mortgaged properties, the title to which has been acquired by the
Company, by investors or by an insurer following foreclosure or
delivery of a deed in lieu of foreclosure and which had not been
liquidated at the end of the period indicated. The length of time
necessary to complete the liquidation of such mortgaged properties may
be affected by prevailing economic conditions and the marketability of
the mortgaged properties.
The delinquency and foreclosure experience set forth above is
historical and is based on the servicing of mortgage loans that may not be
representative of the Mortgage Loans in the Mortgage Pool. Consequently, there
can be no assurance that the delinquency and foreclosure experience on the
Mortgage Loans in the Mortgage Pool will be consistent with the data set forth
above. The Servicing Portfolio, for example, includes mortgage loans having a
wide variety of payment characteristics (e.g., fixed-rate mortgage loans,
adjustable rate mortgage loans and graduated payment mortgage loans) and
mortgage loans secured by mortgaged properties in geographic locations that may
not be representative of the geographic locations of the Mortgage Loans in the
Mortgage Pool. The Servicing Portfolio also includes mortgage loans originated
in accordance with the Company's then applicable underwriting policies as well
as mortgage loans not originated in accordance with such policies but as to
which the Company had acquired the related servicing rights.
The Servicing Portfolio includes many mortgage loans which have not
been outstanding long enough to have seasoned to a point where delinquencies
would be fully reflected. In the absence of substantial continuous additions of
servicing for recently originated mortgage loans to the Servicing Portfolio, it
is possible that the delinquency and foreclosure percentages experienced in the
future could be significantly higher than those indicated in the tables above.
III-6
<PAGE>
GLENDALE FEDERAL BANK, FEDERAL SAVINGS BANK
Of Glendale Federal Bank, Federal Savings Bank's (the "Bank's") $29.6
billion of mortgage loan servicing, approximately $24.7 billion were obtained
through the purchase of servicing agreements and $4.96 billion were obtained
through the sale of loans with servicing rights retained. At June 30, 1997 and
1996, 3.50% and 2.83% of the Bank's loans serviced for others were delinquent 30
days or more.
The following table summarizes activity in the Bank's portfolio of
loans serviced for others for the periods indicated (in millions):
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
--------------------------------------------
1997 1996 1995
------------- ------------ ------------
<S> <C> <C> <C>
Beginning portfolio of loans served for others.... $ 14,168 $ 11,678 $ 10,085
Add: Servicing purchased....................... 17,184 3,696 2,803
Servicing retained on loans sold.......... 92 -- --
Less: Amortization, prepayments and foreclosures (1,846) (1,206) (1,210)
============= ============ ============
Ending portfolio of loans serviced for others..... $ 29,598 $ 14,168 $ 11,678
============= ============ ============
</TABLE>
The foregoing information does not include loans acquired pursuant to
Norwest Asset Securities Corporation's sale of the Prudential Mortgage Company,
Inc.'s mortgage servicing portfolio. No other information was available.
III-7
<PAGE>
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION/
NORWEST MORTGAGE, INC.
As used in this section, the following capitalized terms have the following
meanings:
Master Servicer: Norwest Bank Minnesota, National Association.
NASCOR: Norwest Asset Securities Corporation.
Seller: Norwest Asset Securities Corporation.
Series: A series of Mortgage Pass-Through Certificates issued by NASCOR
which may consist of one or more classes of certificates. Any class of
certificates may be divided into two or more subclasses.
Servicer: Various servicers including Norwest Mortgage, Inc. ("Norwest
Mortgage"), an affiliate of both the Seller and Norwest Bank Minnesota, National
Association ("Norwest Bank").
Trust Estate: a trust fund established by NASCOR and consisting of a
pool of fixed interest rate, conventional, monthly pay, fully amortizing, one-
to four-family, residential first lien mortgage loans having original terms to
stated maturity of approximately 20 years to approximately 30 years (the
"Mortgage Loans"), together with certain related property.
DELINQUENCY AND FORECLOSURE EXPERIENCE
The following tables set forth certain information concerning recent
delinquency and foreclosure experience as reported to the Master Servicer by the
applicable Servicers of such mortgage loans on (i) the conventional fixed- rate
mortgage loans included in various mortgage pools underlying all Series of
NASCOR's Mortgage Pass-Through Certificates (the "Total NASCOR Loans"), (ii) the
Total NASCOR Loans having original terms to maturity of approximately 20 years
to approximately 30 years (the "NASCOR 30-Year Loans"), including, in clauses
(i) and (ii) mortgage loans originated in connection with the purchases of
residences of relocated employees of various corporate employers that
participated in the relocation program of Norwest Mortgage and of various
non-participant employers ("Relocation Mortgage Loans"), (iii) the Total NASCOR
Loans which are not Relocation Mortgage Loans ("Total NASCOR Non- Relocation
Loans"), (iv) the Total NASCOR Non-Relocation Loans having original terms to
maturity of approximately 20 years to approximately 30 years (the "NASCOR
30-Year Non-Relocation Loans") and (v) the Total NASCOR Non-Relocation Loans
having original terms to maturity of approximately 10 years to approximately 15
years (the "NASCOR 15-Year Non-Relocation Loans"). There can be no assurance
that the delinquency and foreclosure experience set forth in any of the
following tables which include mortgage loans with various terms to stated
maturity, may or may not include Relocation Mortgage Loans, and include loans
having a variety of payment characteristics such as subsidy loans and buy-down
loans, will be representative of the results that may be experienced with
respect to the Mortgage Loans included in the Trust Estate with respect to any
Series.
Delinquencies and foreclosures generally are expected to occur more
frequently after the first full year of the life of mortgage loans. Accordingly,
because a large number of mortgage loans included in the mortgage pools
underlying NASCOR's Mortgage Pass-Through Certificates have been recently
originated, the current level of delinquencies and foreclosures may not be
representative of the levels which may be experienced over the lives of such
mortgage loans. In addition, if the volume of Norwest Mortgage's new loan
originations and acquisitions does not continue to grow at the rate experienced
in recent years, resulting in a decrease in growth in the number of mortgage
loans included in the mortgage pools underlying NASCOR's Mortgage Pass-Through
Certificates, the levels of delinquencies and foreclosures as percentages of the
various portfolios mortgage loans covered by the following tables could rise
significantly above the rates indicated in such tables.
III-8
<PAGE>
<TABLE>
<CAPTION>
TOTAL NASCOR LOANS
<S> <C> <C> <C> <C> <C>
By Dollar By Dollar
By No. Amount By No. Amount
of Loans of Loans of Loans of Loans
-------- -------- -------- --------
As of As of
December 31, 1996 December 31, 1997
----------------- -----------------
(Dollar Amounts in Thousands)
Total NASCOR Loans................................. 8,012 $2,285,959 26,137 $7,497,698
===== ========== ====== ==========
Period of Delinquency(1)...........................
30 to 59 days............................... 24 $6,704 57 $17,187
60 to 89 days............................... 2 735 4 1,000
90 days or more............................. 1 232 18 5,461
----- ------ ----- -------
Total Delinquent Loans............................. 27 $7,671 79 $23,648
===== ====== == =======
Percent of Total NASCOR Loans...................... 0.34% 0.34% 0.30% 0.32%
========================================================
As of As of
December 31, 1996 December 31, 1997
----------------- -----------------
Foreclosures(2).................................... $843 $798
Foreclosure Ratio(3)............................... 0.04% 0.01%
</TABLE>
- --------------------------------------------------------
(1) The indicated periods of delinquency are based on the number of days past
due, based on a 30-day month. No mortgage loan is considered delinquent for
these purposes until one month has passed since its contractual due date. A
mortgage loan is no longer considered delinquent once foreclosure proceedings
have commenced.
(2) Includes loans in the applicable portfolio for which foreclosure proceedings
had been instituted or with repsect to which the related property had been
acquired as of the dates indicated.
(3) Foreclosure as a percentage of total loans in the applicable portfolio at
the end of each period.
III-9
<PAGE>
<TABLE>
<CAPTION>
NASCOR 30-YEAR LOANS
By Dollar By Dollar
By No. Amount By No. Amount
of Loans of Loan of Loans of Loan
-------- ------- -------- -------
As of As of
December 31, 1996 December 31, 1997
----------------- -----------------
(Dollar Amount in Thousands)
<S> <C> <C> <C> <C> <C>
Total NASCOR 30-Year Loans........................... 6,511 $1,838,405 22,500 $6,457,669
===== ========== ====== ==========
Period of Delinquency(1).............................
30 to 59 days................................. 19 $5,240 54 $16,365
60 to 89 days................................. 2 735 3 870
90 days or more............................... 1 232 18 5,461
- --- -- -----
Total Delinquent Loans............................... 22 $6,207 75 $22,696
== ====== == =======
Percent of NASCOR 30-Year Loans.................... 0.34% 0.34% 0.33% 0.35%
As of As of
December 31, 1996 December 31, 1997
----------------- -----------------
Foreclosures(2)...................................... $843 $798
Foreclosure Ratio(3)................................. 0.05% 0%
</TABLE>
- -------------------------------
(1) The indicated periods of delinquency are based on the number of days past
due, based on a 30-day month. No mortgage loan is considered delinquent for
these purposes until one month has passed since its contractual due date. A
mortgage loan is no longer considered delinquent once foreclosure proceedings
have commenced.
(2) Includes loans in the applicable portfolio for which foreclosure proceedings
had been instituted or with respect to which the related property had been
acquired as of the dates indicated.
(3) Foreclosure as a percentage of total loans in the applicable portfolio at
the end of each period.
III-10
<PAGE>
<TABLE>
TOTAL NASCOR NON-RELOCATION LOANS
<CAPTION>
By Dollar By Dollar
By No. Amount By No. Amount
of Loans of Loans of Loans of Loans
-------- -------- -------- --------
As of As of
December 31, 1996 December 31, 1997
----------------- -----------------
(Dollar Amounts in Thousands)
<S> <C> <C> <C> <C>
Total NASCOR Non-Relocation Loans.............. 6,451 $1,831,229 21,270 $6,070,912
===== ========== ====== ==========
Period of Delinquency(1).......................
30 to 59 days........................... 24 $6,704 55 $16,601
60 to 89 days........................... 1 491 4 1,000
90 days or more......................... 1 232 17 5,238
- --- -- -----
Total Delinquent Loans......................... 26 $7,427 76 $22,839
== ====== == =======
Percent of Total NASCOR Non-
Relocation Loans............................. 0.40% 0.41% 0.36% 0.38%
</TABLE>
<TABLE>
<CAPTION>
As of As of
December 31, 1996 December 31, 1997
----------------- -----------------
<S> <C> <C> <C>
Foreclosures(2)................................ $843 $798
Foreclosure Ratio(3)........................... 0.05% 0.01%
</TABLE>
- ----------------------------
(1) The indicated periods of delinquency are based on the number of days past
due, based on a 30-day month. No mortgage loan is considered delinquent for
these purposes until one month has passed since its contractual due date. A
mortgage loan is no longer considered delinquent once foreclosure proceedings
have commenced.
(2) Includes loans in the applicable portfolio for which foreclosure proceedings
had been instituted or with respect to which the related property had been
acquired as of the dates indicated.
(3) Foreclosure as a percentage of total loans in the applicable portfolio at
the end of each period.
III-11
<PAGE>
<TABLE>
<CAPTION>
NASCOR 30-YEAR NON-RELOCATION LOANS
By Dollar By Dollar
By No. Amount By No. Amount
of Loans of Loans of Loans of Loans
-------- -------- -------- --------
As of As of
December 31, 1996 December 31, 1997
----------------- -----------------
(Dollar Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Total NASCOR 30-Year Non-Relocation Loans 4,950 $1,383,675 17,633 $5,030,883
===== ========== ====== ==========
Period of Delinquency(1).............................
30 to 59 days................................. 19 $5,240 52 $15,779
60 to 89 days................................. 1 491 3 870
90 days or more............................... 1 232 17 5,238
-- ------ -- ------
Total Delinquent Loans............................... 21 $5,963 72 $21,887
== ====== == =======
Percent of Total NASCOR Non-
Relocation Loans................................... 0.42% 0.43% 0.41% 0.44%
As of As of
December 31, 1996 December 31, 1997
---------------- -----------------
Foreclosures(2)...................................... $843 $798
Foreclosure Ratio(3)................................. 0.06% 0.02%
</TABLE>
- --------------------------
(1) The indicated periods of delinquency are based on the number of days past
due, based on a 30-day month. No mortgage loan is considered delinquent for
these purposes until one month has passed since its contractual due date. A
mortgage loan is no longer considered delinquent once foreclosure proceedings
have commenced.
(2) Includes loans in the applicable portfolio for which foreclosure proceedings
had been instituted or with respect to which the related property had been
acquired as of the dates indicated.
(3) Foreclosure as a percentage of total loans in the applicable portfolio at
the end of each period.
III-12
<PAGE>
<TABLE>
<CAPTION>
NASCOR 15-YEAR NON-RELOCATION LOANS
By Dollar By Dollar
By No. Amount By No. Amount
of Loans of Loans of Loans of Loans
-------- -------- -------- --------
As of As of
December 31, 1996 December 31, 1997
----------------- -----------------
(Dollar Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Total NASCOR 15-Year Non-Relocation Loans............ 1,501 $447,554 3,637 1,040,029
===== ======== ===== =========
Period of Delinquency(1).............................
30 to 59 days................................. 5 $1,464 3 $822
60 to 89 days................................. 0 0 1 130
90 days or more............................... 0 0 0 0
- - - -
Total Delinquent Loans............................... 5 $1,464 4 $952
= ====== = ====
Percent of Total NASCOR 15-Year Non-
0.33% 0.33% 0.11% 0.09%
Relocation Loans...................................
As of As of
December 31, 1996 December 31, 1997
----------------- -----------------
Foreclosures(2)...................................... $0 $0
Foreclosure Ratio(3)................................. 0% 0%
</TABLE>
(1) The indicated periods of delinquency are based on the number of days past
due, based on a 30-day month. No mortgage loan is considered delinquent for
these purposes until one month has passed since its contractual due date. A
mortgage loan is no longer considered delinquent once foreclosure proceedings
have commenced.
(2) Includes loans in the applicable portfolio for which foreclosure proceedings
had been instituted or with respect to which the related property had been
acquired as of the dates indicated.
(3) Foreclosure as a percentage of total loans in the applicable portfolio at
the end of each period.
The likelihood that a mortgagor will become delinquent in the payment
of his or her mortgage loan, the rate of any subsequent foreclosures may be
affected by a number of factors related to a borrower's personal circumstances,
including, but not limited to, unemployment or change in employment (or in the
case of self-employed mortgagors or mortgagors relying on commission income,
fluctuations in income), marital separation and the mortgagor's equity in the
related mortgaged property. In addition, delinquency and foreclosure experience
may be sensitive to adverse economic conditions, either nationally or
regionally, may exhibit seasonal variations and may be influenced by the level
of interest rates and servicing decisions on the applicable mortgage loans.
Regional economic conditions (including declining real estate values) may
particularly affect delinquency and foreclosure experience on mortgage loans to
the extent that mortgaged properties are concentrated in certain geographic
areas. Furthermore, the level of foreclosures reported is affected by the length
of time legally required to complete the foreclosure process and take title to
the related property, which varies from jurisdiction to jurisdiction. The
changes in the delinquency and foreclosure and experience on the mortgage loans
underlying NASCOR's Mortgage Pass-Through Certificates during the periods set
forth in the preceding tables may be attributable to factors such as those
described above, although there can be no assurance as to whether these changes
are the result of any particular factor or a combination of factors. The
delinquency and foreclosure experience on the mortgage loans underlying NASCOR's
Mortgage Pass-Through Certificates may be particularly affected to the extent
that the related Mortgage Properties are concentrated in areas which experience
adverse economic conditions or declining real estate values.
III-13
<PAGE>
RESIDENTIAL FUNDING CORPORATION
As used in this section, the following capitalized terms have the following
meanings:
Residential Funding: Residential Funding Corporation.
The following tables set forth certain information concerning the
delinquency experience (including pending foreclosures) on one- to four-family
residential mortgage loans that were acquired by Residential Funding and were
being master serviced by Residential Funding on December 31, 1995, December 31,
1996 and December 31, 1997. The tables set forth information for the total
mortgage loan portfolio acquired by Residential Funding, and for mortgage loans
underwritten under a reduced loan documentation program. The indicated periods
of delinquency are based on the number of days past due on a contractual basis.
No mortgage loan is considered delinquent for these purposes until, in general,
it is one month past due on a contractual basis.
III-14
<PAGE>
<TABLE>
<CAPTION>
TOTAL LOAN PORTFOLIO DELINQUENCY EXPERIENCE (1)
AT DECEMBER 31, AT DECEMBER 31, AT DECEMBER 31,
1995 1996 1997
---- ---- ----
BY DOLLAR BY DOLLAR BY DOLLAR
BY NO. OF AMOUNT OF BY NO. OF AMOUNT OF BY NO. OF AMOUNT OF
LOANS LOANS LOANS LOANS LOANS LOANS
----- ----- ----- ----- ----- -----
(DOLLAR AMOUNTS IN THOUSANDS)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Loan Portfolio......... 96,741 $24,562,472 112,237 $28,734,063 138,086 $33,593,175
Period of Delinquency
31 to 59 days........... 1,819 $ 417,238 2,151 $ 518,394 2,639 $ 539,647
60 to 89 days........... 388 88,423 391 93,938 487 96,777
90 days or more(2)...... 236 54,530 221 57,247 187 39,504
Foreclosures Pending 785 221,741 745 205,508 853 228,133
--- ------- --- ------- --- -------
Total Delinquent Loans....... 3,228 $ 781,933 3,508 $ 875,088 4,166 $ 904,061
===== ========== ===== ========== ===== ==========
Percent of Loan Portfolio.... 3.337% 3.183% 3.126% 3.045% 3.017% 2.691%
</TABLE>
(1) This table relates only to the mortgage loans referred to above.
(2) Does not include foreclosures pending.
TOTAL REDUCED DOCUMENTATION LOAN
PORTFOLIO DELINQUENCY EXPERIENCE(1)
<TABLE>
<CAPTION>
AT DECEMBER 31, AT DECEMBER 31, AT DECEMBER 31,
1995 1996 1997
---- ---- ----
BY DOLLAR BY DOLLAR BY DOLLAR
BY NO. OF AMOUNT OF BY NO. OF AMOUNT OF BY NO. OF AMOUNTS OF
LOANS LOANS LOANS LOANS LOANS LOANS
----- ----- ----- ----- ----- -----
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total Loan Portfolio......... 23,861 $4,829,287 26,145 $5,173,498 31,119 $5,705,504
Period of Delinquency
31 to 59 days........... 442 $ 102,887 466 $ 98,414 594 $ 117,781
60 to 89 days........... 114 26,180 98 20,177 109 25,024
90 days or more(2)...... 63 15,396 52 15,293 45 9,431
Foreclosures Pending 268 81,268 233 72,224 251 64,697
--- ------ --- ------ --- ------
Total Delinquent Loans....... 887 $ 225,731 849 $ 206,107 999 $ 216,933
=== ========== === ========== === ==========
Percent of Loan Portfolio.... 3.717% 4.674% 3.247% 3.984% 3.210% 3.802%
</TABLE>
(1) This table relates only to the reduced loans documentation loans
referred to above.
(2) Does not include foreclosures pending.
The following tables set forth certain information concerning
foreclosed mortgage loans and loan loss experience of Residential Funding as of
December 31, 1995, December 31, 1996 and December 31, 1997 with respect to the
mortgage loans referred to above. For purposes of the following tables, Average
Portfolio Balance for the period indicated is based on end of month balances
divided by the number of months in the period indicated, the Foreclosed Loans
Ratio is equal to the aggregate principal balance of Foreclosed Loans divided by
the Total Loan Portfolio at the end of the indicated period, and the Gross Loss
Ratios and Net Loss Ratios are computed by dividing the Gross Loss or Net Loss
respectively during the period indicated by the Average Portfolio Balance during
such period.
III-15
<PAGE>
<TABLE>
TOTAL PORTFOLIO FORECLOSURE EXPERIENCE (1)
<CAPTION>
At or for At or for At or for
the year ended the year ended the year ended
December 31, 1995 December 31, 1996 December 31, 1997
----------------- ----------------- -----------------
(Dollar Amounts in Thousands)
<S> <C> <C> <C>
Total Loan Portfolio........................ $ 24,562,472 $ 28,734,063 $33,593,175
Average Portfolio Balance................... 23,089,923 27,384,260 31,122,958
Foreclosed Loans (2)........................ 110,297 87,846 92,556
Liquidated Foreclosed Loans(3).............. 227,853 268,278 180,589
Foreclosed Loans Ratio...................... 0.449% 0.306% 0.276%
Gross Loss(4)............................... 78,964 84,053 42,266
Gross Loss Ratio............................ 0.342% 0.307% 0.136%
Covered Loss(5)............................. 49,492 55,222 28,508
Net Loss (6)................................ 29,472 28,831 13,758
Net Loss Ratio.............................. 0.128% 0.105% 0.044%
Excess Recovery (7)......................... 133 427 251
</TABLE>
<TABLE>
TOTAL REDUCED DOCUMENTATION LOAN
PORTFOLIO FORECLOSURE EXPERIENCE(1)
<CAPTION>
At or for At or for At or for
the year ended the year ended the year ended
December 31, 1995 December 31, 1996 December 31, 1997
----------------- ----------------- -----------------
(Dollar Amounts in Thousands)
<S> <C> <C> <C>
Total Loan Portfolio........................ $ 4,829,287 $ 5,173,498 $ 5,705,504
Average Portfolio Balance................... 4,751,243 5,082,424 5,472,022
Foreclosed Loans (2)........................ 35,944 25,889 26,274
Liquidated Foreclosed Loans(3).............. 87,967 77,889 51,664
Foreclosed Loans Ratio...................... 0.744% 0.500% 0.461%
Gross Loss(4)............................... 34,041 30,003 13,674
Gross Loss Ratio............................ 0.716% 0.590% 0.250%
Covered Loss(5)............................. 20,320 19,027 8,843
Net Loss (6)................................ 13,721 10,977 4,831
Net Loss Ratio.............................. 0.289% 0.216% 0.088%
Excess Recovery (7)......................... 82 195 101
</TABLE>
(1) The tables relate only to the mortgage loans referred to in the
applicable heading.
(2) For purposes of these tables, Foreclosed Loans include the principal
balance of mortgage loans secured by mortgage properties the title to
which has been acquired by Residential Funding, by investors or by an
insurer following foreclosure or delivery of a deed in lieu of
foreclosure and which had not been liquidated by the end of the period
indicated.
(3) Liquidated Foreclosed Loans is the sum of the principal balances of the
Foreclosed Loans liquidated during the period indicated.
(4) Gross Loss is the sum of gross losses less net gains (Excess
Recoveries) on all Mortgage Loans liquidated during the period
indicated. Gross Loss for any Mortgage Loan is equal to the difference
between (a) the principal balance plus accrued interest plus all
Liquidation Expenses related to such Mortgage Loan and (b) all amounts
received in connection with the liquidation of the related Mortgaged
Property, excluding amounts received from mortgage pool or special
hazard insurance or other forms of credit enhancement, as described in
footnote (5) below. Net gains from the liquidation of mortgage loans
are identified in footnote (7) below.
(5) Covered Loss, for the period indicated, is equal to the aggregate of
all proceeds received in connection with liquidated Mortgage Loans from
mortgage pool insurance, special hazard insurance (but not including
principal mortgage insurance, hazard insurance or other insurance
available for specific mortgage properties) or other insurance as well
as all proceeds received from or losses borne by other credit
enhancement, including subordinate certificates.
(6) Net Loss is determined by subtracting Covered Loss from Gross Loss. As
in the case in footnote (4) above, Net Loss indicated here may reflect
Excess Recoveries (see footnote (7) below). Net losses shown here will
include losses on mortgage loan pools which do not have the benefit of
credit enhancement.
(7) Excess Recovery is calculated only with respect to defaulted Mortgage
Loans as to which the liquidation of the related Mortgage Property
resulted in recoveries in excess of the principal balance plus accrued
interest thereon plus all Liquidation Expenses related to such Mortgage
Loan. Excess Recoveries are not applied to reinstate any credit
enhancement, and generally are not allocated to holders of
Certificates.
III-16
<PAGE>
PROSPECTUS
MORTGAGE PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES)
BEAR STEARNS MORTGAGE SECURITIES INC.
SELLER
--------
This Prospectus relates to Mortgage Pass-Through Certificates (the
"Certificates"), which may be sold from time to time in one or more Series on
terms determined at the time of sale and described in the related Prospectus
Supplement. The Certificates of a Series will evidence beneficial ownership of
one or more trust funds (each a "Trust Fund"). As specified in the related
Prospectus Supplement, a Trust Fund for a Series of Certificates will include
certain mortgage-related assets (the "Mortgage Assets") consisting of (i) first
lien mortgage loans or participations therein secured by one- to four-family
residential properties ("Single Family Loans"), (ii) first lien mortgage loans
or participations therein secured by multifamily residential properties
("Multifamily Loans"), (iii) loans or participations therein secured by
security interests or similar liens on shares in cooperative housing
corporations and the related proprietary leases or occupancy agreements
("Cooperative Loans"), (iv) conditional sales contracts and installment sales
or loan agreements or participations therein secured by manufactured housing
("Contracts"), (v) mortgage pass-though securities (the "Agency Securities")
issued or guaranteed by the Government National Mortgage Association ("GNMA"),
the Federal National Mortgage Association ("FNMA"), the Federal Home Loan
Mortgage Corporation ("FHLMC") or other government agencies or
government-sponsored agencies or (vi) privately issued mortgage-backed
securities ("Private Mortgage-Backed Securities"). If specified in the related
Prospectus Supplement, certain Certificates will evidence the entire beneficial
ownership interest in a Trust Fund which will contain a beneficial ownership
interest in another Trust Fund which will contain the Mortgage Assets. The
Mortgage Assets will be acquired by Bear Stearns Mortgage Securities Inc. (the
"Seller") from one or more institutions which may be affiliates of the Seller
(each, a "Lender") and conveyed by the Seller to the related Trust Fund. A
Trust Fund also may include insurance policies, cash accounts, letters of
credit, financial guaranty insurance policies, third party guarantees or other
assets to the extent described in the related Prospectus Supplement.
Each Series of Certificates will be issued in one or more classes. Each
class of Certificates of a Series will evidence beneficial ownership of a
specified percentage (which may be 0%) or portion of future interest payments
and a specified percentage (which may be 0%) or portion of future principal
payments on the Mortgage Assets in the related Trust Fund. A Series of
Certificates may include one or more senior classes that receive certain
preferential treatment with respect to one or more other classes of
Certificates of such Series. One or more classes of Certificates of a Series
may be entitled to receive distributions of principal, interest or any
combination thereof prior to one or more other classes of Certificates of such
Series or after the occurrence of specified events or may be required to absorb
one or more types of losses prior to one or more other classes of Certificates,
in each case as specified in the related Prospectus Supplement.
Distributions to holders of Certificates ("Certificateholders") will be
made monthly, quarterly, semi-annually or at such other intervals and on the
dates specified in the related Prospectus Supplement. Distributions on the
Certificates of a Series will be made only from the assets of the related Trust
Fund.
The Certificates will not represent an obligation of or interest in the
Seller or any affiliate thereof and will not be insured or guaranteed by any
governmental agency or instrumentality or by any other person. Unless otherwise
specified in the related Prospectus Supplement, the only obligations of the
Seller with respect to a Series of Certificates will be to obtain certain
representations and warranties from the Lenders or other third parties and to
assign to the trustee (the "Trustee") for the related Series of Certificates
the Seller's rights with respect to such representations and warranties. The
principal obligations of one or more master servicers (each, a "Master
Servicer") named in the Prospectus Supplement with respect to the related
Series of Certificates will be limited to its or their contractual servicing
obligations, including any obligation to advance delinquent payments on the
Mortgage Assets in the related Trust Fund.
The yield on each class of Certificates of a Series will be affected by
the rate of payment of principal (including prepayments) on the Mortgage Assets
in the related Trust Fund and the timing of receipt of such payments as
described herein and in the related Prospectus Supplement. A Trust Fund may be
subject to early termination under the circumstances described herein and in
the related Prospectus Supplement.
If specified in a Prospectus Supplement, one or more elections may be
made to treat each Trust Fund or specified portions thereof as a "real estate
mortgage investment conduit" ("REMIC") for federal income tax purposes. See
"Certain Federal Income Tax Consequences."
--------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
--------
Prior to issuance there will have been no market for the Certificates of
any Series and there can be no assurance that a secondary market for any
Certificates will develop. This Prospectus may not be used to consummate sales
of a Series of Certificates unless accompanied by a Prospectus Supplement.
Offers of the Certificates may be made through one or more different
methods, including offerings through underwriters, as more fully described
under "Method of Distribution" herein and in the related Prospectus Supplement.
All Certificates will be distributed by, or sold by underwriters managed by:
BEAR, STEARNS & CO. INC.
The date of this Prospectus is February 25, 1998.
<PAGE>
Until 90 days after the date of each Prospectus Supplement, all dealers
effecting transactions in the securities covered by such Prospectus Supplement,
whether or not participating in the distribution thereof, may be required to
deliver such Prospectus Supplement and this Prospectus. This is in addition to
the obligation of dealers to deliver a Prospectus and Prospectus Supplement
when acting as underwriters and with respect to their unsold allotments or
subscriptions.
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to the Certificates of each Series to
be offered hereunder will, among other things, set forth with respect to such
Certificates, as appropriate: (i) a description of the class or classes of
Certificates; (ii) the rate of interest (the "Pass-Through Rate") or method of
determining the amount of interest, if any, to be passed through to each such
class; (iii) the aggregate principal amount, if any, relating to each such
class; (iv) the distribution dates (each a "Distribution Date") for interest
and principal payments and, if applicable, the initial and final scheduled
Distribution Dates for each class; (v) if applicable, the aggregate original
percentage ownership interest in the Trust Fund to be evidenced by each class
of Certificates; (vi) information as to the nature and extent of subordination
with respect to any class of Certificates that is subordinate to any other
class; (vii) information as to the assets comprising the Trust Fund, including
the general characteristics of the Mortgage Assets included therein and, if
applicable, the amount and source of any reserve fund (a "Reserve Account"),
and the insurance, letters of credit, guarantees, or other instruments or
agreements included in the Trust Fund; (viii) the circumstances, if any, under
which the Trust Fund may be subject to early termination; (ix) additional
information with respect to the plan of distribution of such Certificates; (x)
whether one or more REMIC elections will be made and designation of the regular
interests and residual interests; (xi) information as to the Trustee; and (xii)
information as to the Master Servicer.
AVAILABLE INFORMATION
The Seller has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement under the Securities Act of 1933, as
amended, with respect to the Certificates. This Prospectus and the Prospectus
Supplement relating to each Series of Certificates contain summaries of the
material terms of the documents referred to herein and therein, but do not
contain all of the information set forth in the Registration Statement of which
this Prospectus is a part. For further information, reference is made to such
Registration Statement and the exhibits thereto. Such Registration Statement
and exhibits can be inspected and copied at prescribed rates at the public
reference facilities maintained by the Commission at its Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its Regional
Offices located as follows: Chicago Regional Office, Northwestern Atrium
Center, 500 West Madison Street -- Suite 1400, Chicago, Illinois 60661; and New
York Regional Office, 7 World Trade Center -- 13th Floor, New York, New York
10048.
No person has been authorized to give any information or to make any
representation other than those contained in this Prospectus and any Prospectus
Supplement with respect hereto and, if given or made, such information or
representations must not be relied upon. This Prospectus and any Prospectus
Supplement with respect hereto do not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the Certificates
offered hereby and thereby nor an offer of the Certificates to any person in
any state or other jurisdiction in which such offer would be unlawful. The
delivery of this Prospectus at any time does not imply that information herein
is correct as of any time subsequent to its date.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Depositor pursuant to Section 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934, as amended, with respect to a
series of Certificates subsequent to the date of this Prospectus and the
related Prospectus Supplement and prior to the termination of the offering of
such series of Certificates shall be deemed to be incorporated by reference in
this Prospectus as supplemented by the related Prospectus Supplement. If so
specified in any such documents, such document shall also be deemed to be
incorporated by reference in the Registration Statement of which this
Prospectus forms a part.
Any statement contained herein or in a Prospectus Supplement for a series
of Certificates or in a document incorporated or deemed to be incorporated by
reference herein or therein shall be deemed to be modified
-2-
<PAGE>
or superseded for purposes of this Prospectus and such Prospectus Supplement
and, if applicable, the Registration Statement to the extent that a statement
contained herein or therein or in any subsequently filed document which also is
or is deemed to be incorporated by reference herein or therein modifies or
supersedes such statement, except to the extent that such subsequently filed
document expressly states otherwise. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus or the related Prospectus Supplement or,
if applicable, the Registration Statement.
The Depositor will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus and the related Prospectus
Supplement is delivered, on the written or oral request of any such person, a
copy of any and all of the documents incorporated herein by reference, except
the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Written requests for such copies
should be directed to the President, Bear Stearns Mortgage Securities Inc., 245
Park Avenue, New York, New York 10167. Telephone requests for such copies
should be directed to the President at (212) 272-2000.
REPORTS TO CERTIFICATEHOLDERS
Periodic and annual reports concerning the related Trust Fund will be
provided to the Certificateholders. See "Description of the Certificates --
Reports to Certificateholders."
-3-
<PAGE>
SUMMARY OF TERMS
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS AND IN THE RELATED
PROSPECTUS SUPPLEMENT WHICH WILL BE PREPARED IN CONNECTION WITH EACH SERIES OF
CERTIFICATES.
Title of Securities................ Mortgage Pass-Through Certificates
(Issuable in Series).
Seller............................. Bear Stearns Mortgage Securities Inc., a
Delaware corporation and a wholly-owned
subsidiary of Bear Stearns Mortgage
Capital Corporation. See "The Seller."
Trustee............................ The Trustee for each Series of
Certificates will be specified in the
related Prospectus Supplement.
Master Servicer.................... One or more entities named as a Master
Servicer in the related Prospectus
Supplement, which may be an affiliate of
the Seller. See "The Pooling and Servicing
Agreement -- Certain Matters Regarding the
Master Servicer and the Seller."
Trust Fund Assets.................. A Trust Fund for a Series of
Certificates will include the Mortgage
Assets consisting of (i) a pool (a
"Mortgage Pool") of Single Family Loans,
Multifamily Loans, Cooperative Loans or
Contracts (collectively, the "Mortgage
Loans"), (ii) Agency Securities or (iii)
Private Mortgage-Backed Securities,
together with payments in respect of such
Mortgage Assets and certain other
accounts, obligations or agreements, in
each case as specified in the related
Prospectus Supplement.
A. Single Family, Cooperative
and Multi-family Loans.......... Unless otherwise specified in the
related Prospectus Supplement, Single
Family Loans will be secured by first
mortgage liens on one- to four-family
residential properties. Unless otherwise
specified in the related Prospectus
Supplement, Cooperative Loans will be
secured by security interests in shares
issued by private, nonprofit, cooperative
housing corporations ("Cooperatives") and
in the related proprietary leases or
occupancy agreements granting exclusive
rights to occupy specific dwelling units
in such Cooperatives' buildings. Single
Family Loans and Cooperative Loans may be
conventional loans (i.e., loans that are
not insured or guaranteed by any
governmental agency), insured by the
Federal Housing Authority ("FHA") or
partially guaranteed by the Veterans
Administration ("VA") as specified in the
related Prospectus Supplement. Unless
otherwise specified in the related
Prospectus Supplement, Single Family Loans
and Cooperative Loans will all have
individual principal balances at
origination of not less than $25,000 and
not more than $1,000,000, and original
terms to stated maturity of 15 to 40
years.
Multifamily Loans will be secured by
first mortgage liens on rental apartment
buildings or projects containing five or
more residential units, including
apartment buildings owned by
Cooperatives. Such loans may be
conventional loans or insured by the FHA,
as specified in the related
-4-
<PAGE>
Prospectus Supplement. Unless otherwise
specified in the related Prospectus
Supplement, Multifamily Loans will all
have individual principal balances at
origination of not less than $25,000 and
original terms to stated maturity of not
more than 40 years.
The payment terms of the Mortgage Loans
to be included in a Trust Fund will be
described in the related Prospectus
Supplement and may include any of the
following features or combinations
thereof or other features described in
the related Prospectus Supplement:
(a) Interest may be payable at a fixed
rate, a rate adjustable from time
to time in relation to an index, a
rate that is fixed for a period of
time or under certain circumstances
and is followed by an adjustable
rate, a rate that otherwise varies
from time to time, or a rate that
is convertible from an adjustable
rate to a fixed rate. Changes to an
adjustable rate may be subject to
periodic limitations, maximum
rates, minimum rates or a
combination of such limitations.
Accrued interest may be deferred
and added to the principal of a
Mortgage Loan for such periods and
under such circumstances as may be
specified in the related Prospectus
Supplement. Mortgage Loans may
provide for the payment of interest
at a rate lower than the specified
interest rate on the Mortgage Loan
(the "Mortgage Rate") for a period
of time or for the life of the
Mortgage Loan, and the amount of
any difference may be contributed
from funds supplied by the seller
of the Mortgaged Property or
another source ("Buydown Loans") or
may be treated as accrued interest
and added to the principal of the
Mortgage Loan.
(b) Principal may be payable on a level
debt service basis to fully
amortize the Mortgage Loan over its
term, may be calculated on the
basis of an assumed amortization
schedule that is significantly
longer than the original term to
maturity or on an interest rate
that is different from the interest
rate on the Mortgage Loan or may
not be amortized during all or a
portion of the original term.
Payment of all or a substantial
portion of the principal may be due
on maturity ("balloon" payments).
Principal may include interest that
has been deferred and added to the
principal balance of the Mortgage
Loan.
(c) Payments of principal and interest
may be fixed for the life of the
Mortgage Loan, may increase over a
specified period of time or may
change from period to period.
Mortgage Loans may include limits
on periodic increases or decreases
in the amount of monthly payments
and may include maximum or minimum
amounts of monthly payments.
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<PAGE>
(d) Prepayments of principal may be
subject to a prepayment fee, which
may be fixed for the life of the
Mortgage Loan or may decline over
time, and may be prohibited for the
life of the Mortgage Loan or for
certain periods ("lockout
periods"). Certain Mortgage Loans
may permit prepayments after
expiration of the applicable
lockout period and may require the
payment of a prepayment fee in
connection with any such subsequent
prepayment. Other Mortgage Loans
may permit prepayments without
payment of a fee unless the
prepayment occurs during specified
time periods. The Mortgage Loans
may include due-on-sale clauses
which permit the mortgagee to
demand payment of the entire
Mortgage Loan in connection with
the sale or certain transfers of
the related Mortgaged Property.
Other Mortgage Loans may be
assumable by persons meeting the
then applicable underwriting
standards of the Lender.
Certain Mortgage Loans may be originated
or acquired in connection with employee
relocation programs. The real property
constituting security for repayment of a
Mortgage Loan may be located in any one
of the fifty states or the District of
Columbia. Unless otherwise specified in
the related Prospectus Supplement, all of
the Mortgage Loans will be covered by
standard hazard insurance policies
insuring against losses due to fire and
various other causes. The Mortgage Loans
will be covered by primary mortgage
insurance policies to the extent provided
in the related Prospectus Supplement. All
Mortgage Loans will have been purchased
by the Seller, either directly or through
an affiliate, from Lenders.
B. Contracts....................... Contracts will consist of conditional
sales and installment sales or loan
agreements secured by new or used
Manufactured Homes (as defined herein).
Contracts may be conventional loans,
insured by the FHA or partially guaranteed
by the VA, as specified in the related
Prospectus Supplement. Unless otherwise
specified in the related Prospectus
Supplement, each Contract will be fully
amortizing and will bear interest at a
fixed accrual percentage rate ("APR").
Unless otherwise specified in the related
Prospectus Supplement, Contracts will all
have individual principal balances at
origination of not less than $10,000 and
not more than $1,000,000 and original
terms to stated maturity of 5 to 30 years.
C. Agency Securities............... The Agency Securities will consist of
(i) fully modified pass-through
mortgage-backed certificates guaranteed as
to timely payment of principal and
interest by the Government National
Mortgage Association ("GNMA
Certificates"), (ii) Guaranteed Mortgage
Pass-Through Certificates issued and
guaranteed as to timely payment of
principal and interest by the Federal
National Mortgage Association ("FNMA
Certificates"), (iii) Mortgage
Participation
-6-
<PAGE>
Certificates issued and guaranteed as to
timely payment of interest and, unless
otherwise specified in the related
Prospectus Supplement, ultimate payment
of principal by the Federal Home Loan
Mortgage Corporation ("FHLMC
Certificates"), (iv) stripped
mortgage-backed securities representing
an undivided interest in all or a part of
either the principal distributions (but
not the interest distributions) or the
interest distributions (but not the
principal distributions) or in some
specified portion of the principal and
interest distributions (but not all of
such distributions) on certain GNMA,
FNMA, FHLMC or other government agency or
government-sponsored agency Certificates
and, unless otherwise specified in the
Prospectus Supplement, guaranteed to the
same extent as the underlying securities,
(v) another type of guaranteed
pass-through certificate issued or
guaranteed by GNMA, FNMA, FHLMC or
another government agency or
government-sponsored agency and described
in the related Prospectus Supplement, or
(vi) a combination of such Agency
Securities. All GNMA Certificates will be
backed by the full faith and credit of
the United States. No FNMA or FHLMC
Certificates will be backed, directly or
indirectly, by the full faith and credit
of the United States. The Agency
Securities may consist of pass-through
securities issued under the GNMA I
Program, the GNMA II Program, FHLMC's
Cash or Guarantor Program or another
program specified in the Prospectus
Supplement. The payment characteristics
of the Mortgage Loans underlying the
Agency Securities will be described in
the related Prospectus Supplement.
D. Private Mortgage-Backed
Securities...................... Private Mortgage-Backed Securities may
include (i) mortgage participations or
pass-through certificates representing
beneficial interests in certain Mortgage
Loans or (ii) Collateralized Mortgage
Obligations ("CMOs") secured by such
Mortgage Loans. Private Mortgage-Backed
Securities may include stripped
mortgage-backed securities representing an
undivided interest in all or a part of any
of the principal distributions (but not
the interest distributions) or the
interest distributions (but not the
principal distributions) or in some
specified portion of the principal and
interest distributions (but not all of
such distributions) on certain mortgage
loans. Although individual Mortgage Loans
underlying a Private Mortgage-Backed
Security may be insured or guaranteed by
the United States or an agency or
instrumentality thereof, they need not be,
and the Private Mortgage-Backed Securities
themselves will not be so insured or
guaranteed. See "The Trust Fund -- Private
Mortgage-Backed Securities." Unless
otherwise specified in the Prospectus
Supplement relating to a Series of
Certificates, payments on the Private
Mortgage-Backed Securities will be
distributed directly to the Trustee as
registered owner of such Private
Mortgage-Backed Securities. See "The Trust
Fund -- Private Mortgage-Backed
Securities."
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<PAGE>
The related Prospectus Supplement for a
Series will specify (i) the aggregate
approximate principal amount and type of
any Private Mortgage-Backed Securities to
be included in the Trust Fund for such
Series; (ii) certain characteristics of
the Mortgage Loans which comprise the
underlying assets for the Private
Mortgage-Backed Securities including to
the extent available (A) the payment
features of such Mortgage Loans, (B) the
approximate aggregate principal amount,
if known, of the underlying Mortgage
Loans which are insured or guaranteed by
a governmental entity, (C) the servicing
fee or range of servicing fees with
respect to the Mortgage Loans, and (D)
the minimum and maximum stated maturities
of the Mortgage Loans at origination;
(iii) the maximum original term-to-stated
maturity of the Private Mortgage-Backed
Securities; (iv) the weighted average
term-to-stated maturity of the Private
Mortgage-Backed Securities; (v) the
pass-through or certificate rate or
ranges thereof for the Private
Mortgage-Backed Securities; (vi) the
weighted average pass-through or
certificate rate of the Private
Mortgage-Backed Securities; (vii) the
issuer of the Private Mortgage-Backed
Securities (the "PMBS Issuer"), the
servicer of the Private Mortgage-Backed
Securities (the "PMBS Servicer") and the
trustee of the Private Mortgage-Backed
Securities (the "PMBS Trustee"); (viii)
certain characteristics of credit
support, if any, such as reserve funds,
insurance policies, letters of credit,
financial guaranty insurance policies or
third party guarantees, relating to the
Mortgage Loans underlying the Private
Mortgage-Backed Securities, or to such
Private Mortgage-Backed Securities
themselves; (ix) the terms on which
underlying Mortgage Loans for such
Private Mortgage-Backed Securities may,
or are required to, be repurchased prior
to stated maturity; and (x) the terms on
which substitute Mortgage Loans may be
delivered to replace those initially
deposited with the PMBS Trustee. See "The
Trust Fund."
E. Pre-Funding and
Capitalized Interest
Accounts........................ If specified in the related Prospectus
Supplement, a Trust Fund will include one
or more segregated trust accounts (each, a
"Pre-Funding Account") established and
maintained with the Trustee for the
related Series. If so specified, on the
closing date for such Series, a portion of
the proceeds of the sale of the
Certificates of such Series (such amount,
the "Pre-Funded Amount") will be deposited
in the Pre-Funding Account and may be used
to purchase additional Primary Assets
during the period of time, not to exceed
six months, specified in the related
Prospectus Supplement (the "Pre-Funding
Period"). The Primary Assets to be so
purchased will be required to have certain
characteristics specified in the related
Prospectus Supplement. If any Pre-Funded
Amount remains on deposit in the Pre-
Funding Account at the end of the
Pre-Funding Period, such amount will be
applied in the manner specified in
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<PAGE>
the related Prospectus Supplement to
prepay the Certificates of the applicable
Series. The amount initially deposited in
a pre-funding account for a Series of
Certificates will not exceed fifty
percent of the aggregate principal amount
of such Series of Certificates.
If a Pre-Funding Account is established,
one or more segregated trust accounts
(each, a "Capitalized Interest Account")
may be established and maintained with
the Trustee for the related Series. On
the closing date for such Series, a
portion of the proceeds of the sale of
the Certificates of such Series will be
deposited in the Capitalized Interest
Account and used to fund the excess, if
any, of (x) the sum of (i) the amount of
interest accrued on the Certificates of
such Series and (ii) if specified in the
related Prospectus Supplement, certain
fees or expenses during the Pre-Funding
Period such as trustee fees and credit
enhancement fees, over (y) the amount of
interest available therefor from the
Primary Assets in the Trust Fund. Any
amounts on deposit in the Capitalized
Interest Account at the end of the
Pre-Funding Period that are not necessary
for such purposes will be distributed to
the person specified in the related
Prospectus Supplement.
Description of the
Certificates.................... Each Certificate will represent a
beneficial ownership interest in a Trust
Fund created by the Seller pursuant to a
Pooling and Servicing Agreement (each, an
"Agreement") among the Seller, the Master
Servicer(s) and the Trustee for the
related Series. The Certificates of any
Series may be issued in one or more
classes as specified in the related
Prospectus Supplement. A Series of
Certificates may include one or more
classes of senior Certificates
(collectively, the "Senior Certificates")
which receive certain preferential
treatment specified in the related
Prospectus Supplement with respect to one
or more classes of subordinate
Certificates (collectively, the
"Subordinated Certificates"). Certain
Series or classes of Certificates may be
covered by insurance policies, cash
accounts, letters of credit, financial
guaranty insurance policies, third party
guarantees or other forms of credit
enhancement as described herein and in the
related Prospectus Supplement.
One or more classes of Certificates of
each Series (i) may be entitled to
receive distributions allocable only to
principal, only to interest or to any
combination thereof; (ii) may be entitled
to receive distributions only of
prepayments of principal throughout the
lives of the Certificates or during
specified periods; (iii) may be
subordinated in the right to receive
distributions of scheduled payments of
principal, prepayments of principal,
interest or any combination thereof to
one or more other classes of Certificates
of such Series throughout the lives of
the Certificates or during specified
periods or may be subordinated with
respect to certain losses or
delinquencies; (iv) may be entitled to
receive such distributions only after
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<PAGE>
the occurrence of events specified in the
Prospectus Supplement; (v) may be
entitled to receive distributions in
accordance with a schedule or formula or
on the basis of collections from
designated portions of the assets in the
related Trust Fund; (vi) as to
Certificates entitled to distributions
allocable to interest, may be entitled to
receive interest at a fixed rate or a
rate that is subject to change from time
to time; and (vii) as to Certificates
entitled to distributions allocable to
interest, may be entitled to
distributions allocable to interest only
after the occurrence of events specified
in the Prospectus Supplement and may
accrue interest until such events occur,
in each case as specified in the
Prospectus Supplement. The timing and
amounts of such distributions may vary
among classes, over time, or otherwise as
specified in the related Prospectus
Supplement.
Distributions on the
Certificates.................... Distributions on the Certificates
entitled thereto will be made monthly,
quarterly, semi-annually or at such other
intervals and on such other Distribution
Dates specified in the Prospectus
Supplement solely out of the payments
received in respect of the assets of the
related Trust Fund or other assets pledged
for the benefit of the Certificates as
specified in the related Prospectus
Supplement. The amount allocable to
payments of principal and interest on any
Distribution Date will be determined as
specified in the Prospectus Supplement.
Unless otherwise specified in the
Prospectus Supplement, all distributions
will be made pro rata to
Certificateholders of the class entitled
thereto, and the aggregate original
principal balance of the Certificates will
equal the aggregate distributions
allocable to principal that such
Certificates will be entitled to receive.
If specified in the Prospectus Supplement,
the Certificates will have an aggregate
original principal balance equal to the
aggregate unpaid principal balance of the
Mortgage Assets as of a date specified in
the related Prospectus Supplement related
to the creation of the Trust Fund (the
"Cut-off Date") and will bear interest in
the aggregate at a rate equal to the
interest rate borne by the underlying
Mortgage Loans, Agency Securities or
Private Mortgage-Backed Securities, net
of the aggregate servicing fees and any
other amounts specified in the Prospectus
Supplement. If specified in the
Prospectus Supplement, the aggregate
original principal balance of the
Certificates and interest rates on the
classes of Certificates will be
determined based on the cash flow on the
Mortgage Assets. The Pass-Through Rate at
which interest will be passed through to
holders of Certificates entitled thereto
may be a fixed rate or a rate that is
subject to change from time to time from
the time and for the periods, in each
case as specified in the Prospectus
Supplement. Any such rate may be
calculated on a loan-by-loan, weighted
average or other basis, in each case as
described in the Prospectus Supplement.
Credit Enhancement............... The assets in a Trust Fund or the
Certificates of one or more classes in the
related Series may have the benefit of
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<PAGE>
one or more types of credit enhancement
described in the related Prospectus
upplement. The protection against losses
afforded by any such credit support will
be limited. Such credit enhancement may
include one or more of the following
types:
A. Subordination................... The rights of the holders of the
Subordinated Certificates of a Series to
receive distributions with respect to the
assets in the related Trust Fund will be
subordinated to such rights of the holders
of the Senior Certificates of the same
Series to the extent described in the
related Prospectus Supplement. This
subordination is intended to enhance the
likelihood of regular receipt by holders
of Senior Certificates of the full amount
of payments which such holders would be
entitled to receive if there had been no
losses or delinquencies. The protection
afforded to the holders of Senior
Certificates of a Series by means of the
subordination feature may be accomplished
by (i) the preferential right of such
holders to receive, prior to any
distribution being made in respect of the
related Subordinated Certificates, the
amounts of principal and interest due them
on each Distribution Date out of the funds
available for distribution on such date in
the related Certificate Account and, to
the extent described in the related
Prospectus Supplement, by the right of
such holders to receive future
distributions on the assets in the related
Trust Fund that would otherwise have been
payable to the Subordinated
Certificateholders; (ii) reducing the
ownership interest of the related
subordinated Certificates; (iii) a
combination of clauses (i) and (ii) above;
or (iv) as otherwise described in the
related Prospectus Supplement. The
protection afforded to the holders of
Senior Certificates of a Series by means
of the subordination feature also may be
accomplished by allocating certain types
of losses or delinquencies to the
Subordinated Certificates to the extent
described in the related Prospectus
Supplement.
If so specified in the related Prospectus
Supplement, the same class of
Certificates may be Senior Certificates
with respect to certain types of payments
or certain types of losses or
delinquencies and Subordinated
Certificates with respect to other types
of payments or types of losses or
delinquencies. If so specified in the
related Prospectus Supplement,
subordination may apply only in the event
of certain types of losses not covered by
other forms of credit support, such as
hazard losses not covered by standard
hazard insurance policies or losses due
to the bankruptcy of the borrower. If
specified in the Prospectus Supplement, a
reserve fund may be established and
maintained by the deposit therein of
distributions allocable to the holders of
Subordinated Certificates until a
specified level is reached. The related
Prospectus Supplement will set forth
information concerning the amount of
subordination of a class or classes of
Subordinated Certificates in a Series,
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<PAGE>
the circumstances in which such
subordination will be applicable, the
manner, if any, in which the amount of
subordination will decrease over time,
the manner of funding the related reserve
fund, if any, and the conditions under
which amounts in any such reserve fund
will be used to make distributions to
holders of Senior Certificates or
released from the related Trust Fund.
B. Reserve Accounts................ One or more Reserve Accounts may be
established and maintained for each
Series. The related Prospectus Supplement
will specify whether or not any such
Reserve Account will be included in the
corpus of the Trust Fund for such Series
and will also specify the manner of
funding the related Reserve Account and
the conditions under which the amounts in
any such Reserve Account will be used to
make distributions to holders of
Certificates of a particular class or
released from the related Trust Fund.
C. Pool Insurance Policy........... A mortgage pool insurance policy or
policies (the "Pool Insurance Policy") may
be obtained and maintained for each Series
pertaining to Single Family Loans,
Cooperative Loans or Contracts, limited in
scope, covering defaults on the related
Single Family Loans, Cooperative Loans or
Contracts in an initial amount equal to a
specified percentage of the aggregate
principal balance of all Single Family
Loans, Cooperative Loans or Contracts
included in the Mortgage Pool as of the
Cut-off Date or such other date as is
specified in the related Prospectus
Supplement.
D. Special Hazard Insurance
Policy.......................... In the case of Single Family Loans,
Cooperative Loans or Contracts, certain
physical risks that are not otherwise
insured against by standard hazard
insurance policies may be covered by a
special hazard insurance policy or
policies (the "Special Hazard Insurance
Policy"). Unless otherwise specified in
the related Prospectus Supplement, each
Special Hazard Insurance Policy will be
limited in scope and will cover losses in
an initial amount equal to the greatest of
(i) a specified percentage of the
aggregate principal balance of the Single
Family Loans, Cooperative Loans or
Contracts as of the related Cut-off Date,
(ii) twice the unpaid principal balance as
of the related Cut-off Date of the largest
Single Family Loan, Cooperative Loan or
Contract in the related Mortgage Pool, or
(iii) the aggregate principal balance of
Single Family Loans, Cooperative Loans or
Contracts as of the Cut-off Date secured
by property in any single zip code
concentration.
E. Bankruptcy Bond................. A bankruptcy bond or bonds (the
"Bankruptcy Bond") may be obtained
covering certain losses resulting from
action which may be taken by a bankruptcy
court in connection with a Single Family
Loan, Cooperative Loan or Contract. The
level of coverage of each Bankruptcy Bond
will be specified in the related
Prospectus Supplement.
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<PAGE>
F. FHA Insurance and VA
Guarantee....................... All or a portion of the Mortgage Loans
in a Mortgage Pool may be insured by FHA
insurance and all or a portion of the
Single Family Loans or Contracts in a
Mortgage Pool may be partially guaranteed
by the VA.
G. Other Arrangements.............. Other arrangements as described in the
related Prospectus Supplement including,
but not limited to, one or more letters of
credit, financial guaranty insurance
policies or third party guarantees,
interest rate or other swap agreements,
caps, collars or floors, may be used to
provide coverage for certain risks of
defaults or losses. These arrangements may
be in addition to or in substitution for
any forms of credit support described in
the Prospectus. Any such arrangement must
be acceptable to each nationally
recognized rating agency that rates the
related Series of Certificates (the
"Rating Agency").
H. Cross Support................... If specified in the Prospectus
Supplement, the beneficial ownership of
separate groups of assets or separate
Trust Funds may be evidenced by separate
classes of the related Series of
Certificates. In such case, credit support
may be provided by a cross-support feature
which requires that distributions be made
with respect to certain Certificates
evidencing beneficial ownership of one or
more asset groups or Trust Funds prior to
distributions to other Certificates
evidencing a beneficial ownership interest
in other asset groups or Trust Funds. If
specified in the Prospectus Supplement,
the coverage provided by one or more forms
of credit support may apply concurrently
to two or more separate Trust Funds,
without priority among such Trust Funds,
until the credit support is exhausted. If
applicable, the Prospectus Supplement will
identify the asset groups or Trust Funds
to which such credit support relates and
the manner of determining the amount of
the coverage provided thereby and of the
application of such coverage to the
identified asset groups or Trust Funds.
Advances......................... Unless otherwise specified in the
related Prospectus Supplement, each Master
Servicer and, if applicable, each mortgage
servicing institution that services a
Mortgage Loan in a Mortgage Pool on behalf
of a Master Servicer (a "Sub-Servicer")
will be obligated to advance amounts
corresponding to delinquent principal and
interest payments on such Mortgage Loan
until the date on which the related
Mortgaged Property is sold at a
foreclosure sale or the related Mortgage
Loan is otherwise liquidated. Any such
obligation to make advances may be limited
to amounts due holders of Senior
Certificates of the related Series, to
amounts deemed to be recoverable from late
payments or liquidation proceeds, for
specified periods or any combination
thereof, or as otherwise specified in the
related Prospectus Supplement. See
"Description of the Certificates --
Advances." Advances will be reimbursable
to the extent described herein and in the
related Prospectus Supplement.
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<PAGE>
Optional Termination The Master Servicer, the holders of the
residual interests in a REMIC, or any
other entity specified in the related
Prospectus Supplement may have the option
to effect early retirement of a Series of
Certificates through the purchase of the
Mortgage Assets and other assets in the
related Trust Fund under the
circumstances and in the manner described
in "The Pooling and Servicing Agreement
-- Termination; Optional Termination."
Legal Investment................. Unless otherwise specified in the
related Prospectus Supplement, each class
of Certificates offered hereby and by the
related Prospectus Supplement will
constitute "mortgage-related securities"
for purposes of the Secondary Mortgage
Market Enhancement Act of 1984 ("SMMEA")
and, as such, will be legal investments
for certain types of institutional
investors to the extent provided in
SMMEA, subject, in any case, to any other
regulations which may govern investments
by such institutional investors. See
"Legal Investment."
Institutions whose investment activities
are subject to legal investment laws and
regulations or to review by certain
regulatory authorities may be subject to
restrictions on investment in the
Certificates. Any such institution should
consult its own legal advisors in
determining whether and to what extent
there may be restrictions on its ability
to invest in the Certificates. See "Legal
Investment" herein.
Certain Federal Income Tax
Consequences..................... The federal income tax consequences of
the purchase, ownership and disposition of
the Certificates of each series will
depend on whether an election is made to
treat the corresponding Trust Fund (or
certain assets of the Trust Fund) as a
REMIC under the Internal Revenue Code of
1986, as amended (the "Code").
REMIC. If an election is to be made to
-----
treat the Trust Fund for a series of
Certificates as a REMIC for federal
income tax purposes, the related
Prospectus Supplement will specify which
class or classes thereof will be
designated as regular interests in the
REMIC ("REMIC Regular Certificates") and
which class of Certificates will be
designated as the residual interest in
the REMIC ("REMIC Residual
Certificates").
For federal income tax purposes, REMIC
Regular Certificates generally will be
treated as debt obligations of the Trust
Fund with payment terms equivalent to the
terms of such Certificates. Holders of
REMIC Regular Certificates will be
required to report income with respect to
such Certificates under an accrual
method, regardless of their normal tax
accounting method. Original issue
discount, if any, on REMIC Regular
Certificates will be includible in the
income of the Holders thereof as it
accrues, in advance of receipt of the
cash attributable thereto, which rate of
accrual will be determined based on a
reasonable assumed
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<PAGE>
prepayment rate. The REMIC Residual
Certificates generally will not be
treated as evidences of indebtedness for
federal income tax purposes, but instead,
as representing rights to the taxable
income or net loss of the REMIC.
Each holder of a REMIC Residual
Certificate will be required to take into
account separately its pro rata portion
of the REMIC's taxable income or loss.
Certain income of a REMIC (referred to as
"excess inclusions") generally may not be
offset by such a holder's net operating
loss carryovers or other deductions, and
in the case of a tax-exempt holder of a
REMIC Residual Certificate will be
treated as "unrelated business taxable
income". In certain situations,
particularly in the early years of a
REMIC, holders of a REMIC Residual
Certificate may have taxable income, and
possibly tax liabilities with respect to
such income, in excess of cash
distributed to them. "DISQUALIFIED
ORGANIZATIONS," AS DEFINED IN "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES -- REMIC
RESIDUAL CERTIFICATES -- TAX ON
DISPOSITION OF EMIC RESIDUAL
CERTIFICATES; RESTRICTION ON TRANSFER;
HOLDING BY PASS-THROUGH ENTITIES," ARE
PROHIBITED FROM ACQUIRING OR HOLDING ANY
BENEFICIAL INTEREST IN THE REMIC RESIDUAL
CERTIFICATES. In certain cases, a
transfer of a REMIC Residual Certificate
will not be effective for Federal income
tax purposes. See "Certain Federal Income
Tax Consequences -- Transfers of REMIC
Residual Certificates" and " -- Foreign
Investors" herein.
Grantor Trust. If no election is to be
-------------
made to treat the Trust Fund for a series
of Certificates ("Non-REMIC
Certificates") as a REMIC, the Trust Fund
will be classified as a grantor trust for
federal income tax purposes and not as an
association taxable as a corporation.
Holders of Non-REMIC Certificates will be
treated for such purposes, subject to the
possible application of the stripped bond
rules, as owners of undivided interests
in the related Mortgage Loans and
generally will be required to report as
income their pro rata share of the entire
gross income (including amounts paid as
reasonable servicing compensation) from
the Mortgage Loan and will be entitled,
subject to certain limitations, to deduct
their pro rata share of expenses of the
Trust Fund.
Investors are advised to consult their
tax advisors and to review "Certain
Federal Income Tax Consequences" herein
and, if applicable, in the related
Prospectus Supplement.
ERISA Considerations............... A fiduciary of any employee benefit plan
or other retirement plan or arrangement
subject to the Employee Retirement Income
Security Act of 1974, as amended
("ERISA"), or Section 4975 of the Code
should carefully review with its legal
advisors whether the purchase, holding or
disposition of Certificates could give
rise to a prohibited transaction under
ERISA or the Code or subject the assets of
the Trust Fund to the fiduciary investment
standards of ERISA. See "ERISA
Considerations."
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<PAGE>
THE TRUST FUND
A Trust Fund for a Series of Certificates will include the Mortgage
Assets consisting of (A) a Mortgage Pool* comprised of (i) Single Family Loans,
(ii) Multifamily Loans, (iii) Cooperative Loans or (iv) Contracts, (B) Agency
Securities, or (C) Private Mortgage-Backed Securities, in each case, as
specified in the related Prospectus Supplement, together with payments in
respect of such Mortgage Assets and certain other accounts, obligations or
agreements, in each case as specified in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, the
Certificates will be entitled to payment only from the assets of the related
Trust Fund and will not be entitled to payments in respect of the assets of any
other trust fund established by the Seller. If specified in the related
Prospectus Supplement, certain Certificates will evidence the entire beneficial
ownership interest in a Trust Fund which will contain a beneficial ownership
interest in another Trust Fund which will contain the Mortgage Assets. Unless
otherwise specified in the related Prospectus Supplement, the Mortgage Assets
of any Trust Fund will consist of Mortgage Loans, Agency Securities or Private
Mortgage-Backed Securities but not a combination thereof.
The Mortgage Assets will be acquired by the Seller, either directly or
through affiliates, from the Lenders and conveyed by the Seller to the related
Trust Fund. The Lenders may have originated the Mortgage Assets or acquired the
Mortgage Assets from the originators or other entities. See "Mortgage Loan
Program-Underwriting Standards."
The following is a brief description of the Mortgage Assets expected to
be included in the Trust Funds. If specific information respecting the Mortgage
Assets is not known at the time the related Series of Certificates initially is
offered, more general information of the nature described below will be
provided in the Prospectus Supplement, and specific information will be set
forth in a report on Form 8-K to be filed with the Commission within fifteen
days after the initial issuance of such Certificates (the "Detailed
Description"). A copy of the Agreement with respect to each Series of
Certificates will be attached to the Form 8-K and will be available for
inspection at the corporate trust office of the Trustee specified in the
related Prospectus Supplement. A schedule of the Mortgage Assets relating to
such Series will be attached to the Agreement delivered to the Trustee upon
delivery of the Certificates.
THE MORTGAGE LOANS-GENERAL
The real property and Manufactured Homes, as the case may be, which
secure repayment of the Mortgage Loans (the "Mortgaged Properties") may be
located in any one of the fifty states or the District of Columbia, Guam,
Puerto Rico or any other territory of the United States. Certain Mortgage Loans
may be conventional loans (I.E., loans that are not insured or guaranteed by
any governmental agency), insured by the FHA or partially guaranteed by the VA,
as specified in the Prospectus Supplement and described below. Mortgage Loans
with certain Loan-to-Value Ratios (as defined herein) and/or certain principal
balances may be covered wholly or partially by primary mortgage guaranty
insurance policies (each, a "Primary Insurance Policy"). The existence, extent
and duration of any such coverage will be described in the applicable
Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, all of
the Mortgage Loans in a Mortgage Pool will provide for payments to be made
monthly or bi-weekly. Unless otherwise specified in the related Prospectus
Supplement, all of the monthly-pay Mortgage Loans in a Mortgage Pool will have
payments due on the first day of each month. The payment terms of the Mortgage
Loans to be included in a Trust Fund will be described in the related
Prospectus Supplement and may include any of the following features or
combination thereof or other features described in the related Prospectus
Supplement:
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*Whenever the terms "Mortgage Pool" and "Certificates" are used in this
Prospectus, such terms will be deemed to apply, unless the context indicates
otherwise, to one specific Mortgage Pool and the Certificates representing
certain undivided interests, as described below, in a single Trust Fund
consisting primarily of the Mortgage Loans in such Mortgage Pool. Similarly,
the term "Pass-Through Rate" will refer to the Pass-Through Rate borne by the
Certificates of one specific Series and the term "Trust Fund" will refer to one
specific Trust Fund.
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(a) Interest may be payable at a fixed rate, a rate adjustable from
time to time in relation to an index, a rate that is fixed for period of
time or under certain circumstances and is followed by an adjustable
rate, a rate that otherwise varies from time to time, or a rate that is
convertible from an adjustable rate to a fixed rate. Changes to an
adjustable rate may be subject to periodic limitations, maximum rates,
minimum rates or a combination of such limitations. Accrued interest may
be deferred and added to the principal of a Mortgage Loan for such
periods and under such circumstances as may be specified in the related
Prospectus Supplement. Mortgage Loans may provide for the payment of
interest at a rate lower than the Mortgage Rate for a period of time or
for the life of the Mortgage Loan, and the amount of any difference may
be contributed from funds supplied by the seller of the Mortgaged
Property or another source or may be treated as accrued interest added to
the principal of the Mortgage Loan.
(b) Principal may be payable on a level debt service basis to fully
amortize the Mortgage Loan over its term, may be calculated on the basis
of an assumed amortization schedule that is significantly longer than the
original term to maturity or on an interest rate that is different from
the interest rate on the Mortgage Loan or may not be amortized during all
or a portion of the original term. Payment of all or a substantial
portion of the principal may be due on maturity ("balloon" payments).
Principal may include interest that has been deferred and added to the
principal balance of the Mortgage Loan.
(c) Monthly payments of principal and interest may be fixed for the
life of the Mortgage Loan, may increase over a specified period of time
or may change from period to period. Mortgage Loans may include limits on
periodic increases or decreases in the amount of monthly payments and may
include maximum or minimum amounts of monthly payments. Certain Mortgage
Loans sometimes called graduated payment mortgage loans may require the
monthly payments of principal and interest to increase for a specified
period, provide for deferred payment of a portion of the interest due
monthly during such period, and recoup the deferred interest through
negative amortization whereby the difference between the scheduled
payment of interest and the amount of interest actually accrued is added
monthly to the outstanding principal balance. Other Mortgage Loans
sometimes referred to as growing equity mortgage loans may provide for
periodic scheduled payment increases for a specified period with the full
amount of such increases being applied to principal. Other Mortgage Loans
sometimes referred to as reverse mortgages may provide for monthly
payments to the borrowers with interest and principal payable when the
borrowers move or die. Reverse mortgages typically are made to older
persons who have substantial equity in their homes.
(d) Prepayments of principal may be subject to a prepayment fee,
which may be fixed for the life of the Mortgage Loan or may decline over
time, and may be prohibited for the life of the Mortgage Loan or for
certain periods ("lockout periods"). Certain Mortgage Loans may permit
prepayments after expiration of the applicable lockout period and may
require the payment of a prepayment fee in connection with any such
subsequent prepayment. Other Mortgage Loans may permit prepayments
without payment of a fee unless the prepayment occurs during specified
time periods. The Mortgage Loans may include due-on-sale clauses which
permit the mortgagee to demand payment of the entire Mortgage Loan in
connection with the sale or certain transfers of the related Mortgaged
Property. Other Mortgage Loans may be assumable by persons meeting the
then applicable underwriting standards of the Lender.
Each Prospectus Supplement will contain information, as of the date of
such Prospectus Supplement and to the extent then specifically known to the
Seller, with respect to the Mortgage Loans contained in the related Mortgage
Pool, including (i) the aggregate outstanding principal balance and the average
outstanding principal balance of the Mortgage Loans as of the applicable
Cut-off Date, (ii) the type of property securing the Mortgage Loans (E.G., one-
to four-family houses, vacation and second homes, Manufactured Homes,
multifamily apartments or other real property), (iii) the original terms to
maturity of the Mortgage Loans, (iv) the largest original principal balance and
the smallest original principal balance of any of the Mortgage Loans, (v) the
earliest origination date and latest maturity date of any of the Mortgage
Loans, (vi) the aggregate principal balance of Mortgage Loans having
Loan-to-Value Ratios at origination exceeding 80%, (vii) the Mortgage Rates or
APR's or range of Mortgage Rates or APR's borne by the Mortgage Loans, and
(viii) the geographical distribution of the Mortgage Loans on a state-by-state
basis. If specific information respecting the Mortgage Loans is not known to
the Seller at the time the related Certificates are initially offered, more
general information of
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the nature described above will be provided in the Prospectus Supplement and
specific information will be set forth in the Detailed Description.
The "Loan-to-Value Ratio" of a Mortgage Loan at any given time is the
ratio, expressed as a percentage, of the then outstanding principal balance of
the Mortgage Loan to the Collateral Value of the related Mortgaged Property.
Unless otherwise specified in the related Prospectus Supplement, the
"Collateral Value" of a Mortgaged Property, other than with respect to
Contracts and certain Mortgage Loans the proceeds of which were used to
refinance an existing mortgage loan (each, a "Refinance Loan"), is the lesser
of (a) the appraised value determined in an appraisal obtained by the
originator at origination of such Mortgage Loan and (b) the sales price for
such property. Unless otherwise specified in the related Prospectus Supplement,
in the case of Refinance Loans, the Collateral Value of the related Mortgaged
Property is the appraised value thereof determined in an appraisal obtained at
the time of refinancing. Unless otherwise specified in the related Prospectus
Supplement, for purposes of calculating the Loan-to-Value Ratio of a Contract
relating to a new Manufactured Home, the Collateral Value is no greater than
the sum of a fixed percentage of the list price of the unit actually billed by
the manufacturer to the dealer (exclusive of freight to the dealer site)
including "accessories" identified in the invoice (the "Manufacturer's Invoice
Price"), plus the actual cost of any accessories purchased from the dealer, a
delivery and set-up allowance, depending on the size of the unit, and the cost
of state and local taxes, filing fees and up to three years prepaid hazard
insurance premiums. Unless otherwise specified in the related Prospectus
Supplement, the Collateral Value of a used Manufactured Home is the least of
the sales price, appraised value, and National Automobile Dealer's Association
book value plus prepaid taxes and hazard insurance premiums. The appraised
value of a Manufactured Home is based upon the age and condition of the
manufactured housing unit and the quality and condition of the mobile home park
in which it is situated, if applicable.
No assurance can be given that values of the Mortgaged Properties have
remained or will remain at their levels on the dates of origination of the
related Mortgage Loans. If the residential real estate market should experience
an overall decline in property values such that the outstanding principal
balances of the Mortgage Loans, and any secondary financing on the Mortgaged
Properties, in a particular Mortgage Pool become equal to or greater than the
value of the Mortgaged Properties, the actual rates of delinquencies,
foreclosures and losses could be higher than those now generally experienced in
the mortgage lending industry. In addition, adverse economic conditions and
other factors (which may or may not affect real property values) may affect the
timely payment by mortgagors of scheduled payments of principal and interest on
the Mortgage Loans and, accordingly, the actual rates of delinquencies,
foreclosures and losses with respect to any Mortgage Pool. In the case of
Multifamily Loans, such other factors could include excessive building
resulting in an oversupply of rental housing stock or a decrease in employment
reducing the demand for rental units in an area; federal, state or local
regulations and controls affecting rents; prices of goods and energy;
environmental restrictions; increasing labor and material costs; and the
relative attractiveness to tenants of the Mortgaged Properties. To the extent
that such losses are not covered by credit enhancements, such losses will be
borne, at least in part, by the holders of the Certificates of the related
Series.
The Seller will cause the Mortgage Loans comprising each Mortgage Pool to
be assigned to the Trustee named in the related Prospectus Supplement for the
benefit of the holders of the Certificates of the related Series. One or more
Master Servicers named in the related Prospectus Supplement will service the
Mortgage Loans, either directly or through Sub-Servicers, pursuant to the
Agreement and will receive a fee for such services. See "Mortgage Loan Program"
and "The Pooling and Servicing Agreement." With respect to Mortgage Loans
serviced by a Master Servicer through a Sub-Servicer, the Master Servicer will
remain liable for its servicing obligations under the related Agreement as if
the Master Servicer alone were servicing such Mortgage Loans.
Unless otherwise specified in the related Prospectus Supplement, the only
obligations of the Seller with respect to a Series of Certificates will be to
obtain certain representations and warranties from the Lenders or other third
parties and to assign to the Trustee for such Series of Certificates the
Seller's rights with respect to such representations and warranties. See "The
Pooling and Servicing Agreement-Assignment of Mortgage Assets." The obligations
of each Master Servicer with respect to the Mortgage Loans will consist
principally of its contractual servicing obligations under the related
Agreement (including its obligation to enforce the obligations of the
Sub-Servicers, Lenders or other third parties as more fully described herein
under "Mortgage Loan Program-Representations by Lenders; Repurchases" and "The
Pooling and Servicing Agreement-Sub-Servicing by Lenders," "-Assignment of
Mortgage Assets") and its obligation to make certain cash advances in the event
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of delinquencies in payments on or with respect to the Mortgage Loans in the
amounts described herein under "Description of the Certificates-Advances." The
obligations of a Master Servicer to make advances may be subject to
limitations, to the extent provided herein and in the related Prospectus
Supplement.
SINGLE FAMILY AND COOPERATIVE LOANS
Unless otherwise specified in the Prospectus Supplement, Single Family
Loans will consist of mortgage loans, deeds of trust or participation or other
beneficial interests therein, secured by first liens on one- to four-family
residential properties. If so specified, the Single Family Loans may include
loans or participations therein secured by mortgages or deeds of trust on
condominium units in condominium buildings together with such condominium
unit's appurtenant interest in the common elements of the condominium building.
Unless otherwise specified, the Cooperative Loans will be secured by security
interests in or similar liens on stock, shares or membership certificates
issued by Cooperatives and in the related proprietary leases or occupancy
agreements granting exclusive rights to occupy specific dwelling units in such
Cooperatives' buildings. Single Family Loans and Cooperative Loans may be
conventional loans (I.E., loans that are not insured or guaranteed by any
governmental agency), insured by the FHA or partially guaranteed by the VA, as
specified in the related Prospectus Supplement. Unless otherwise specified in
the related Prospectus Supplement, Single Family Loans and Cooperative Loans
will all have individual principal balances at origination of not less than
$25,000 and not more than $1,000,000, and original terms to stated maturity of
15 to 40 years.
The Mortgaged Properties relating to Single Family Loans will consist of
detached or semi-detached one-family dwelling units, two- to four-family
dwelling units, townhouses, rowhouses, individual condominium units, individual
units in planned unit developments, and certain other dwelling units. Such
Mortgaged Properties may include vacation and second homes, investment
properties and leasehold interests. In the case of leasehold interests, the
term of the leasehold will exceed the scheduled maturity of the Mortgage Loan
by at least five years, unless otherwise specified in the related Prospectus
Supplement. Certain Mortgage Loans may be originated or acquired in connection
with employee relocation programs.
MULTIFAMILY LOANS
Multifamily Loans will consist of mortgage loans, deeds of trust or
participation or other beneficial interests therein, secured by first liens on
rental apartment buildings or projects containing five or more residential
units. Such loans may be conventional loans or FHA-insured loans, as specified
in the related Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement, Multifamily Loans will all have original terms to stated
maturity of not more than 40 years.
Mortgaged Properties which secure Multifamily Loans may include
high-rise, mid-rise and garden apartments. Certain of the Multifamily Loans may
be secured by apartment buildings owned by Cooperatives. The Cooperative owns
all the apartment units in the building and all common areas. The Cooperative
is owned by tenant-stockholders who, through ownership of stock, shares or
membership certificates in the corporation, receive proprietary leases or
occupancy agreements which confer exclusive rights to occupy specific
apartments or units. Generally, a tenant-stockholder of a Cooperative must make
a monthly payment to the Cooperative representing such tenant-stockholder's pro
rata share of the Cooperative's payments for its mortgage loan, real property
taxes, maintenance expenses and other capital or ordinary expenses. Those
payments are in addition to any payments of principal and interest the
tenant-stockholder must make on any loans to the tenant-stockholder secured by
its shares in the Cooperative. The Cooperative will be directly responsible for
building management and, in most cases, payment of real estate taxes and hazard
and liability insurance. A Cooperative's ability to meet debt service
obligations on a Multifamily Loan, as well as all other operating expenses,
will be dependent in large part on the receipt of maintenance payments from the
tenant-stockholders, as well as any rental income from units or commercial
areas the Cooperative might control. Unanticipated expenditures may in some
cases have to be paid by special assessments on the tenant-stockholders.
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CONTRACTS
The Contracts will consist of manufactured housing conditional sales
contracts and installment sales or loan agreements each secured by a
Manufactured Home. Contracts may be conventional, insured by the FHA or
partially guaranteed by the VA, as specified in the related Prospectus
Supplement. Unless otherwise specified in the related Prospectus Supplement,
each Contract will be fully amortizing and will bear interest at its APR.
Unless otherwise specified in the related Prospectus Supplement, Contracts will
all have individual principal balances at origination of not less than $10,000
and not more than $1,000,000 and original terms to stated maturity of 5 to 40
years.
Unless otherwise specified in the related Prospectus Supplement, the
"Manufactured Homes" securing the Contracts will consist of manufactured homes
within the meaning of 42 United States Code, Section 5402(6), which defines a
"manufactured home" as "a structure, transportable in one or more sections,
which in the traveling mode, is eight body feet or more in width or forty body
feet or more in length, or, when erected on site, is three hundred twenty or
more square feet, and which is built on a permanent chassis and designed to be
used as a dwelling with or without a permanent foundation when connected to the
required utilities, and includes the plumbing, heating, air conditioning, and
electrical systems contained therein; except that such term shall include any
structure which meets all the requirements of [this] paragraph except the size
requirements and with respect to which the manufacturer voluntarily files a
certification required by the Secretary of Housing and Urban Development and
complies with the standards established under [this] chapter."
The related Prospectus Supplement will specify for the Contracts
contained in the related Trust Fund, among other things, the date of
origination of the Contracts; the APRs on the Contracts; the Contract Loan-to-
Value Ratios; the minimum and maximum outstanding principal balances as of the
Cut-off Date and the average outstanding principal balance; the outstanding
principal balances of the Contracts included in the related Trust Fund; and the
original maturities of the Contracts and the last maturity date of any
Contract.
AGENCY SECURITIES
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION. GNMA is a wholly-owned
corporate instrumentality of the United States with the United States
Department of Housing and Urban Development. Section 306(g) of Title II of the
National Housing Act of 1934, as amended (the "Housing Act"), authorizes GNMA
to guarantee the timely payment of the principal of and interest on
certificates which represent an interest in a pool of mortgage loans insured by
FHA under the Housing Act, or Title V of the Housing Act of 1949 ("FHA Loans"),
or partially guaranteed by the VA under the Servicemen's Readjustment Act of
1944, as amended, or Chapter 37 of Title 38, United States Code ("VA Loans").
Section 306(g) of the Housing Act provides that "the full faith and
credit of the United States is pledged to the payment of all amounts which may
be required to be paid under any guarantee under this subsection." In order to
meet its obligations under any such guarantee, GNMA may, under Section 306(d)
of the Housing Act, borrow from the United States Treasury in an amount which
is at any time sufficient to enable GNMA, with no limitations as to amount, to
perform its obligations under its guarantee.
GNMA CERTIFICATES. Each GNMA Certificate held in a Trust Fund (which may
be issued under either the GNMA I Program or the GNMA II Program) will be a
"fully modified pass-through" mortgaged-backed certificate issued and serviced
by a mortgage banking company or other financial concern ("GNMA Issuer")
approved by GNMA or approved by FNMA as a seller-servicer of FHA Loans and/or
VA Loans. The mortgage loans underlying the GNMA Certificates will consist of
FHA Loans and/or VA Loans. Each such mortgage loan is secured by a one- to
four-family residential property or a manufactured home. GNMA will approve the
issuance of each such GNMA Certificate in accordance with a guaranty agreement
(a "Guaranty Agreement") between GNMA and the GNMA Issuer. Pursuant to its
Guaranty Agreement, a GNMA Issuer will be required to advance its own funds in
order to make timely payments of all amounts due on each such GNMA Certificate,
even if the payments received by the GNMA Issuer on the FHA Loans or VA Loans
underlying each such GNMA Certificate are less than the amounts due on each
such GNMA Certificate.
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The full and timely payment of principal of and interest on each GNMA
Certificate will be guaranteed by GNMA, which obligation is backed by the full
faith and credit of the United States. Each such GNMA Certificate will have an
original maturity of not more than 30 years (but may have original maturities
of substantially less than 30 years). Each such GNMA Certificate will be based
on and backed by a pool of FHA Loans or VA Loans secured by one- to four-family
residential properties or manufactured homes and will provide for the payment
by or on behalf of the GNMA Issuer to the registered holder of such GNMA
Certificate of scheduled monthly payments of principal and interest equal to
the registered holder's proportionate interest in the aggregate amount of the
monthly principal and interest payment on each FHA Loan or VA Loan underlying
such GNMA Certificate, less the applicable servicing and guarantee fee which
together equal the difference between the interest on the FHA Loan or VA Loan
and the pass-through rate on the GNMA Certificate. In addition, each payment
will include proportionate pass-through payments of any prepayments of
principal on the FHA Loans or VA Loans underlying such GNMA Certificate and
liquidation proceeds in the event of a foreclosure or other disposition of any
such FHA Loans or VA Loans.
If a GNMA Issuer is unable to make the payments on a GNMA Certificate as
it becomes due, it must promptly notify GNMA and request GNMA to make such
payment. Upon notification and request, GNMA will make such payments directly
to the registered holder of such GNMA Certificate. In the event no payment is
made by a GNMA Issuer and the GNMA Issuer fails to notify and request GNMA to
make such payment, the holder of such GNMA Certificate will have recourse only
against GNMA to obtain such payment. The Trustee or its nominee, as registered
holder of the GNMA Certificates held in a Trust Fund, will have the right to
proceed directly against GNMA under the terms of the Guaranty Agreements
relating to such GNMA Certificates for any amounts that are not paid when due.
All mortgage loans underlying a particular GNMA I Certificate must have
the same interest rate (except for pools of mortgage loans secured by
manufactured homes) over the term of the loan. The interest rate on such GNMA I
Certificate will equal the interest rate on the mortgage loans included in the
pool of mortgage loans underlying such GNMA I Certificate, less one-half
percentage point per annum of the unpaid principal balance of the mortgage
loans.
Mortgage loans underlying a particular GNMA II Certificate may have per
annum interest rates that vary from each other by up to one percentage point.
The interest rate on each GNMA II Certificate will be between one-half
percentage point and one and one-half percentage points lower than the highest
interest rate on the mortgage loans included in the pool of mortgage loans
underlying such GNMA II Certificate (except for pools of mortgage loans secured
by manufactured homes).
Regular monthly installment payments on each GNMA Certificate held in a
Trust Fund will be comprised of interest due as specified on such GNMA
Certificate plus the scheduled principal payments on the FHA Loans or VA Loans
underlying such GNMA Certificate due on the first day of the month in which the
scheduled monthly installments on such GNMA Certificate is due. Such regular
monthly installments on each such GNMA Certificate are required to be paid to
the Trustee as registered holder by the 15th day of each month in the case of a
GNMA I Certificate and are required to be mailed to the Trustee by the 20th day
of each month in the case of a GNMA II Certificate. Any principal prepayments
on any FHA Loans or VA Loans underlying a GNMA Certificate held in a Trust Fund
or any other early recovery of principal on such loan will be passed through to
the Trustee as the registered holder of such GNMA Certificate.
GNMA Certificates may be backed by graduated payment mortgage loans or by
"buydown" mortgage loans for which funds will have been provided (and deposited
into escrow accounts) for application to the payment of a portion of the
borrowers' monthly payments during the early years of such mortgage loan.
Payments due the registered holders of GNMA Certificates backed by pools
containing "buydown" mortgage loans will be computed in the same manner as
payments derived from other GNMA Certificates and will include amounts to be
collected from both the borrower and the related escrow account. The graduated
payment mortgage loans will provide for graduated interest payments that,
during the early years of such mortgage loans, will be less than the amount of
stated interest on such mortgage loans. The interest not so paid will be added
to the principal of such graduated payment mortgage loans and, together with
interest thereon, will be paid in subsequent years. The obligations of GNMA and
of a GNMA Issuer will be the same irrespective of whether the GNMA Certificates
are backed by graduated payment mortgage loans or Buydown Loans. No statistics
comparable to the FHA's
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prepayment experience on level payment, non-buydown loans are available in
respect of graduated payment or buydown mortgages. GNMA Certificates related to
a Series of Certificates may be held in book-entry form.
If specified in a Prospectus Supplement, GNMA Certificates may be backed
by multifamily mortgage loans having the characteristics specified in such
Prospectus Supplement.
The GNMA Certificates included in a Trust fund, and the related
underlying mortgage loans, may have characteristics and terms different from
those described above. Any such different characteristics and terms will be
described in the related Prospectus Supplement.
FEDERAL NATIONAL MORTGAGE ASSOCIATION. FNMA is a federally chartered and
privately owned corporation organized and existing under the Federal National
Mortgage Association Charter Act (the "Charter Act"). FNMA was originally
established in 1938 as a United States government agency to provide
supplemental liquidity to the mortgage market and was transformed into a
stockholder-owned and privately-managed corporation by legislation enacted in
1968.
FNMA provides funds to the mortgage market primarily by purchasing
mortgage loans from lenders, thereby replenishing their funds for additional
lending. FNMA acquires funds to purchase mortgage loans from many capital
market investors that may not ordinarily invest in mortgages, thereby expanding
the total amount of funds available for housing. Operating nationwide, FNMA
helps to redistribute mortgage funds from capital-surplus to capital-short
areas.
FNMA CERTIFICATES. FNMA Certificates are Guaranteed Mortgage Pass-Through
Certificates representing fractional undivided interests in a pool of mortgage
loans formed by FNMA. Each mortgage loan must meet the applicable standards of
the FNMA purchase program. Mortgage loans comprising a pool are either provided
by FNMA from its own portfolio or purchased pursuant to the criteria of the
FNMA purchase program.
Mortgage loans underlying FNMA Certificates held by a Trust Fund will
consist of conventional mortgage loans, FHA Loans or VA Loans. Original
maturities of substantially all of the conventional, level payment mortgage
loans underlying a FNMA Certificate are expected to be between either 8 to 15
years or 20 to 30 years. The original maturities of substantially all of the
fixed rate level payment FHA Loans or VA Loans are expected to be 30 years.
Mortgage loans underlying a FNMA Certificate may have annual interest
rates that vary by as much as two percentage points from each other. The rate
of interest payable on a FNMA Certificate is equal to the lowest interest rate
of any mortgage loan in the related pool, less a specified minimum annual
percentage representing servicing compensation and FNMA's guaranty fee. Under a
regular servicing option (pursuant to which the mortgagee or other servicers
assumes the entire risk of foreclosure losses), the annual interest rates on
the mortgage loans underlying a FNMA Certificate will be between 50 basis
points and 250 basis points greater than in its annual pass-through rate and
under a special servicing option (pursuant to which FNMA assumes the entire
risk for foreclosure losses), the annual interest rates on the mortgage loans
underlying a FNMA Certificate will generally be between 55 basis points and 255
basis points greater than the annual FNMA Certificate pass-through rate. If
specified in the Prospectus Supplement, FNMA Certificates may be backed by
adjustable rate mortgages.
FNMA guarantees to each registered holder of a FNMA Certificate that it
will distribute amounts representing such holder's proportionate share of
scheduled principal and interest payments at the applicable pass-through rate
provided for by such FNMA Certificate on the underlying mortgage loans, whether
or not received, and such holder's proportionate share of the full principal
amount of any foreclosed or other finally liquidated mortgage loan, whether or
not such principal amount is actually recovered. The obligations of FNMA under
its guarantees are obligations solely of FNMA and are not backed by, nor
entitled to, the full faith and credit of the United States. Although the
Secretary of the Treasury of the United States has discretionary authority to
lend FNMA up to $2.25 billion outstanding at any time, neither the United
States nor any agency thereof is obligated to finance FNMA's operations or to
assist FNMA in any other manner. If FNMA were unable to satisfy its
obligations, distributions to holders of FNMA Certificates would consist solely
of payments and other recoveries on the underlying mortgage loans and,
accordingly, monthly distributions to holders of FNMA Certificates would be
affected by delinquent payments and defaults on such mortgage loans.
FNMA Certificates evidencing interests in pools of mortgage loans formed
on or after May 1, 1985 (other than FNMA Certificates backed by pools
containing graduated payment mortgage loans or mortgage loans
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secured by multifamily projects) are available in book-entry form only.
Distributions of principal and interest on each FNMA Certificate will be made
by FNMA on the 25th day of each month to the persons in whose name the FNMA
Certificate is entered in the books of the Federal Reserve Banks (or registered
on the FNMA Certificate register in the case of fully registered FNMA
Certificates) as of the close of business on the last day of the preceding
month. With respect to FNMA Certificates issued in book-entry form,
distributions thereon will be made by wire, and with respect to fully
registered FNMA Certificates, distributions thereon will be made by check.
The FNMA Certificates included in a Trust Fund, and the related
underlying mortgage loans, may have characteristics and terms different from
those described above. Any such different characteristics and terms will be
described in the related Prospectus Supplement.
FEDERAL HOME LOAN MORTGAGE CORPORATION. FHLMC is a publicly held United
States government-sponsored enterprise created pursuant to the Federal Home
Loan Mortgage Corporation Act, Title III of the Emergency Home Finance Act of
1970, as amended (the "FHLMC Act"). The common stock of FHLMC is owned by the
Federal Home Loan Banks. FHLMC was established primarily for the purpose of
increasing the availability of mortgage credit for the financing of urgently
needed housing. It seeks to provide an enhanced degree of liquidity for
residential mortgage investments primarily by assisting in the development of
secondary markets for conventional mortgages. The principal activity of FHLMC
currently consists of the purchase of first lien conventional mortgage loans or
participation interests in such mortgage loans and the sale of the mortgage
loans or participations so purchased in the form of mortgage securities,
primarily FHLMC Certificates. FHLMC is confined to purchasing, so far as
practicable, mortgage loans that it deems to be of such quality, type and class
as to meet generally the purchase standards imposed by private institutional
mortgage investors.
FHLMC CERTIFICATES. Each FHLMC Certificate represents an undivided
interest in a pool of mortgage loans that may consist of first lien
conventional loans, FHA Loans or VA Loans (a "FHLMC Certificate group"). FHLMC
Certificates are sold under the terms of a Mortgage Participation Certificate
Agreement. A FHLMC Certificate may be issued under either FHLMC's Cash Program
or Guarantor Program.
Unless otherwise described in the Prospectus Supplement, Mortgage loans
underlying the FHLMC Certificates held by a Trust Fund will consist of mortgage
loans with original terms to maturity of between 10 and 30 years. Each such
mortgage loan must meet the applicable standards set forth in the FHLMC Act. A
FHLMC Certificate group may include whole loans, participation interests in
whole loans and undivided interests in whole loans and/or participations
comprising another FHLMC Certificate group. Under the Guarantor Program, any
such FHLMC Certificate group may include only whole loans or participation
interests in whole loans.
FHLMC guarantees to each registered holder of a FHLMC Certificate the
timely payment of interest on the underlying mortgage loans to the extent of
the applicable Certificate rate on the registered holder's pro rata share of
the unpaid principal balance outstanding on the underlying mortgage loans in
the FHLMC Certificate group represented by such FHLMC Certificate, whether or
not received. FHLMC also guarantees to each registered holder of a FHLMC
Certificate collection by such holder of all principal on the underlying
mortgage loans, without any offset or deduction, to the extent of such holder's
pro rata share thereof, but does not, except if and to the extent specified in
the Prospectus Supplement for a Series of Certificates, guarantee the timely
payment of scheduled principal. Under FHLMC's Gold PC Program, FHLMC guarantees
the timely payment of principal based on the difference between the pool
factor, published in the month preceding the month of distribution and the pool
factor published in such month of distribution. Pursuant to its guarantees,
FHLMC indemnifies holders of FHLMC Certificates against any diminution in
principal by reason of charges for property repairs, maintenance and
foreclosure. FHLMC may remit the amount due on account of its guarantee of
collection of principal at any time after default on an underlying mortgage
loan, but not later than (i) 30 days following foreclosure sale, (ii) 30 days
following payment of the claim by any mortgage insurer, or (iii) 30 days
following the expiration of any right of redemption, whichever occurs later,
but in any event no later than one year after demand has been made upon the
mortgagor for accelerated payment of principal. In taking actions regarding the
collection of principal after default on the mortgage loans underlying FHLMC
Certificates, including the timing of demand for acceleration, FHLMC reserves
the right to exercise its judgment with respect to the mortgage loans in the
same manner as for mortgage loans which it has purchased but not sold. The
length of time
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necessary for FHLMC to determine that a mortgage loan should be accelerated
varies with the particular circumstances of each mortgagor, and FHLMC has not
adopted standards which require that the demand be made within any specified
period.
FHLMC Certificates are not guaranteed by the United States or by any
Federal Home Loan Bank and do not constitute debts or obligations of the United
States or any Federal Home Loan Bank. The obligations of FHLMC under its
guarantee are obligations solely of FHLMC and are not backed by, nor entitled
to, the full faith and credit of the United States. If FHLMC were unable to
satisfy such obligations, distributions to holders of FHLMC Certificates would
consist solely of payments and other recoveries on the underlying mortgage
loans and, accordingly, monthly distributions to holders of FHLMC Certificates
would be affected by delinquent payments and defaults on such mortgage loans.
Registered holders of FHLMC Certificates are entitled to receive their
monthly pro rata share of all principal payments on the underlying mortgage
loans received by FHLMC, including any scheduled principal payments, full and
partial repayments of principal and principal received by FHLMC by virtue of
condemnation, insurance, liquidation or foreclosure, and repurchases of the
mortgage loans by FHLMC or the seller thereof. FHLMC is required to remit each
registered FHLMC Certificateholder's pro rata share of principal payments on
the underlying mortgage loans, interest at the FHLMC pass-through rate and any
other sums such as prepayment fees, within 60 days of the date on which such
payments are deemed to have been received by FHLMC.
Under FHLMC's Cash Program, interest rates on the mortgage loans
underlying a FHLMC Certificate may exceed the pass-through rate on the FHLMC
Certificate by 50 to 100 basis points. Under such program, FHLMC purchases
groups of whole mortgage loans from sellers at specified percentages of their
unpaid principal balances, adjusted for accrued or prepaid interest, which when
applied to the interest rate of the mortgage loans and participations
purchased, results in the yield (expressed as a percentage) required by FHLMC.
The required yield, which includes a minimum servicing fee retained by the
servicer, is calculated using the outstanding principal balance. The range of
interest rates on the mortgage loans and participations in a FHLMC Certificate
group under the Cash Program will vary since mortgage loans and participations
are purchased and assigned to a FHLMC Certificate group based upon their yield
to FHLMC rather than on the interest rate on the underlying mortgage loans.
Under FHLMC's Guarantor Program, the pass-through rate on a FHLMC Certificate
is established based upon the lowest interest rate on the underlying mortgage
loans, minus a minimum servicing fee and the amount of FHLMC's management and
guaranty income as agreed upon between the seller and FHLMC.
FHLMC Certificates duly presented for registration of ownership on or
before the last business day of a month are registered effective as of the
first day of the month. The first remittance to a registered holder of a FHLMC
Certificate will be distributed so as to be received normally by the 15th day
of the second month following the month in which the purchaser became a
registered holder of the FHLMC Certificates. Thereafter, such remittance will
be distributed monthly to the registered holder so as to be received normally
by the 15th day of each month. The Federal Reserve Bank of New York maintains
book-entry accounts with respect to FHLMC Certificates sold by FHLMC on or
after January 2, 1985, and makes payments of principal and interest each month
to the registered holders thereof in accordance with such holders'
instructions.
STRIPPED MORTGAGE-BACKED SECURITIES. Agency Securities may consist of one
or more stripped mortgage-backed securities, each as described herein and in
the related Prospectus Supplement. Each such Agency Security will represent an
undivided interest in all or part of either the principal distributions (but
not the interest distributions) or the interest distributions (but not the
principal distributions), or in some specified portion of the principal and
interest distributions (but not all of such distributions) on certain FHLMC,
FNMA, GNMA or other government agency or government-sponsored agency
Certificates. The underlying securities will be held under a trust agreement by
FHLMC, FNMA, GNMA or another government agency or government-sponsored agency,
each as trustee, or by another trustee named in the related Prospectus
Supplement. FHLMC, FNMA, GNMA or another government agency or
government-sponsored agency will guarantee each stripped Agency Security to the
same extent as such entity guarantees the underlying securities backing such
stripped Agency Security, unless otherwise specified in the related Prospectus
Supplement.
OTHER AGENCY SECURITIES. If specified in the related Prospectus
Supplement, a Trust Fund may include other mortgage pass-through certificates
issued or guaranteed by GNMA, FNMA, FHLMC or other government
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agencies or government-sponsored agencies. The characteristics of any such
mortgage pass-through certificates will be described in such Prospectus
Supplement. If so specified, a combination of different types of Agency
Securities may be held in a Trust Fund.
PRIVATE MORTGAGE-BACKED SECURITIES
GENERAL. Private Mortgage-Backed Securities may consist of (a) mortgage
pass-through certificates evidencing an undivided interest in a pool of
Mortgage Loans, or (b) collateralized mortgage obligations secured by Mortgage
Loans. Private Mortgage-Backed Securities will have been issued pursuant to a
PMBS agreement (the "PMBS Agreement"). The seller/servicer of the underlying
Mortgage Loans will have entered into the PMBS Agreement with the PMBS Trustee
under the PMBS Agreement. The PMBS Trustee or its agent, or a custodian, will
possess the Mortgage Loans underlying such Private Mortgage-Backed Security.
Mortgage Loans underlying a Private Mortgage-Backed Security will be serviced
by the PMBS Servicer directly or by one or more sub-servicers who may be
subject to the supervision of the PMBS Servicer. Unless otherwise described in
the Prospectus Supplement, the PMBS Servicer will be a FNMA or FHLMC approved
servicer and, if FHA Loans underlie the Private Mortgage-Backed Securities,
approved by the Department of Housing and Urban Development ("HUD") as an FHA
mortgagee.
The PMBS Issuer will be a financial institution or other entity engaged
generally in the business of mortgage lending or the acquisition of mortgage
loans, a public agency or instrumentality of a state, local or federal
government, or a limited purpose or other corporation organized for the purpose
of among other things, establishing trusts and acquiring and selling housing
loans to such trusts and selling beneficial interests in such trusts. If so
specified in the Prospectus Supplement, the PMBS Issuer may be an affiliate of
the Seller. The obligations of the PMBS Issuer will generally be limited to
certain representations and warranties with respect to the assets conveyed by
it to the related trust. Unless otherwise specified in the related Prospectus
Supplement, the PMBS Issuer will not have guaranteed any of the assets conveyed
to the related trust or any of the Private Mortgage-Backed Securities issued
under the PMBS Agreement. Additionally, although the Mortgage Loans underlying
the Private Mortgage-Backed Securities may be guaranteed by an agency or
instrumentality of the United States, the Private Mortgage-Backed Securities
themselves will not be so guaranteed.
Distributions of principal and interest will he made on the Private
Mortgage-Backed Securities on the dates specified in the related Prospectus
Supplement. The Private Mortgage-Backed Securities may be entitled to receive
nominal or no principal distributions or nominal or no interest distributions.
Principal and interest distributions will be made on the Private
Mortgage-Backed Securities by the PMBS Trustee or the PMBS Servicer. The PMBS
Issuer or the PMBS Servicer may have the right to repurchase assets underlying
the Private Mortgage-Backed Securities after a certain date or under other
circumstances specified in the related Prospectus Supplement.
UNDERLYING LOANS. The Mortgage Loans underlying the Private
Mortgage-Backed Securities may consist of fixed rate, level payment, fully
amortizing loans or graduated payment mortgage loans, buydown loans, adjustable
rate mortgage loans, or loans having balloon or other special payment features.
Such Mortgage Loans may be secured by single family property, multifamily
property, Manufactured Homes or by an assignment of the proprietary lease or
occupancy agreement relating to a specific dwelling within a Cooperative and
the related shares issued by such Cooperative. Except as otherwise specified in
the related Prospectus Supplement, (i) no Mortgage Loan will have had a
Loan-to-Value Ratio at origination in excess of 95%, (ii) each Single Family
Loan secured by a Mortgaged Property having a Loan-to-Value Ratio in excess of
80% at origination will be covered by a primary mortgage insurance policy until
the principal balance is reduced to 80%, (iii) each Mortgage Loan will have had
an original term to stated maturity of not less than 5 years and not more than
40 years, (iv) no Mortgage Loan that was more than 30 days delinquent more than
once in the past 12 months and will not be delinquent as of the Cut-off Date as
to the payment of principal or interest will have been eligible for inclusion
in the assets under the related PMBS Agreement, (v) each Mortgage Loan (other
than a Cooperative Loan) will be required to be covered by a standard hazard
insurance policy (which may be a blanket policy), and (vi) each Mortgage Loan
(other than a Cooperative Loan or a Contract secured by a Manufactured Home)
will be covered by a title insurance policy.
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CREDIT SUPPORT RELATING TO PRIVATE MORTGAGE-BACKED SECURITIES. Credit
support in the form of subordination of other private mortgage certificates
issued under the PMBS Agreement, reserve funds, insurance policies, letters of
credit, financial guaranty insurance policies, guarantees or other types of
credit support may be provided with respect to the Mortgage Loans underlying
the Private Mortgage-Backed Securities or with respect to the Private
Mortgage-Backed Securities themselves.
ADDITIONAL INFORMATION. The Prospectus Supplement for a Series for which
the Trust Fund includes Private Mortgage-Backed Securities will specify (i) the
aggregate approximate principal amount and type of the Private Mortgage-Backed
Securities to be included in the Trust Fund, (ii) certain characteristics of
the Mortgage Loans which comprise the underlying assets for the Private
Mortgage-Backed Securities including to the extent available (A) the payment
features of such Mortgage Loans, (B) the approximate aggregate principal
balance, if known, of underlying Mortgage Loans insured or guaranteed by a
governmental entity, (C) the servicing fee or range of servicing fees with
respect to the Mortgage Loans, and (D) the minimum and maximum stated
maturities of the underlying Mortgage Loans at origination, (iii) the maximum
original term-to-stated maturity of the Private Mortgage-Backed Securities,
(iv) the weighted average term-to-stated maturity of the Private Mortgage-Backed
Securities, (v) the pass-through or certificate rate of the Private
Mortgage-Backed Securities, (vi) the weighted average pass-through or
certificate rate of the Private Mortgage-Backed Securities, (vii) the PMBS
Issuer, the PMBS Servicer (if other than the PMBS Issuer) and the PMBS Trustee
for such Private Mortgage-Backed Securities, (viii) certain characteristics of
credit support, if any, such as reserve funds, insurance policies, letters of
credit or guarantees relating to the Mortgage Loans underlying the Private
Mortgage-Backed Securities or to such Private Mortgage-Backed Securities
themselves, (ix) the terms on which the underlying Mortgage Loans for such
Private Mortgage-Backed Securities may, or are required to, be purchased prior
to their stated maturity or the stated maturity of the Private Mortgage-Backed
Securities and (x) the terms on which Mortgage Loans may be substituted for
those originally underlying the Private Mortgage-Backed Securities.
SUBSTITUTION OF MORTGAGE ASSETS
If so provided in the related Prospectus Supplement, substitution of
Mortgage Assets will be permitted in the event of breaches of representations
and warranties with respect to any original Mortgage Asset or in the event the
documentation with respect to any Mortgage Asset is determined by the Trustee
to be incomplete. The period during which such substitution will be permitted
generally will be indicated in the related Prospectus Supplement. The related
Prospectus Supplement will describe any other conditions upon which Mortgage
Assets may be substituted for Mortgage Assets initially included in the Trust
Fund.
USE OF PROCEEDS
The Seller intends to use the net proceeds to be received from the sale
of the Certificates of each Series to repay short-term loans incurred to
finance the purchase of the Mortgage Assets related to such Certificates, to
acquire certain of the Mortgage Assets to be deposited in the related trust
Fund, and/or to pay other expenses connected with pooling Mortgage Assets and
issuing Certificates. Any amounts remaining after such payments may be used for
general corporate purposes. The Seller expects to sell Certificates in Series
from time to time.
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THE SELLER
Bear Stearns Mortgage Securities Inc., the Seller, is a Delaware
corporation organized on October 17, 1991 for the purpose of acquiring Mortgage
Assets and selling interests therein or bonds secured thereby. It is a wholly
owned subsidiary of Bear Stearns Mortgage Capital Corporation, a Delaware
corporation, and an affiliate of Bear, Stearns & Co. Inc. The Seller maintains
its principal office at 245 Park Avenue, New York, New York 10167. Its
telephone number is (212) 272-2000.
The Seller does not have, nor is it expected in the future to have, any
significant assets.
MORTGAGE LOAN PROGRAM
The Mortgage Loans will have been purchased by the Seller, either
directly or through affiliates, from Lenders. Unless otherwise specified in the
related Prospectus Supplement, the Mortgage Loans so acquired by the Seller
will have been originated in accordance with the underwriting criteria
specified below under "Underwriting Standards."
UNDERWRITING STANDARDS
Unless otherwise specified in the related Prospectus Supplement, each
Lender will represent and warrant that all Mortgage Loans originated and/or
sold by it to the Seller or one of its affiliates will have been underwritten
in accordance with standards consistent with those utilized by mortgage lenders
or manufactured home lenders generally during the period of origination. As to
any Mortgage Loan insured by the FHA or partially guaranteed by the VA, the
Lender will represent that it has complied with underwriting policies of the
FHA or the VA, as the case may be.
Underwriting standards are applied by or on behalf of a Lender to
evaluate the borrower's credit standing and repayment ability, and the value
and adequacy of the Mortgaged Property as collateral. In general, a prospective
borrower applying for a Single Family Loan or a Cooperative Loan or for
financing secured by a Manufactured Home is required to fill out a detailed
application designed to provide to the underwriting officer pertinent credit
information. As part of the description of the borrower's financial condition,
the borrower generally is required to provide a current list of assets and
liabilities and a statement of income and expenses, as well as an authorization
to apply for a credit report which summarizes the borrower's credit history
with local merchants and lenders and any record of bankruptcy. In most cases,
an employment verification is obtained from an independent source (typically
the borrower's employer) which verification reports the length of employment
with that organization, the current salary, and whether it is expected that the
borrower will continue such employment in the future. If a prospective borrower
is self-employed, the borrower may be required to submit copies of signed tax
returns. The borrower may also be required to authorize verification of
deposits at financial institutions where the borrower has demand or savings
accounts. Underwriting standards which pertain to the creditworthiness of
borrowers seeking Multifamily Loans will be described in the related Prospectus
Supplement.
In determining the adequacy of the Mortgaged Property as collateral, an
appraisal is made of each property considered for financing. The appraiser is
required to inspect the property and verify that it is in good condition and
that construction, if new, has been completed. With respect to Single Family
Loans, the appraisal is based on the market value of comparable homes, the
estimated rental income (if considered applicable by the appraiser) and the
cost of replacing the home. With respect to Cooperative Loans, the appraisal is
based on the market value of comparable units. With respect to Contracts, the
appraisal is based on recent sales of comparable Manufactured Homes and, when
deemed applicable, a replacement cost analysis based on the cost of a
comparable Manufactured Home. With respect to a Multifamily Loan, the appraisal
must specify whether an income analysis, a market analysis or a cost analysis,
was used. An appraisal employing the income approach to value analyzes a
multifamily project's cashflow, expenses, capitalization and other operational
information in determining the property's value. The market approach to value
focuses its analysis on the prices paid for the purchase of similar properties
in the multifamily project's area, with adjustments made for variations between
these other properties and the multifamily project being appraised. The cost
approach calls for the appraiser to make an estimate of land value and then
determine the current cost of reproducing the building less any accrued
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depreciation. In any case, the value of the property being financed, as
indicated by the appraisal, must be such that it currently supports, and is
anticipated to support in the future, the outstanding loan balance.
In the case of Single Family Loans, Cooperative Loans and Contracts, once
all applicable employment, credit and property information is received, a
determination generally is made as to whether the prospective borrower has
sufficient monthly income available (i) to meet the borrower's monthly
obligations on the proposed mortgage loan (determined on the basis of the
monthly payments due in the year of origination) and other expenses related to
the Mortgaged Property (such as property taxes and hazard insurance) and (ii)
to meet monthly housing expenses and other financial obligations and monthly
living expenses. The underwriting standards applied by Lenders may be varied in
appropriate cases where factors such as low Loan-to-Value Ratios or other
favorable credit factors exist.
A Lender may originate Mortgage Loans under a reduced documentation
program. A reduced documentation program is designed to facilitate the loan
approval process and thereby improve the Lender's competitive position among
other loan originators. Under a reduced documentation program, relatively more
emphasis is placed on property underwriting than on credit underwriting and
certain credit underwriting documentation concerning income and employment
verification is waived.
In the case of a Single Family or Multifamily Loan secured by a leasehold
interest in a real property, the title to which is held by a third party
lessor, the Lender will represent and warrant, among other things, that the
remaining term of the lease and any sublease is at least five years longer than
the remaining term of the Mortgage Loan.
Certain of the types of Mortgage Loans which may be included in the
Mortgage Pools are recently developed and may involve additional uncertainties
not present in traditional types of loans. For example, certain of such
Mortgage Loans may provide for escalating or variable payments by the mortgagor
or obligor. These types of Mortgage Loans are underwritten on the basis of a
judgment that mortgagors or obligors will have the ability to make monthly
payments required initially. In some instances, however, a mortgagor's or
obligor's income may not be sufficient to permit continued loan payments as
such payments increase.
QUALIFICATIONS OF LENDERS
Unless otherwise specified in the related Prospectus Supplement, each
Lender will be required to satisfy the qualifications set forth herein. Each
Lender must be an institution experienced in originating and servicing Mortgage
Loans of the type contained in the related Mortgage Pool in accordance with
accepted practices and prudent guidelines, and must maintain satisfactory
facilities to originate and service those Mortgage Loans. Unless otherwise
specified in the Prospectus Supplement, each Lender must be a seller/servicer
approved by either FNMA or FHLMC, and each Lender must be a mortgagee approved
by the HUD or an institution the deposit accounts in which are insured by the
Federal Deposit Insurance Corporation (the "FDIC").
REPRESENTATIONS BY LENDERS; REPURCHASES
Unless otherwise specified in the related Prospectus Supplement or
Agreement, each Lender will have made representations and warranties in respect
of the Mortgage Loans sold by such Lender and evidenced by a Series of
Certificates. Such representations and warranties generally include, among
other things: (i) that title insurance (or in the case of Mortgaged Properties
located in areas where such policies are generally not available, an attorney's
certificate of title) in the case of Single Family Loans and Multifamily Loans
and any required hazard insurance policy was in effect on the date of purchase
of the Mortgage Loan from the Lender by or on behalf of the Seller; (ii) that
the Lender had title to each such Mortgage Loan and such Mortgage Loan was
subject to no offsets, defenses or counterclaims; (iii) that each Mortgage Loan
constituted a valid first lien on, or a perfected security interest with
respect to, the Mortgaged Property (subject only to permissible title insurance
exceptions, if applicable, and certain other exceptions described in the
Agreement) and that the Mortgaged Property was free from damage and was in good
repair; (iv) that there were no delinquent tax or assessment liens against the
Mortgaged Property, (v) that no required payment on a Mortgage Loan was more
than thirty days delinquent; and (vi) that each Mortgage Loan was made in
compliance with, and is enforceable under, all applicable state and federal
laws and regulations in all material respects.
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Unless otherwise specified in the related Prospectus Supplement, all of
the representations and warranties of a Lender in respect of a Mortgage Loan
will have been made as of the date on which such Lender sold the Mortgage Loan
to the Seller or one of its affiliates. A substantial period of time may have
elapsed between such date and the date of initial issuance of the Series of
Certificates evidencing an interest in such Mortgage Loan. Since the
representations and warranties of a Lender do not address events that may occur
following the sale of a Mortgage Loan by such Lender, its repurchase obligation
described below will not arise if the relevant event that would otherwise have
given rise to such an obligation with respect to a Mortgage Loan occurs after
the date of sale of such Mortgage Loan by such Lender to the Seller or its
affiliates. If the Master Servicer is also a Lender with respect to a
particular Series, such representations will be in addition to the
representations and warranties, if any, made by the Master Servicer in its
capacity as a Master Servicer.
Unless otherwise specified in the related Prospectus Supplement, the
Master Servicer or the Trustee, if the Master Servicer is the Lender, will
promptly notify the relevant Lender of any breach of any representation or
warranty made by it in respect of a Mortgage Loan which materially and
adversely affects the interests of the Certificateholders in such Mortgage
Loan. Unless otherwise specified in the related Prospectus Supplement, if such
Lender cannot cure such breach within 60 days after notice from the Master
Servicer or the Trustee, as the case may be, then such Lender will be obligated
to repurchase such Mortgage Loan from the Trust Fund at a price (the "Purchase
Price") equal to the unpaid principal balance thereof as of the date of the
repurchase plus accrued interest thereon to the first day of the month
following the month of repurchase at the Mortgage Rate (less any amount payable
as related servicing compensation if the Lender is the Master Servicer) or such
other price as may be described in the related Prospectus Supplement. Except in
those cases in which the Master Servicer is the Lender, the Master Servicer
will be required under the applicable Agreement to enforce this obligation for
the benefit of the Trustee and the holders of the Certificates, following the
practices it would employ in its good faith business judgment were it the owner
of such Mortgage Loan. This repurchase obligation will constitute the sole
remedy available to holders of Certificates or the Trustee for a breach of
representation by a Lender. Certain rights of substitution for defective
Mortgage Loans may be provided with respect to a Series in the related
Prospectus Supplement.
Neither the Seller nor the Master Servicer (unless the Master Servicer is
the Lender) will be obligated to purchase a Mortgage Loan if a Lender defaults
on its obligation to do so, and no assurance can be given that Lenders will
carry out their respective repurchase obligations with respect to Mortgage
Loans. However, to the extent that a breach of a representation and warranty of
a Lender may also constitute a breach of a representation made by the Master
Servicer, the Master Servicer may have a repurchase obligation as described
below under "The Pooling and Servicing Agreement -- Assignment of Mortgage
Assets."
If specified in the related Prospectus Supplement, the Lender may have
acquired the Mortgage Loans from a third party which made certain
representations and warranties to the Lender as of the time of the sale to the
Lender. In lieu of representations and warranties made by the Lender as of the
time of the sale to the Seller, the Lender may assign the representations and
warranties from the third party to the Seller, which will assign them to the
Trustee on behalf of the Certificateholders. In such cases, the third party
will be obligated to purchase a Mortgage Loan upon a breach of such
representations and warranties, and the Lender will not be obligated to
purchase a Mortgage Loan if the third party defaults on its obligation to do
so.
The Lender and any third party which conveyed the Mortgage Loans to the
Lender may experience financial difficulties and in some instances may enter
into insolvency proceedings. As a consequence, the Lender or such third party
may be unable to perform its repurchase obligations with respect to the
Mortgage Loans. Any arrangements for the assignment of representations and the
repurchase of Mortgage Loans must be acceptable to the Rating Agency rating the
related Certificates.
OPTIONAL PURCHASE OF DEFAULTED LOANS
If specified in the related Prospectus Supplement, the Master Servicer
may, at its option, purchase from the Trust Fund any Mortgage Loan which is
delinquent in payment by 91 days or more. Any such purchase shall be at such
price as may be described in the related Prospectus Supplement.
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DESCRIPTION OF THE CERTIFICATES
Each Series of Certificates will be issued pursuant to an Agreement,
dated as of the related Cut-off Date, among the Seller, one or more Master
Servicers and the Trustee for the benefit of the holders of the Certificates of
such Series. The provisions of each Agreement will vary depending upon the
nature of the Certificates to be issued thereunder and the nature of the
related Trust Fund. A form of an Agreement is an exhibit to the Registration
Statement of which this Prospectus is a part. The following summaries describe
certain provisions which may appear in each Agreement. The Prospectus
Supplement for a Series of Certificates will describe any provision of the
Agreement relating to such Series that materially differs from the description
thereof contained in this Prospectus. The summaries do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all of the provisions of the Agreement for each Series of Certificates and
the applicable Prospectus Supplement. The Seller will provide a copy of the
Agreement (without exhibits) relating to any Series without charge upon written
request of a holder of a Certificate of such Series addressed to Bear Stearns
Mortgage Securities Inc., 245 Park Avenue, New York, New York 10167.
GENERAL
Unless otherwise specified in the Prospectus Supplement, the Certificates
of each Series will be issued in fully registered form only, in the
denominations specified in the related Prospectus Supplement, will evidence
specified beneficial ownership interests in the related Trust Fund created
pursuant to each Agreement and will not be entitled to payments in respect of
the Mortgage Assets included in any other Trust Fund established by the Seller.
The Certificates will not represent obligations of the Seller or any affiliate
of the Seller. The Mortgage Loans will not be insured or guaranteed by any
governmental entity or other person, unless otherwise specified in the
Prospectus Supplement. Each Trust Fund will consist of, to the extent provided
in the Agreement, (i) the Mortgage Assets, as from time to time are subject to
the related Agreement (exclusive of any amounts specified in the Prospectus
Supplement ("Retained Interest"), (ii) such assets as from time to time are
required to be deposited in the related Protected Account, Certificate Account
or any other accounts established pursuant to the Agreement (collectively, the
"Accounts"); (iii) property which secured a Mortgage Loan and which is acquired
on behalf of the Certificateholders by foreclosure or deed in lieu of
foreclosure and (iv) any Primary Insurance Policies, FHA insurance (the "FHA
Insurance"), VA guarantees (the "VA Guarantees"), other insurance policies or
other forms of credit enhancement required to be maintained pursuant to the
Agreement. If so specified in the related Prospectus Supplement, a Trust Fund
may include one or more of the following: reinvestment income on payments
received on the Mortgage Assets, a reserve fund, a mortgage pool insurance
policy, a special hazard insurance policy, a bankruptcy bond, one or more
letters of credit, a financial guaranty insurance policy, third party
guarantees or similar instruments or other agreements. If provided in the
related Agreement, a certificate administrator may be obligated to perform
certain duties in connection with the administration of the Certificates.
Each Series of Certificates will be issued in one or more classes. Each
class of Certificates of a Series will evidence beneficial ownership of a
specified percentage (which may be 0%) or portion of future interest payments
and a specified percentage (which may be 0%) or portion of future principal
payments on the Mortgage Assets in the related Trust Fund. A Series of
Certificates may include one or more classes that receive certain preferential
treatment with respect to one or more other classes of Certificates of such
Series. Certain Series or classes of Certificates may he covered by insurance
policies or other forms of credit enhancement, in each case as described herein
and in the related Prospectus Supplement. Distributions on one or more classes
of a Series of Certificates may be made prior to one or more other classes,
after the occurrence of specified events, in accordance with a schedule or
formula, on the basis of collections from designated portions of the Mortgage
Assets in the related Trust Fund or on a different basis, in each case, as
specified in the related Prospectus Supplement. The timing and amounts of such
distributions may vary among classes or over time as specified in the related
Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement,
distributions of principal and interest (or, where applicable, of principal
only or interest only) on the related Certificates will be made by the Trustee
on each Distribution Date (I.E, monthly, quarterly, semi-annually or at such
other intervals and on the dates as are specified in the Prospectus Supplement)
in proportion to the percentages specified in the related Prospectus
Supplement. Distributions will be made to the persons in whose names the
Certificates are registered at the close
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of business on the dates specified in the Prospectus Supplement (each, a
"Record Date"). Distributions will be made by check or money order mailed to
the persons entitled thereto at the address appearing in the register
maintained for holders of Certificates (the "Certificate Register") or, if
specified in the related Prospectus Supplement, in the case of Certificates
that are of a certain minimum denomination, upon written request by the
Certificateholder, by wire transfer or by such other means as are described
therein; provided, however, that the final distribution in retirement of the
Certificates will be made only upon presentation and surrender of the
Certificates at the office or agency of the Trustee or other person specified
in the notice to Certificateholders of such final distribution.
The Certificates will be freely transferable and exchangeable at the
Corporate Trust Office of the Trustee as set forth in the related Prospectus
Supplement. No service charge will be made for any registration of exchange or
transfer of Certificates of any Series but the Trustee may require payment of a
sum sufficient to cover any related tax or other governmental charge.
DISTRIBUTIONS ON CERTIFICATES
GENERAL. In general, the method of determining the amount of
distributions on a particular Series of Certificates will depend on the type of
credit support, if any, that is used with respect to such Series. See "Credit
Enhancement." Set forth below are descriptions of various methods that may be
used to determine the amount of distributions on the Certificates of a
particular Series. The Prospectus Supplement for each Series of Certificates
will describe the method to be used in determining the amount of distributions
on the Certificates of such Series.
Distributions allocable to principal and interest on the Certificates
will be made by the Trustee out of, and only to the extent of, funds in the
related Certificate Account, including any funds transferred from any Reserve
Account and funds received as a result of credit enhancement. As between
Certificates of different classes and as between distributions of interest and
principal and, if applicable, between distributions of prepayments of principal
and scheduled payments of principal, distributions made on any Distribution
Date will be applied as specified in the Prospectus Supplement. Unless
otherwise specified in the Prospectus Supplement, distributions to any class of
Certificates will be made pro rata to all Certificateholders of that class.
AVAILABLE FUNDS. All distributions on the Certificates of each Series on
each Distribution Date will be made from the Available Funds described below,
in accordance with the terms described in the related Prospectus Supplement and
specified in the Agreement. Unless otherwise provided in the related Prospectus
Supplement, "Available Funds" for each Distribution Date will equal the sum of
the following amounts:
(i) the aggregate of all previously undistributed payments on
account of principal (including principal prepayments, if any, and
prepayment penalties, if so provided in the related Prospectus
Supplement) and interest on the Mortgage Loans in the related Trust Fund
received by the Master Servicer after the Cut-off Date and on or prior to
the day of the month of the related Distribution Date specified in the
Prospectus Supplement (the "Determination Date") except:
(a) all payments which were due on or before the Cut-off
Date;
(b) all Liquidation Proceeds, all Insurance Proceeds, all
Principal Prepayments (each defined herein) and all proceeds of any
Mortgage Loan purchased by a Lender or any other entity pursuant to
the Agreement that were received after the prepayment period
specified in the Prospectus Supplement and all related payments of
interest representing interest for any period after such prepayment
period;
(c) all scheduled payments of principal and interest due on a
date or dates subsequent to the first day of the month of
distribution;
(d) amounts received on particular Mortgage Loans as late
payments of principal or interest or other amounts required to be
paid by the mortgagors (the "Mortgagors"), but only to the extent
of any unreimbursed advance in respect thereof made by the Master
Servicer (including the related Sub-Servicers);
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(e) amounts representing reimbursement, to the extent
permitted by the Agreement and as described under "Advances" below,
for advances made by the Master Servicer and advances made by
Sub-Servicers that were deposited into the Certificate Account, and
amounts representing reimbursement for certain other losses and
expenses incurred by the Master Servicer or the Seller and
described below or in the related Agreement; and
(f) that portion of each collection of interest on a
particular Mortgage Loan in such Trust Fund which represents
servicing compensation payable to the Master Servicer or Retained
Interest which is to be retained from such collection or is
permitted to be retained from related Insurance Proceeds,
Liquidation Proceeds or proceeds of Mortgage Loans purchased
pursuant to the Agreement;
(ii) the amount of any advance made by the Master Servicer
(including Sub-Servicers) as described under "Advances" below and
deposited by it in the Certificate Account; and
(iii) if applicable, amounts withdrawn from a Reserve Account or
received in connection with other credit support.
DISTRIBUTIONS OF INTEREST. Unless otherwise specified in the Prospectus
Supplement, interest will accrue on the aggregate Current Principal Amount
(defined herein) (or, in the case of Certificates entitled only to
distributions allocable to interest, the aggregate notional principal balance)
of each class of Certificates entitled to interest from the date, at the
Pass-Through Rate and for the periods specified in the Prospectus Supplement.
To the extent funds are available therefor, interest accrued during each such
specified period on each class of Certificates entitled to interest (other than
a class of Certificates that provides for interest that accrues, but is not
currently payable, referred to hereafter as "Accrual Certificates") will be
distributable on the Distribution Dates specified in the Prospectus Supplement
until the aggregate Current Principal Amount of the Certificates of such class
has been distributed in full or, in the case of Certificates entitled only to
distributions allocable to interest, until the aggregate notional principal
balance of such Certificates is reduced to zero or for the period of time
designated in the Prospectus Supplement. The original Current Principal Amount
of each Certificate will equal the aggregate distributions allocable to
principal to which such Certificate is entitled. Unless otherwise specified in
the Prospectus Supplement, distributions allocable to interest on each
Certificate that is not entitled to distributions allocable to principal will
be calculated based on the notional principal balance of such Certificate. The
notional principal balance of a Certificate will not evidence an interest in or
entitlement to distributions allocable to principal but will be used solely for
convenience in expressing the calculation of interest and for certain other
purposes.
With respect to any class of Accrual Certificates, if specified in the
Prospectus Supplement, any interest that has accrued but is not paid on a given
Distribution Date will be added to the aggregate Current Principal Amount of
such class of Certificates on that Distribution Date. Unless otherwise
specified in the Prospectus Supplement, distributions of interest on each class
of Accrual Certificates will commence only after the occurrence of the events
specified in the Prospectus Supplement. Unless otherwise specified in the
Prospectus Supplement, prior to such time, the beneficial ownership interest of
such class of Accrual Certificates in the Trust Fund, as reflected in the
aggregate Current Principal Amount of such class of Accrual Certificates, will
increase on each Distribution Date by the amount of interest that accrued on
such class of Accrual Certificates during the preceding interest accrual period
but that was not required to be distributed to such class on such Distribution
Date. Any such class of Accrual Certificates will thereafter accrue interest on
its outstanding Current Principal Amount as so adjusted.
DISTRIBUTIONS OF PRINCIPAL. Unless otherwise specified in the Prospectus
Supplement, the aggregate "Current Principal Amount" of any class of
Certificates entitled to distributions of principal will be the aggregate
original Current Principal Amount of such class of Certificates specified in
the Prospectus Supplement, reduced by all distributions and losses reported to
the holders of such Certificates as allocable to principal, and, in the case of
Accrual Certificates, unless otherwise specified in the Prospectus Supplement,
increased by all interest accrued but not then distributable on such Accrual
Certificates. The Prospectus Supplement will specify the method by which the
amount of principal to be distributed on the Certificates on each Distribution
Date will be calculated and the manner in which such amount will be allocated
among the classes of Certificates entitled to distributions of principal.
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If so provided in the Prospectus Supplement, one or more classes of
Senior Certificates will be entitled to receive all or a disproportionate
percentage of the payments of principal which are received from borrowers in
advance of their scheduled due dates and are not accompanied by amounts
representing scheduled interest due after the month of such payments
("Principal Prepayments") in the percentages and under the circumstances or for
the periods specified in the Prospectus Supplement. Any such allocation of
Principal Prepayments to such class or classes of Certificateholders will have
the effect of accelerating the amortization of such Senior Certificates while
increasing the interests evidenced by the Subordinated Certificates in the
Trust Fund. Increasing the interests of the Subordinated Certificates relative
to that of the Senior Certificates is intended to preserve the availability of
the subordination provided by the Subordinated Certificates. See "Credit
Enhancement-Subordination."
UNSCHEDULED DISTRIBUTIONS. If specified in the Prospectus Supplement, the
Certificates will be subject to receipt of distributions before the next
scheduled Distribution Date under the circumstances and in the manner described
below and in the Prospectus Supplement. If applicable, the Trustee will be
required to make such unscheduled distributions on the day and in the amount
specified in the Prospectus Supplement if, due to substantial payments of
principal (including Principal Prepayments) on the Mortgage Assets, low rates
then available for reinvestment of such payments or both, the Trustee or the
Master Servicer determines, based on the assumptions specified in the
Agreement, that the amount anticipated to be on deposit in the Certificate
Account on the next Distribution Date, together with, if applicable, any
amounts available to be withdrawn from any Reserve Account, may be insufficient
to make required distributions on the Certificates on such Distribution Date.
Unless otherwise specified in the Prospectus Supplement, the amount of any such
unscheduled distribution that is allocable to principal will not exceed the
amount that would otherwise have been required to be distributed as principal
on the Certificates on the next Distribution Date. Unless otherwise specified
in the Prospectus Supplement, all unscheduled distributions will include
interest at the applicable Pass-Through Rate (if any) on the amount of the
unscheduled distribution allocable to principal for the period and to the date
specified in the Prospectus Supplement.
Unless otherwise specified in the Prospectus Supplement, all
distributions allocable to principal in any unscheduled distribution will be
made in the same priority and manner as distributions of principal on the
Certificates would have been made on the next Distribution Date, and with
respect to Certificates of the same class, unscheduled distributions of
principal will be made on a pro rata basis. Notice of any unscheduled
distribution will be given by the Trustee prior to the date of such
distribution.
ADVANCES
Unless otherwise provided in the related Prospectus Supplement, the
Master Servicer will be required to advance on or before each Distribution Date
(from its own funds, funds advanced by Sub-Servicers or funds held in any of
the Accounts for future distributions to the holders of such Certificates), an
amount equal to the aggregate of payments of principal and interest that were
delinquent on the related Determination Date and were not advanced by any
Sub-Servicer, subject to the Master Servicer's determination that such advances
will be recoverable out of late payments by Mortgagors, Liquidation Proceeds,
Insurance Proceeds or otherwise with respect to the specific Mortgage Loan or,
if required by the applicable Rating Agency, with respect to any of the
Mortgage Loans.
In making advances, the Master Servicer will endeavor to maintain a
regular flow of scheduled interest and principal payments to holders of the
Certificates, rather than to guarantee or insure against losses. If advances
are made by the Master Servicer from cash being held for future distribution to
Certificateholders, the Master Servicer will replace such funds on or before
any future Distribution Date to the extent that funds in the applicable Account
on such Distribution Date would be less than the amount required to be
available for distributions to Certificateholders on such date. Any Master
Servicer funds advanced will be reimbursable to the Master Servicer out of
recoveries on the specific Mortgage Loans with respect to which such advances
were made (E.G., late payments made by the related Mortgagor, any related
Insurance Proceeds, Liquidation Proceeds or proceeds of any Mortgage Loan
purchased by a Lender under the circumstances described hereinabove). Advances
by the Master Servicer (and any advances by a Sub-Servicer) also will be
reimbursable to the Master Servicer (or Sub-Servicer) from cash otherwise
distributable to Certificateholders (including the holders of Senior
Certificates) at such time as the Master Servicer determines that any such
advances previously made are not
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ultimately recoverable from the proceeds with respect to the specific Mortgage
Loan or, if required by the applicable Rating Agency, at such time as a loss is
realized with respect to a specific Mortgage Loan. The Master Servicer also
will be obligated to make advances, to the extent recoverable out of Insurance
Proceeds, Liquidation Proceeds or otherwise, in respect of certain taxes and
insurance premiums not paid by Mortgagors on a timely basis. Funds so advanced
are reimbursable to the Master Servicer to the extent permitted by the
Agreement. If specified in the related Prospectus Supplement, the obligations
of the Master Servicer to make advances may be supported by a cash advance
reserve fund, a surety bond or other arrangement, in each case as described in
such Prospectus Supplement.
REPORTS TO CERTIFICATEHOLDERS
Prior to or concurrently with each distribution on a Distribution Date
and except as otherwise set forth in an applicable Prospectus Supplement or
Agreement, the Master Servicer or the Trustee will furnish to each
Certificateholder of record of the related Series a statement setting forth, to
the extent applicable or material to such Series of Certificates, among other
things:
(i) the amount of such distribution allocable to principal,
separately identifying the aggregate amount of any Principal Prepayments
and if so specified in the related Prospectus Supplement, prepayment
penalties included therein;
(ii) the amount of such distribution allocable to interest;
(iii) the amount of any advance by the Master Servicer;
(iv) the aggregate amount (a) otherwise allocable to the
Subordinated Certificateholders on such Distribution Date, and (b)
withdrawn from the Reserve Fund, if any, that is included in the amounts
distributed to the Senior Certificateholders;
(v) the outstanding Current Principal Amount or notional principal
balance of such class after giving effect to the distribution of
principal on such Distribution Date;
(vi) if applicable, the percentage of principal payments on the
Mortgage Loans, if any, which such class will be entitled to receive on
the following Distribution Date;
(vii) unless the Pass-Through Rate is a fixed rate, the
Pass-Through Rate applicable to the distribution on the Distribution
Date;
(viii) the number and aggregate principal balances of Mortgage
Loans in the related Mortgage Pool delinquent (a) one month and (b) two
or more months;
(ix) the book value of any real estate acquired through foreclosure
or grant of a deed in lieu of foreclosure, and if such real estate
secured a Multifamily Loan, such additional information as may be
specified in the related Prospectus Supplement; and
(x) if applicable, the amount remaining in any Reserve Account or
the amount remaining of any other credit support, after giving effect to
the distribution on the Distribution Date.
Where applicable, any amount set forth above may be expressed as a dollar
amount per single Certificate of the relevant class having a denomination or
interest specified in the related Prospectus Supplement or the report to
Certificateholders. The report to Certificateholders for any Series of
Certificates may include additional or other information of a similar nature to
that specified above.
In addition, within a reasonable period of time after the end of each
calendar year, the Master Servicer or the Trustee will mail to each
Certificateholder of record at any time during such calendar year a report (a)
as to the aggregate of amounts reported pursuant to (i) and (ii) for such
calendar year and (b) such other customary information as may be deemed
necessary or desirable for Certificateholders to prepare their tax returns.
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BOOK-ENTRY REGISTRATION
If so specified in the related Prospectus Supplement, a class of
Certificates initially may be represented by one or more certificates
registered in the name of Cede & Co. ("Cede"), the nominee for The Depository
Trust Company ("DTC"). 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 New York Uniform Commercial
Code ("UCC") and a "clearing agency" registered pursuant to the provisions of
Section 17A of the Securities Exchange Act of 1934, as amended. 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 certificates. 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 brokers, dealers, banks and
trust companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("Indirect Participant").
Certificateholders that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of Certificates
registered in the name of Cede, as nominee of DTC, may do so only through
Participants and Indirect Participants. In addition, such Certificateholders
will receive all distributions of principal of and interest on the Certificates
from the Trustee through DTC and its Participants. Under a book-entry format,
Certificateholders will receive payments after the related Distribution Date
because, while payments are required to be forwarded to Cede, 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
Certificateholders. Under a book-entry format, it is anticipated that the only
Certificateholder will be Cede, as nominee of DTC, and that the beneficial
holders of Certificates will not be recognized by the Trustee as
Certificateholders under the Agreement. The beneficial holders of such
Certificates will only be permitted to exercise the rights of
Certificateholders under the Agreement 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 Certificates and is
required to receive and transmit payments of principal of and interest of the
Certificates. Participants and Indirect Participants with which
Certificateholders have accounts with respect to the Certificates similarly are
required to make book-entry transfers and receive and transmit such payments on
behalf of their respective Certificateholders.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Certificateholder to pledge Certificates to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
Certificates may be limited due to the lack of a physical certificate for such
Certificates.
DTC in general advises that it will take any action permitted to be taken
by a Certificateholder under an Agreement only at the direction of one or more
Participants to whose account with DTC the Certificates are credited.
Additionally, DTC in general advises that it will take such actions with
respect to specified percentages of the Certificateholders only at the
direction of and on behalf of Participants whose holdings include current
principal amounts of outstanding Certificates that satisfy such specified
percentages. DTC may take conflicting actions with respect to other current
principal amounts of outstanding Certificates to the extent that such actions
are taken on behalf of Participants whose holdings include such current
principal amounts of outstanding Certificates.
Any Certificates initially registered in the name of Cede, as nominee of
DTC, will be issued in fully registered, certificated form to
Certificateholders or their nominees ("Definitive Certificates"), rather than
to DTC or its nominee only under the events specified in the related Agreement.
Such events may include the following: (i) the Seller advises the Trustee in
writing that DTC is no longer willing or able to properly discharge its
responsibilities as Depository with respect to the Certificates, and the
Trustee or the Seller is unable to locate a qualified successor, (ii) the
Seller, at its option, elects to terminate the book-entry system through DTC,
or (iii) after the occurrence of an Event of Default (defined herein),
Certificateholders representing not less than 50% of the aggregate Current
Principal Amount of the Certificates advise the Trustee and DTC through
Participants in writing that the continuation of a book-entry system through
DTC (or a successor thereto) is no longer
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in the best interest of the Certificateholders. Upon the occurrence of any of
the events specified in the related Agreement, DTC will be required to notify
all Participants of the availability through DTC of Definitive Certificates.
Upon surrender by DTC of the certificates representing the Certificates and
instruction for re-registration, the Trustee will issue the Certificates in the
form of Definitive Certificates, and thereafter the Trustee will recognize the
holders of such Definitive Certificates as Certificateholders. Thereafter,
payments of principal of and interest on the Certificates will be made by the
Trustee directly to Certificateholders in accordance with the procedures set
forth herein and in the Agreement. The final distribution of any Certificate
(whether Definitive Certificates or Certificates registered in the name of
Cede), however, will be made only upon presentation and surrender of such
Certificates on the final Distribution Date at such office or agency as is
specified in the notice of final payment to Certificateholders.
CREDIT ENHANCEMENT
GENERAL
Credit enhancement may be provided with respect to one or more classes of
a Series of Certificates or with respect to the Mortgage Assets in the related
Trust Fund. Credit enhancement may be in the form of (i) the subordination of
one or more classes of the Certificates of such Series, (ii) the use of a Pool
Insurance Policy, Special Hazard Insurance Policy, Bankruptcy Bond, FHA
Insurance, VA Guarantees, Reserve Accounts, a letter of credit, a limited
financial guaranty insurance policy, other third party guarantees, interest
rate or other swap agreements, caps, collars or floors, another method of
credit enhancement described in the related Prospectus Supplement, or the use
of a cross-support feature, or (iii) any combination of the foregoing. Unless
otherwise specified in the Prospectus Supplement, any credit enhancement will
not provide protection against all risks of loss and will not guarantee
repayment of the entire principal balance of the Certificates and interest
thereon. If losses occur which exceed the amount covered by credit enhancement
or which are not covered by the credit enhancement, holders of one or more
classes of Certificates will bear their allocable share of deficiencies. If a
form of credit enhancement applies to several classes of Certificates, and if
principal payments equal to the Current Principal Amounts of certain classes
will be distributed prior to such distributions to other classes, the classes
which receive such distributions at a later time are more likely to bear any
losses which exceed the amount covered by credit enhancement. Unless otherwise
specified in the Prospectus Supplement, coverage under any credit enhancement
may be canceled or reduced by the Master Servicer or the Seller if such
cancellation or reduction would not adversely affect the rating or ratings of
the related Certificates.
SUBORDINATION
If so specified in the Prospectus Supplement, distributions in respect of
scheduled principal, Principal Prepayments, interest or any combination thereof
that otherwise would have been payable to one or more classes of Subordinated
Certificates of a Series will instead be payable to holders of one or more
classes of Senior Certificates under the circumstances and to the extent
specified in the Prospectus Supplement. If specified in the Prospectus
Supplement, delays in receipt of scheduled payments on the Mortgage Loans and
losses on defaulted Mortgage Loans will be borne first by the various classes
of Subordinated Certificates and thereafter by the various classes of Senior
Certificates, in each case under the circumstances and subject to the
limitations specified in the Prospectus Supplement. The aggregate distributions
in respect of delinquent payments on the Mortgage Loans over the lives of the
Certificates or at any time, the aggregate losses in respect of defaulted
Mortgage Loans which must be borne by the Subordinated Certificates by virtue
of subordination and the amount of the distributions otherwise distributable to
the Subordinated Certificateholders that will be distributable to Senior
Certificateholders on any Distribution Date may be limited as specified in the
Prospectus Supplement. If aggregate distributions in respect of delinquent
payments on the Mortgage Loans or aggregate losses in respect of such Mortgage
Loans were to exceed the total amounts payable and available for distribution
to holders of Subordinated Certificates or, if applicable, were to exceed the
specified maximum amount, holders of Senior Certificates would experience
losses on the Certificates.
In addition to or in lieu of the foregoing, if so specified in the
Prospectus Supplement, all or any portion of distributions otherwise payable to
holders of Subordinated Certificates on any Distribution Date may
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instead be deposited into one or more Reserve Accounts established with the
Trustee. If so specified in the Prospectus Supplement, such deposits may be
made on each Distribution Date, on each Distribution Date for specified periods
or until the balance in the Reserve Account has reached a specified amount and,
following payments from the Reserve Account to holders of Senior Certificates
or otherwise, thereafter to the extent necessary to restore the balance in the
Reserve Account to required levels, in each case as specified in the Prospectus
Supplement. If so specified in the Prospectus Supplement, amounts on deposit in
the Reserve Account may be released to the holders of the class of Certificates
specified in the Prospectus Supplement at the times and under the circumstances
specified in the Prospectus Supplement.
If so specified in the Prospectus Supplement, the same class of
Certificates may be Senior Certificates with respect to certain types of
payments or certain types of losses or delinquencies and Subordinated
Certificates with respect to other types of payment or types of losses or
delinquencies. If specified in the Prospectus Supplement, various classes of
Senior Certificates and Subordinated Certificates may themselves be subordinate
in their right to receive certain distributions to other classes of Senior and
Subordinated Certificates, respectively, through a cross support mechanism or
otherwise.
As between classes of Senior Certificates and as between classes of
Subordinated Certificates, distributions may be allocated among such classes
(i) in the order of their scheduled final distribution dates, (ii) in
accordance with a schedule or formula, (iii) in relation to the occurrence of
events, or (iv) otherwise, in each case as specified in the Prospectus
Supplement.
POOL INSURANCE POLICIES
If specified in the Prospectus Supplement related to a Mortgage Pool of
Single Family Loans or Cooperative Loans, a separate Pool Insurance Policy will
be obtained for the Mortgage Pool and issued by the insurer (the "Pool
Insurer") named in such Prospectus Supplement. Each Pool Insurance Policy will,
subject to the limitations described below, cover loss by reason of default in
payment on Single Family Loans or Cooperative Loans in the Mortgage Pool in an
amount specified in such Prospectus Supplement. As more fully described below,
the Master Servicer will present claims thereunder to the Pool Insurer on
behalf of itself, the Trustee and the holders of the Certificates. The Mortgage
Pool Insurance Policies, however, are not blanket policies against loss, since
claims thereunder may only be made respecting particular defaulted Mortgage
Loans and only upon satisfaction of certain conditions precedent described
below. Unless otherwise specified in the Prospectus Supplement, a Pool
Insurance Policy will not cover losses due to a failure to pay or denial of a
claim under a Primary Insurance Policy.
Unless otherwise specified in the related Prospectus Supplement, each
Pool Insurance Policy will provide that no claims may be validly presented
unless (i) any required Primary Insurance Policy is in effect for the defaulted
Mortgage Loan and a claim thereunder has been submitted and settled; (ii)
hazard insurance on the related Mortgaged Property has been kept in force and
real estate taxes and other protection and preservation expenses have been
paid; (iii) if there has been physical loss or damage to the Mortgaged
Property, it has been restored to its physical condition (reasonable wear and
tear excepted) at the time of issuance of the policy; and (iv) the insured has
acquired good and merchantable title to the Mortgaged Property free and clear
of liens except certain permitted encumbrances. Upon satisfaction of these
conditions, the Pool Insurer will have the option either (a) to purchase the
Mortgaged Property at a price equal to the principal balance thereof plus
accrued and unpaid interest at the Mortgage Rate to the date of purchase and
certain expenses incurred by the Master Servicer on behalf of the Trustee and
Certificateholders, or (b) to pay the amount by which the sum of the principal
balance of the defaulted Mortgage Loan plus accrued and unpaid interest at the
Mortgage Rate to the date of payment of the claim and the aforementioned
expenses exceeds the proceeds received from an approved sale of the Mortgaged
Property, in either case net of certain amounts paid or assumed to have been
paid under the related Primary Insurance Policy. If any Mortgaged Property
securing a defaulted Mortgage Loan is damaged and proceeds, if any, from the
related hazard insurance policy or the applicable Special Hazard Insurance
Policy are insufficient to restore the damaged Mortgaged Property to a
condition sufficient to permit recovery under the Pool Insurance Policy, the
Master Servicer will not be required to expend its own funds to restore the
damaged Mortgaged Property unless it determines that (i) such restoration will
increase the proceeds to Certificateholders on liquidation of the Mortgage Loan
after reimbursement of the Master Servicer for its expenses and (ii) such
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expenses will be recoverable by it through proceeds of the sale of the
Mortgaged Property or proceeds of the related Pool Insurance Policy or any
related Primary Insurance Policy.
A Pool Insurance Policy generally will not insure (and many Primary
Insurance Policies do not insure) against loss sustained by reason of a default
arising from, among other things, (i) fraud or negligence in the origination or
servicing of a Mortgage Loan, including misrepresentation by the Mortgagor, the
originator or persons involved in the origination thereof, or (ii) failure to
construct a Mortgaged Property in accordance with plans and specifications. If
so specified in the related Prospectus supplement, an endorsement to the Pool
Insurance Policy, a bond or other credit support may cover fraud in connection
with the origination of Mortgage Loans. If so specified in the related
Prospectus Supplement, a failure of coverage attributable to an event specified
in clause (i) or (ii) above might result in a breach of the related Lender's
representations described above and, in such event, might give rise to an
obligation on the part of such Lender to purchase the defaulted Mortgage Loan
if the breach cannot be cured by such Lender. No Pool Insurance Policy will
cover (and many Primary Insurance Policies do not cover) a claim in respect of
a defaulted Mortgage Loan occurring when the servicer of such Mortgage Loan, at
the time of default or thereafter, was not approved by the applicable insurer.
Unless otherwise specified in the related Prospectus Supplement, the
original amount of coverage under each Pool Insurance Policy will be reduced
over the life of the related Certificates by the aggregate dollar amount of
claims paid less the aggregate of the net dollar amounts realized by the Pool
Insurer upon disposition of all foreclosed properties covered thereby. The
amount of claims paid will include certain expenses incurred by the Master
Servicer as well as accrued interest on delinquent Mortgage Loans to the date
of payment of the claim. Accordingly, if aggregate net claims paid under any
Pool Insurance Policy reach the original policy limit, coverage under that Pool
Insurance Policy will be exhausted and any further losses will be borne by the
Certificateholders.
The terms of any pool insurance policy relating to a pool of Contracts
will be described in the related Prospectus Supplement.
SPECIAL HAZARD INSURANCE POLICIES
If specified in the related Prospectus Supplement, a separate Special
Hazard Insurance Policy will be obtained for the Mortgage Pool and will be
issued by the insurer (the "Special Hazard Insurer") named in such Prospectus
Supplement. Each Special Hazard Insurance Policy will, subject to limitations
described below, protect holders of the related Certificates from (i) loss by
reason of damage to Mortgaged Properties caused by certain hazards (including
earthquakes and, to a limited extent, tidal waves and related water damage) not
insured against under the standard form of hazard insurance policy for the
respective states in which the Mortgaged Properties are located or under a
flood insurance policy if the Mortgaged Property is located in a federally
designated flood area, and (ii) loss caused by reason of the application of the
coinsurance clause contained in hazard insurance policies. See "The Pooling and
Servicing Agreement-Hazard Insurance". Each Special Hazard Insurance Policy
will not cover losses occasioned by war, civil insurrection, certain
governmental action, errors in design, faulty workmanship or materials (except
under certain circumstances), nuclear reaction, flood (if the Mortgaged
Property is located in a federally designated flood area), chemical
contamination and certain other risks. The amount of coverage under any Special
Hazard Insurance Policy will be specified in the related Prospectus Supplement.
Each Special Hazard Insurance Policy will provide that no claim may be paid
unless hazard and, if applicable, flood insurance on the property securing the
Mortgage Loan has been kept in force and other protection and preservation
expenses have been paid.
Subject to the foregoing limitations, each Special Hazard Insurance
Policy will provide that where there has been damage to property securing a
foreclosed Mortgage Loan (title to which has been acquired by the insured) and
to the extent such damage is not covered by the hazard insurance policy or
flood insurance policy, if any, maintained by the Mortgagor or the Master
Servicer, the Special Hazard Insurer will pay the lesser of (i) the cost of
repair or replacement of such property or (ii) upon transfer of the property to
the Special Hazard Insurer, the unpaid principal balance of such Mortgage Loan
at the time of acquisition of such property by foreclosure or deed in lieu of
foreclosure, plus accrued interest to the date of claim settlement and certain
expenses incurred by the Master Servicer with respect to such property. If the
unpaid principal balance of a Mortgage Loan plus accrued interest and certain
expenses is paid by the Special Hazard Insurer, the amount of further coverage
under the related Special Hazard Insurance Policy will be reduced by such
amount less any net proceeds from the sale of the property. Any amount paid as
the cost of repair of the property will further reduce
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coverage by such amount. So long as a Pool Insurance Policy remains in effect,
the payment by the Special Hazard Insurer of the cost of repair or of the
unpaid principal balance of the related Mortgage Loan plus accrued interest and
certain expenses will not affect the total insurance proceeds paid to
Certificateholders, but will affect the relative amounts of coverage remaining
under the related Special Hazard Insurance Policy.
Unless otherwise specified in the related Prospectus Supplement, since
each Special Hazard Insurance Policy will be designed to permit full recovery
under the Pool Insurance Policy in circumstances in which such recoveries would
otherwise be unavailable because property has been damaged by a cause not
insured against by a standard hazard policy and thus would not be restored,
each Agreement will provide that, if the related Pool Insurance Policy shall
have been terminated or been exhausted through payment of claims, the Master
Servicer will be under no further obligation to maintain such Special Hazard
Insurance Policy.
To the extent specified in the Prospectus Supplement, the Master Servicer
may deposit cash, an irrevocable letter of credit or any other instrument
acceptable to each nationally recognized rating agency rating the Certificates
of the related Series in a special trust account to provide protection in lieu
of or in addition to that provided by a Special Hazard Insurance Policy. The
amount of any Special Hazard Insurance Policy or of the deposit to the special
trust account in lieu thereof relating to such Certificates may be reduced so
long as any such reduction will not result in a downgrading of the rating of
such Certificates by any such rating agency.
The terms of any Special Hazard Insurance Policy relating to a pool of
Contracts will be described in the related Prospectus Supplement.
BANKRUPTCY BONDS
If specified in the related Prospectus Supplement, a Bankruptcy Bond for
proceedings under the federal Bankruptcy Code will be issued by an insurer
named in such Prospectus Supplement. Each Bankruptcy Bond will cover certain
losses resulting from a reduction by a bankruptcy court of scheduled payments
of principal and interest on a Mortgage Loan or a reduction by such court of
the principal amount of a Mortgage Loan and will cover certain unpaid interest
on the amount of such a principal reduction from the date of the filing of a
bankruptcy petition. The required amount of coverage under each Bankruptcy Bond
will be set forth in the related Prospectus Supplement. To the extent specified
in an applicable Prospectus Supplement, the Master Servicer may deposit cash,
an irrevocable letter of credit or any other instrument acceptable to each
nationally recognized rating agency rating the Certificates of the related
Series in the Trust Fund to provide protection in lieu of or in addition to
that provided by a Bankruptcy Bond. See "Certain Legal Aspects of the Mortgage
Loans -- Anti-Deficiency Legislation and Other Limitations on Lenders."
To the extent specified in the Prospectus Supplement, the Master Servicer
may deposit cash, an irrevocable letter of credit or any other instrument
acceptable to each nationally recognized rating agency rating the Certificates
of the related Series in a special trust account to provide protection in lieu
of or in addition to that provided by a Bankruptcy Bond. The amount of any
Bankruptcy Bond or of the deposit to the special trust account in lieu thereof
relating to such Certificates may be reduced so long as any such reduction will
not result in a downgrading of the rating of such Certificates by any such
rating agency.
The terms of any Bankruptcy Bond relating to a pool of Contracts will be
described in the related Prospectus Supplement.
FHA INSURANCE; VA GUARANTEES
Single Family Loans designated in the related Prospectus Supplement as
insured by the FHA will be insured by the FHA as authorized under the United
States Housing Act of 1937, as amended. Such Mortgage Loans will be insured
under various FHA programs including the standard FHA 203(b) program to finance
the acquisition of one- to four-family housing units and the FHA 245 graduated
payment mortgage program. These programs generally limit the principal amount
and interest rates of the mortgage loans insured. Single Family Loans insured
by the FHA generally require a minimum down payment of approximately 5% of the
original principal amount of the loan. No FHA-insured Single Family Loan
relating to a Series may have an interest rate or original principal amount
exceeding the applicable FHA limits at the time of origination of such loan.
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The insurance premiums for Single Family Loans insured by the FHA are
collected by lenders approved by HUD or by the Master Servicer or any
Sub-Servicers and are paid to the FHA. The regulations governing FHA
single-family mortgage insurance programs provide that insurance benefits are
payable either upon foreclosure (or other acquisition of possession) and
conveyance of the mortgaged premises to HUD or upon assignment of the defaulted
Mortgage Loan to HUD. With respect to a defaulted FHA-insured Single Family
Loan, the Master Servicer or any Sub-Servicer is limited in its ability to
initiate foreclosure proceedings. When it is determined, either by the Master
Servicer or any Sub-Servicer or HUD, that default was caused by circumstances
beyond the mortgagor's control, the Master Servicer or any Sub-Servicer is
expected to make an effort to avoid foreclosure by entering, if feasible, into
one of a number of available forms of forbearance plans with the mortgagor.
Such plans may involve the reduction or suspension of regular mortgage payments
for a specified period, with such payments to be made up on or before the
maturity date of the mortgage, or the recasting of payments due under the
mortgage up to or beyond the maturity date. In addition, when a default caused
by such circumstances is accompanied by certain other criteria, HUD may provide
relief by making payments to the Master Servicer or any Sub-Servicer in partial
or full satisfaction of amounts due under the Mortgage Loan (which payments are
to be repaid by the mortgagor to HUD) or by accepting assignment of the loan
from the Master Servicer or any Sub-Servicer. With certain exceptions, at least
three full monthly installments must be due and unpaid under the Mortgage Loan,
and HUD must have rejected any request for relief from the mortgagor before the
Master Servicer or any Sub-Servicer may initiate foreclosure proceedings.
HUD has the option, in most cases, to pay insurance claims in cash or in
debentures issued by HUD. Currently, claims are being paid in cash, and claims
have not been paid in debentures since 1965. HUD debentures issued in
satisfaction of FHA insurance claims bear interest at the applicable HUD
debenture interest rate. The Master Servicer or any Sub-Servicer of each
FHA-insured Single Family Loan will be obligated to purchase any such debenture
issued in satisfaction of such Mortgage Loan upon default for an amount equal
to the principal amount of any such debenture.
The amount of insurance benefits generally paid by the FHA is equal to
the entire unpaid principal amount of the defaulted Mortgage Loan adjusted to
reimburse the Master Servicer or Sub-Servicer for certain costs and expenses
and to deduct certain amounts received or retained by the Master Servicer or
Sub-Servicer after default. When entitlement to insurance benefits results from
foreclosure (or other acquisition of possession) and conveyance to HUD, the
Master Servicer or Sub-Servicer is compensated for no more than two-thirds of
its foreclosure costs, and is compensated for interest accrued and unpaid prior
to such date but in general only to the extent it was allowed pursuant to a
forbearance plan approved by HUD. When entitlement to insurance benefits
results from assignment of the Mortgage Loan to HUD, the insurance payment
includes full compensation for interest accrued and unpaid to the assignment
date. The insurance payment itself, upon foreclosure of an FHA-insured Single
Family Loan, bears interest from a date 30 days after the mortgagor's first
uncorrected failure to perform any obligation to make any payment due under the
Mortgage and, upon assignment, from the date of assignment, to the date of
payment of the claim, in each case at the same interest rate as the applicable
HUD debenture interest rate as described above.
Single Family Loans designated in the related Prospectus Supplement as
guaranteed by the VA will be partially guaranteed by the VA under the
Serviceman's Readjustment Act of 1944, as amended. The Serviceman's
Readjustment Act of 1944, as amended, permits a veteran (or in certain
instances the spouse of a veteran) to obtain a mortgage loan guarantee by the
VA covering mortgage financing of the purchase of a one- to four-family
dwelling unit at interest rates permitted by the VA. The program has no
mortgage loan limits, requires no down payment from the purchaser and permits
the guarantee of mortgage loans of up to 30 years' duration. However, no Single
Family Loan guaranteed by the VA will have an original principal amount greater
than five times the partial VA guarantee for such Mortgage Loan.
The maximum guarantee that may be issued by the VA under a VA-guaranteed
mortgage loan depends upon the original principal amount of the mortgage loan,
as further described in 38 United States Code Section 3703(a), as amended. As
of January 1, 1993, the maximum guarantee that may be issued by the VA under a
VA-guaranteed mortgage loan of more than $144,000 is the lesser of 25% of the
original principal amount of the mortgage loan and $46,000. The liability on
the guarantee is reduced or increased pro rata with any reduction or increase
in the amount of indebtedness, but in no event will the amount payable on the
guarantee exceed the amount of the original guarantee. The VA may, at its
option and without regard to the guarantee, make full payment to a mortgage
holder of unsatisfied indebtedness on a mortgage upon its assignment to the VA.
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With respect to a defaulted VA-guaranteed Single Family Loan, the Master
Servicer or Sub-Servicer is, absent exceptional circumstances, authorized to
announce its intention to foreclose only when the default has continued for
three months. Generally, a claim for the guarantee is submitted after
liquidation of the Mortgaged Property.
The amount payable under the guarantee will be the percentage of the
VA-insured Single Family Loan originally guaranteed applied to indebtedness
outstanding as of the applicable date of computation specified in the VA
regulations. Payments under the guarantee will be equal to the unpaid principal
amount of the loan, interest accrued on the unpaid balance of the loan to the
appropriate date of computation and limited expenses of the mortgagee, but in
each case only to the extent that such amounts have not been recovered through
liquidation of the Mortgaged Property. The amount payable under the guarantee
may in no event exceed the amount of the original guarantee.
FHA INSURANCE ON MULTIFAMILY LOANS
There are two primary FHA insurance programs that are available for
Multifamily Loans. Sections 221(d)(3) and (d)(4) of the Housing Act allow HUD
to insure mortgage loans that are secured by newly constructed and
substantially rehabilitated multifamily rental projects. Section 244 of the
Housing Act provides for co-insurance of such mortgage loans made under
Sections 221(d)(3) and (d)(4) by HUD/FHA and a HUD-approved co-insurer.
Generally the term of such a mortgage loan may be up to 40 years and the ratio
of loan amount to property replacement cost can be up to 90%.
Section 223(f) of the Housing Act allows HUD to insure mortgage loans
made for the purchase or refinancing of existing apartment projects which are
at least three years old. Section 244 also provides for co-insurance of
mortgage loans made under Section 223(f). Under Section 223(f), the loan
proceeds cannot be used for substantial rehabilitation work, but repairs may be
made for up to, in general, a dollar amount per apartment unit established from
time to time by HUD or, at the discretion of the Secretary of HUD, 25% of the
value of the property. In general the loan term may not exceed 35 years and a
loan to value ratio of no more than 85% is required for the purchase of a
project and 70% for the refinancing of a project.
FHA insurance is generally payable in cash or, at the option of the
mortgagee, in debentures. Such insurance does not cover 100% of the mortgage
loan but is instead subject to certain deductions and certain losses of
interest from the date of the default.
RESERVE ACCOUNTS
If specified in the Prospectus Supplement, cash, U.S. Treasury
securities, instruments evidencing ownership of principal or interest payments
thereon, demand notes, certificates of deposit or a combination thereof in the
aggregate amount specified in the Prospectus Supplement will be deposited by
the Master Servicer or Seller on the date specified in the Prospectus
Supplement in one or more Reserve Accounts established with the Trustee. Such
cash and the principal and interest payments on such other instruments will be
used to enhance the likelihood of timely payment of principal of, and interest
on, or, if so specified in the Prospectus Supplement, to provide additional
protection against losses in respect of, the assets in the related Trust Fund,
to pay the expenses of the Trust Fund or for such other purposes specified in
the Prospectus Supplement. Whether or not the Master Servicer or Seller has any
obligation to make such a deposit, certain amounts to which the Subordinated
Certificateholders, if any, will otherwise be entitled may instead be deposited
into the Reserve Account from time to time and in the amounts as specified in
the Prospectus Supplement. Any cash in the Reserve Account and the proceeds of
any other instrument upon maturity will be invested, to the extent acceptable
to the applicable Rating Agency, in obligations of the United States and
certain agencies thereof, certificates of deposit, certain commercial paper,
time deposits and bankers acceptances sold by eligible commercial banks,
certain repurchase agreements of United States government securities with
eligible commercial banks and certain other instruments acceptable to the
applicable Rating Agency ("Permitted Investments"). Unless otherwise specified
in the Prospectus Supplement, any instrument deposited in the Reserve Account
will name the Trustee, in its capacity as trustee for the holders of the
Certificates, as beneficiary and will be issued by an entity acceptable to the
applicable Rating Agency. Additional information with respect to such
instruments deposited in the Reserve Accounts will be set forth in the
Prospectus Supplement.
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Any amounts so deposited and payments on instruments so deposited will be
available for withdrawal from the Reserve Account for distribution to the
holders of Certificates for the purposes, in the manner and at the times
specified in the Prospectus Supplement.
OTHER INSURANCE, GUARANTEES AND SIMILAR INSTRUMENTS OR AGREEMENTS
If specified in the related Prospectus Supplement, a Trust Fund may
include in lieu of some or all of the foregoing or in addition thereto letters
of credit, financial guaranty insurance policies, third party guarantees, and
other arrangements for maintaining timely payments or providing additional
protection against losses on the assets included in such Trust Fund, paying
administrative expenses, or accomplishing such other purpose as may be
described in the Prospectus Supplement. The Trust Fund may include a guaranteed
investment contract or reinvestment agreement pursuant to which funds held in
one or more accounts will be invested at a specified rate. If any class of
Certificates has a floating interest rate, or if any of the Mortgage Assets has
a floating interest rate, the Trust Fund may include an interest rate swap
contract, an interest rate cap agreement or similar contract providing limited
protection against interest rate risks.
CROSS SUPPORT
If specified in the Prospectus Supplement, the beneficial ownership of
separate groups of assets included in a Trust Fund may be evidenced by separate
classes of the related Series of Certificates. In such case, credit support may
be provided by a cross-support feature which requires that distributions be
made with respect to Certificates evidencing a beneficial ownership interest in
other asset groups within the same Trust Fund. The Prospectus Supplement for a
Series which includes a cross-support feature will describe the manner and
conditions for applying such cross-support feature.
If specified in the Prospectus Supplement, the coverage provided by one
or more forms of credit support may apply concurrently to two or more separate
Trust Funds. If applicable, the Prospectus Supplement will identify the Trust
Funds to which such credit support relates and the manner of determining the
amount of the coverage provided hereby and of the application of such coverage
to the identified Trust Funds.
YIELD AND PREPAYMENT CONSIDERATIONS
The yields to maturity of the Certificates will be affected by the amount
and timing of principal payments on or in respect of the Mortgage Assets
included in the related Trust Funds, the allocation of available funds to
various Classes of Certificates, the Pass-Through Rate for various Classes of
Certificates and the purchase price paid for the Certificates.
The original terms to maturity of the Mortgage Loans in a given Mortgage
Pool will vary depending upon the type of Mortgage Loans included therein. Each
Prospectus Supplement will contain information with respect to the type and
maturities of the Mortgage Loans in the related Mortgage Pool. Unless otherwise
specified in the related Prospectus Supplement, Single Family Loans,
Cooperative Loans and Contracts may be prepaid without penalty in full or in
part at any time. Multifamily Loans may prohibit prepayment for a specified
period after origination, may prohibit partial prepayments entirely, and may
require the payment of a prepayment penalty upon prepayment in full or in part.
Unless otherwise provided in the related Prospectus Supplement, all
conventional Single Family Loans, Cooperative Loans and Contracts will contain
due-on-sale provisions permitting the mortgagee or holder of the Contract to
accelerate the maturity of the Mortgage Loan or Contract upon sale or certain
transfers by the mortgagor or obligor of the underlying Mortgaged Property. As
described in the related Prospectus Supplement, conventional Multifamily Loans
may contain due-on-sale provisions, due-on-encumbrance provisions, or both.
Mortgage Loans insured by the FHA, and Single Family Loans and Contracts
partially guaranteed by the VA, are assumable with the consent of the FHA and
the VA, respectively. Thus, the rate of prepayments on such Mortgage Loans may
be lower than that of conventional Mortgage Loans bearing comparable interest
rates. Unless otherwise provided in the related Prospectus Supplement, the
Master Servicer generally will enforce any due-on-sale or due-on-encumbrance
clause, to the extent it has knowledge of the conveyance or further encumbrance
or the proposed conveyance or proposed further encumbrance of the Mortgaged
Property and reasonably believes
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that it is entitled to do so under applicable law; provided, however, that the
Master Servicer will not take any enforcement action that would impair or
threaten to impair any recovery under any related insurance policy. See "The
Pooling and Servicing Agreement -- Collection Procedures" and "Certain Legal
Aspects of the Mortgage Loans" for a description of certain provisions of each
Agreement and certain legal developments that may affect the prepayment
experience on the Mortgage Loans.
When a full prepayment is made on a Single Family Loan or Cooperative
Loan, the Mortgagor is charged interest on the principal amount of the Mortgage
Loan so prepaid only for the number of days in the month actually elapsed up to
the date of the prepayment rather than for a full month. Similarly, upon
liquidation of a Mortgage Loan, interest accrues on the principal amount of the
Mortgage Loan only for the number of days in the month actually elapsed up to
the date of liquidation rather than for a full month. Unless otherwise
specified in the related Prospectus Supplement, the effect of prepayments in
full and liquidations will be to reduce the amount of interest passed through
in the following month to holders of Certificates because interest on the
principal amount of any Mortgage Loan so prepaid will be paid only to the date
of prepayment or liquidation. Interest shortfalls also could result from the
application of the Solders' and Sailors' Civil Relief Act of 1940, as amended,
as described under "Certain Legal Aspects of the Mortgage Loans -- Soldiers'
and Sailors' Civil Relief Act" herein. Partial prepayments in a given month may
be applied to the outstanding principal balances of the Mortgage Loans so
prepaid on the first day of the month of receipt or the month following
receipt. In the latter case, partial prepayments will not reduce the amount of
interest passed through in such month. Prepayment penalties collected with
respect to Multifamily Loans will be distributed to the holders of
Certificates, or to other persons entitled thereto, as described in the related
Prospectus Supplement.
Under certain circumstances, the Master Servicer, the holders of the
residual interests in a REMIC or another person specified in the related
Prospectus Supplement may have the option to purchase the assets of a Trust
Fund thereby effecting earlier retirement of the related Series of
Certificates. See "The Pooling and Servicing Agreement -- Termination; Optional
Termination."
The rate of prepayments with respect to conventional mortgage loans has
fluctuated significantly in recent years. In general, if prevailing rates fall
significantly below the Mortgage Rates borne by the Mortgage Loans, such
Mortgage Loans are likely to be subject to higher prepayment rates than if
prevailing interest rates remain at or above such Mortgage Rates. Conversely,
if prevailing interest rates rise appreciably above the Mortgage Rates borne by
the Mortgage Loans, such Mortgage Loans are likely to experience a lower
prepayment rate than if prevailing rates remain at or below such Mortgage
Rates. However, there can be no assurance that such will be the case.
Prepayments are influenced by a variety of economic, geographical,
social, tax, legal and additional factors. The rate of prepayment on Single
Family Loans, Cooperative Loans and Contracts may be affected by changes in a
mortgagor's housing needs, job transfers, unemployment, a borrower's net equity
in the mortgage properties, the enforcement of due-on-sale clauses and other
servicing decisions. Adjustable rate mortgage loans, bi-weekly mortgage loans,
graduated payment mortgage loans, growing equity mortgage loans, reverse
mortgage loans, buy-down mortgage loans and mortgage loans with other
characteristics may experience a rate of principal prepayments which is
different from that of fixed rate, monthly pay, fully amortizing mortgage
loans. The rate of prepayment on Multifamily Loans may be affected by other
factors, including Mortgage Loan terms (E.G., the existence of lockout periods,
due-on-sale and due-on-encumbrance clauses and prepayment penalties), relative
economic conditions in the area where the Mortgaged Properties are located, the
quality of management of the Mortgaged Properties and the relative tax benefits
associated with the ownership of income-producing real property.
The timing of payments on the Mortgage Assets may significantly affect an
investor's yield. In general, the earlier a prepayment of principal on the
Mortgage Assets, the greater will be the effect on an investor's yield to
maturity. As a result, the effect on an investor's yield of principal
prepayments occurring at a rate higher (or lower) than the rate anticipated by
the investor during the period immediately following the issuance of the
Certificates will not be offset by a subsequent like reduction (or increase) in
the rate of principal prepayments.
Unless otherwise specified in the related Prospectus Supplement, the
effective yield to Certificateholders will be slightly lower than the yield
otherwise produced by the applicable Pass-Through Rate and purchase price,
because while interest generally will accrue on each Mortgage Loan from the
first day of the month, the distribution of such interest will not be made
earlier than a specified date in the month following the month of accrual.
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In the case of any Certificates purchased at a discount, a slower than
anticipated rate of principal payments could result in an actual yield that is
lower than the anticipated yield. In the case of any Certificates purchased at
a premium, a faster than anticipated rate of principal payments could result in
an actual yield that is lower than the anticipated yield. A discount or premium
would be determined in relation to the price at which a Certificate will yield
its Pass-Through Rate, after giving effect to any payment delay.
Factors other than those identified herein and in the Prospectus
Supplement could significantly affect principal prepayments at any time and
over the lives of the Certificates. The relative contribution of the various
factors affecting prepayment may also vary from time to time. There can be no
assurance as to the rate of payment of principal of the Mortgage Assets at any
time or over the lives of the Certificates.
The Prospectus Supplement relating to a Series of Certificates will
discuss in greater detail the effect of the rate and timing of principal
payments (including prepayments) on the yield, weighted average lives and
maturities of such Certificates.
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THE POOLING AND SERVICING AGREEMENT
Set forth below is a summary of certain provisions of each Agreement
which are not described elsewhere in this Prospectus. The summary does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, the provisions of each Agreement. Where particular provisions or
terms used in the Agreements are referred to, such provisions or terms are as
specified in the Agreements.
ASSIGNMENT OF MORTGAGE ASSETS
ASSIGNMENT OF THE MORTGAGE LOANS. At the time of issuance of the
Certificates of a Series, the Seller will cause the Mortgage Loans comprising
the related Trust Fund to be sold and assigned to the Trustee, together with
all principal and interest received by or on behalf of the Seller on or with
respect to such Mortgage Loans after the Cut-off Date, other than principal and
interest due on or before the Cut-off Date and other than any Retained Interest
specified in the Prospectus Supplement. The Trustee will, concurrently with
such assignment, deliver the Certificates to the Seller in exchange for the
Mortgage Loans. Each Mortgage Loan will be identified in a schedule appearing
as an exhibit to the related Agreement. Such schedule will include information
as to the outstanding principal balance of each Mortgage Loan after application
of payments due on the Cut-off Date, as well as information regarding the
Mortgage Rate or APR, the current scheduled monthly payment of principal and
interest, the maturity of the loan, the Loan-to-Value Ratio at origination and
certain other information.
In addition, unless otherwise specified in the Prospectus Supplement, the
Seller will deliver or cause to be delivered to the Trustee (or to the
custodian hereinafter referred to) as to each Mortgage Loan, among other
things, (i) the mortgage note or Contract endorsed without recourse in blank or
to the order of the Trustee, (ii) in the case of Single Family Loans or
Multifamily Loans, the mortgage, deed of trust or similar instrument (a
"Mortgage") with evidence of recording indicated thereon (except for any
Mortgage not returned from the public recording office, in which case the
Seller will deliver or cause to be delivered a copy of such Mortgage together
with a certificate that the original of such Mortgage was or will be delivered
to such recording office), (iii) an assignment of the Mortgage or Contract to
the Trustee, which assignment will be in recordable form in the case of a
Mortgage assignment, and (iv) such other security documents as may be specified
in the related Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement, (i) in the case of Single Family Loans or Multifamily
Loans, the Seller or Master Servicer will promptly cause the assignments of the
related Mortgage Loans to be recorded in the appropriate public office for real
property records, except in the discretion of the Seller in states in which, in
the opinion of counsel acceptable to the Trustee, such recording is not
required to protect the Trustee's interest in such loans against the claim of
any subsequent transferee or any successor to or creditor of the Seller or the
originator of such loans, and (ii) in the case of Contracts, the Seller or
Master Servicer will promptly make or cause to be made an appropriate filing of
a UCC-1 financing statement in the appropriate states to give notice of the
Trustee's ownership of the Contracts.
With respect to any Mortgage Loans which are Cooperative Loans, the
Seller will cause to be delivered to the Trustee (or to the custodian
hereinafter referred to), the related original cooperative note endorsed
without recourse in blank or to the order of the Trustee, the original security
agreement, the proprietary lease or occupancy agreement, the recognition
agreement, an executed financing agreement and the relevant stock certificate
and related blank stock powers. The Seller will cause to be filed in the
appropriate office an assignment and a financing statement evidencing the
Trustee's security interest in each Cooperative Loan.
The Trustee (or the custodian hereinafter referred to) will review such
Mortgage Loan documents within the time period specified in the related
Prospectus Supplement after receipt thereof, and the Trustee will hold such
documents in trust for the benefit of the Certificateholders. Unless otherwise
specified in the related Prospectus Supplement, if any such document is found
to be missing or defective in any material respect, the Trustee (or such
custodian) will notify the Master Servicer and the Seller, and the Master
Servicer will notify the related Lender. Unless otherwise specified in the
related Prospectus Supplement, if the Lender or an entity which sold the
Mortgage Loan to the Lender cannot cure the omission or defect within 60 days
after receipt of such notice, the Lender or such entity will be obligated to
purchase the related Mortgage Loan from the Trustee at the Purchase Price.
There can be no assurance that a Lender or such entity will fulfill this
purchase obligation. Although the Master Servicer may be obligated to enforce
such obligation to the extent described above under "Mortgage
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Loan Program -- Representations by Lenders; Repurchases," neither the Master
Servicer nor the Seller will be obligated to purchase such Mortgage Loan if the
Lender or such entity defaults on its purchase obligation, unless such breach
also constitutes a breach of the representations or warranties of the Master
Servicer or the Seller, as the case may be. Unless otherwise specified in the
related Prospectus Supplement, this purchase obligation constitutes the sole
remedy available to the Certificateholders or the Trustee for omission of, or a
material defect in, a constituent document. Certain rights of substitution for
defective Mortgage Loans may be provided with respect to a Series in the
related Prospectus Supplement.
The Trustee will be authorized to appoint a custodian pursuant to a
custodial agreement to maintain possession of and, if applicable, to review the
documents relating to the Mortgage Loans as agent of the Trustee.
ASSIGNMENT OF AGENCY SECURITIES. The Seller will cause Agency Securities
to be registered in the name of the Trustee or its nominee, and the Trustee
concurrently will execute, countersign and deliver the Certificates. Each
Agency Security will be identified in a schedule appearing as an exhibit to the
Agreement, which will specify as to each Agency Security the original principal
amount and outstanding principal balance as of the Cut-off Date, the annual
pass-through rate (if any) and the maturity date.
ASSIGNMENT OF PRIVATE MORTGAGE-BACKED SECURITIES. The Seller will cause
Private Mortgage-Backed Securities to be registered in the name of the Trustee.
The Trustee (or the custodian) will have possession of any certificated Private
Mortgage-Backed Securities. Unless otherwise specified in the related
Prospectus Supplement, the Trustee will not be in possession of or be assignee
of record of any underlying assets for a Private Mortgage-Backed Security. See
"The Trust Fund -- Private Mortgage-Backed Securities" herein. Each Private
Mortgage-Backed Security will be identified in a schedule appearing as an
exhibit to the related Agreement which will specify the original principal
amount, outstanding principal balance as of the Cut-off Date, annual
pass-through rate or interest rate and maturity date for each Private
Mortgage-Backed Security conveyed to the Trustee.
PAYMENTS ON MORTGAGE LOANS; DEPOSITS TO ACCOUNTS
Unless otherwise specified in the related Prospectus Supplement or
provided in the Agreement, each Master Servicer and Sub-Servicer servicing the
Mortgage Loans will be required to establish and maintain for one or more
Series of Certificates a separate account or accounts for the collection of
payments on the related Mortgage Assets (the "Protected Account"), which must
be either (i) maintained with a depository institution the debt obligations of
which (or in the case of a depository institution that is the principal
subsidiary of a holding company, the obligations of such holding company) are
rated in one of the two highest rating categories by each Rating Agency rating
the Series of Certificates, (ii) an account or accounts the deposits in which
are fully insured by the FDIC, (iii) an account or accounts the deposits in
which are insured by the FDIC (to the limits established by the FDIC), and the
uninsured deposits in which are invested in Permitted Investments held in the
name of the Trustee, or (iv) an account or accounts otherwise acceptable to
each Rating Agency. A Protected Account may be maintained as an interest
bearing account or the funds held therein may be invested pending each
succeeding Distribution Date in Permitted Investments. Unless otherwise
specified in the related Prospectus Supplement, the related Master Servicer or
Sub-Servicer or its designee will be entitled to receive any such interest or
other income earned on funds in the Protected Account as additional
compensation and will be obligated to deposit in the Protected Account the
amount of any loss immediately as realized. The Protected Account may be
maintained with the Master Servicer or Sub-Servicer or with a depository
institution that is an affiliate of the Master Servicer or Sub-Servicer,
provided it meets the standards set forth above.
Each Master Servicer and Sub-Servicer will be required to deposit or
cause to be deposited in the Protected Account for each Trust Fund on a daily
basis, to the extent applicable and unless otherwise specified in the related
Prospectus Supplement or provided in the Agreement, the following payments and
collections received or advances made by or on behalf of it subsequent to the
Cut-off Date (other than payments due on or before the Cut-off Date and
exclusive of any amounts representing Retained Interest):
(i) all payments on account of principal, including Principal Prepayments
and, if specified in the related Prospectus Supplement, prepayment penalties,
on the Mortgage Loans;
(ii) all payments on account of interest on the Mortgage Loans, net of
applicable servicing compensation;
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(iii) to the extent specified in the related Agreement, all proceeds (net
of unreimbursed payments of property taxes, insurance premiums and similar
items ("Insured Expenses") incurred, and unreimbursed advances made, by the
related Master Servicer or Sub-Servicer, if any) of the title insurance
policies, the hazard insurance policies and any Primary Insurance Policies, to
the extent such proceeds are not applied to the restoration of the property or
released to the Mortgagor in accordance with the Master Servicer's normal
servicing procedures (collectively, "Insurance Proceeds") and all other cash
amounts (net of unreimbursed expenses incurred in connection with liquidation
or foreclosure ("Liquidation Expenses") and unreimbursed advances made, by the
related Master Servicer or Sub-Servicer, if any) received and retained in
connection with the liquidation of defaulted Mortgage Loans, by foreclosure or
otherwise ("Liquidation Proceeds"), together with any net proceeds received
with respect to any properties acquired on behalf of the Certificateholders by
foreclosure or deed in lieu of foreclosure;
(iv) all proceeds of any Mortgage Loan or property in respect thereof
purchased as described under "Mortgage Loan Program -- Representations by
Lenders; Repurchases" or " -- Assignment of Mortgage Assets" above;
(v) all payments required to be deposited in the Protected Account with
respect to any deductible clause in any blanket insurance policy described
under " -- Hazard Insurance" below;
(vi) any amount required to be deposited by the Master Servicer or
Sub-Servicer in connection with losses realized on investments for the benefit
of the Master Servicer or Sub-Servicer of funds held in any Accounts; and
(vii) all other amounts required to be deposited in the Protected Account
pursuant to the Agreement.
If acceptable to each Rating Agency rating the Series of Certificates, a
Protected Account maintained by a Master Servicer or Sub-Servicer may commingle
funds from the Mortgage Loans deposited in the Trust Fund with similar funds
relating to other mortgage loans which are serviced or owned by the Master
Servicer or Sub-Servicer. The Agreement may require that certain payments
related to the Mortgage Assets be transferred from a Protected Account
maintained by a Master Servicer or Sub-Servicer into another Account maintained
under conditions acceptable to each Rating Agency.
The Trustee will be required to establish in its name as Trustee for one
or more Series of Certificates a trust account or another account acceptable to
each Rating Agency (the "Certificate Account"). The Certificate Account may be
maintained as an interest bearing account or the funds held therein may be
invested pending each succeeding Distribution Date in Permitted Investments. If
there is more than one Master Servicer for the rated Series of Certificates,
there may be a separate Certificate Account or a separate subaccount in a
single Certificate Account for funds received from each Master Servicer. Unless
otherwise specified in the Prospectus Supplement, the related Master Servicer
or its designee will be entitled to receive any interest or other income earned
on funds in the Certificate Account or subaccount of the Certificate Account as
additional compensation and will be obligated to deposit in the Certificate
Account or subaccount the amount of any loss immediately as realized. The
Trustee will be required to deposit into the Certificate Account on the
business day received all funds received from the Master Servicer for deposit
into the Certificate Account and any other amounts required to be deposited
into the Certificate Account pursuant to the Agreement. In addition to other
purposes specified in the Agreement, the Trustee will be required to make
withdrawals from the Certificate Account to make distributions to
Certificateholders. If the Series includes one Trust Fund which contains a
beneficial ownership interest in another Trust Fund, funds from the Mortgage
Assets may be withdrawn from the Certificate Account included in the latter
Trust Fund and deposited into another Account included in the former Trust Fund
prior to transmittal to Certificateholders with a beneficial ownership interest
in the former Trust Fund. If specified in the related Prospectus Supplement,
the Protected Account and the Certificate Account may be combined into a single
Certificate Account.
SUB-SERVICING BY LENDERS
Each Lender with respect to a Mortgage Loan or any other servicing entity
may act as the Master Servicer or the Sub-Servicer for such Mortgage Loan
pursuant to an agreement (each, a "Sub-Servicing Agreement"), which will not
contain any terms inconsistent with the related Agreement. While each
Sub-Servicing Agreement will be a contract solely between the Master Servicer
and the Sub-Servicer, the Agreement pursuant
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to which a Series of Certificates is issued will provide that, if for any
reason the Master Servicer for such Series of Certificates is no longer the
Master Servicer of the related Mortgage Loans, the Trustee or any successor
Master Servicer must recognize the Sub-Servicer's rights and obligations under
such Sub-Servicing Agreement.
With the approval of the Master Servicer, a Sub-Servicer may delegate its
servicing obligations to third-party servicers, but, unless otherwise specified
in the Prospectus Supplement, such Sub-Servicer will remain obligated under the
related Sub-Servicing Agreement. Each Sub-Servicer will be required to perform
the customary functions of a servicer of mortgage loans. Such functions
generally include collecting payments from mortgagors or obligors and remitting
such collections to the Master Servicer; maintaining hazard insurance policies
as described herein and in any related Prospectus Supplement, and filing and
settling claims thereunder, subject in certain cases to the right of the Master
Servicer to approve in advance any such settlement; maintaining escrow or
impoundment accounts of mortgagors or obligors for payment of taxes, insurance
and other items required to be paid by the mortgagor or obligor pursuant to the
related Mortgage Loan; processing assumptions or substitutions, although,
unless otherwise specified in the related Prospectus Supplement, the Master
Servicer is generally required to exercise due-on-sale clauses to the extent
such exercise is permitted by law and would not adversely affect insurance
coverage; attempting to cure delinquencies; supervising foreclosures;
inspecting and managing Mortgaged Properties under certain circumstances;
maintaining accounting records relating to the Mortgage Loans; and, to the
extent specified in the related Prospectus Supplement, maintaining additional
insurance policies or credit support instruments and filing and settling claims
thereunder. A Sub-Servicer will also be obligated to make advances in respect
of delinquent installments of principal and interest on Mortgage Loans, as
described more fully above under " -- Payments on Mortgage Loans; Deposits to
Accounts," and in respect of certain taxes and insurance premiums not paid on a
timely basis by mortgagors or obligors.
As compensation for its servicing duties, each Sub-Servicer will be
entitled to a monthly servicing fee (to the extent the scheduled payment on the
related Mortgage Loan has been collected) in the amount set forth in the
related Prospectus Supplement. Each Sub-Servicer is also entitled to collect
and retain, as part of its servicing compensation, any prepayment or late
charges provided in the mortgage note or related instruments. Each Sub-Servicer
will be reimbursed by the Master Servicer for certain expenditures which it
makes, generally to the same extent the Master Servicer would be reimbursed
under the Agreement. The Master Servicer may purchase the servicing of Mortgage
Loans if the Sub-Servicer elects to release the servicing of such Mortgage
Loans to the Master Servicer. See " -- Servicing and Other Compensation and
Payment of Expenses."
Each Sub-Servicer may be required to agree to indemnify the Master
Servicer for any liability or obligation sustained by the Master Servicer in
connection with any act or failure to act by the Sub-Servicer in its servicing
capacity. Each Sub-Servicer will be required to maintain a fidelity bond and an
errors and omissions policy with respect to its officers, employees and other
persons acting on its behalf or on behalf of the Master Servicer.
Each Sub-Servicer will be required to service each Mortgage Loan pursuant
to the terms of the Sub-Servicing Agreement for the entire term of such
Mortgage Loan, unless the Sub-Servicing Agreement is earlier terminated by the
Master Servicer or unless servicing is released to the Master Servicer. Unless
otherwise specified in the related Prospectus Supplement, the Master Servicer
may terminate a Sub-Servicing Agreement without cause, upon written notice to
the Sub-Servicer.
The Master Servicer may agree with a Sub-Servicer to amend a
Sub-Servicing Agreement or, upon termination of the Sub-Servicing Agreement,
the Master Servicer may act as servicer of the related Mortgage Loans or enter
into new Sub-Servicing Agreements with other sub-servicers. If the Master
Servicer acts as servicer, it will not assume liability for the representations
and warranties of the Sub-Servicer which it replaces. Each Sub-Servicer must be
a Lender or meet the standards for becoming a Lender or have such servicing
experience as to be otherwise satisfactory to the Master Servicer and the
Seller. The Master Servicer will make reasonable efforts to have the new
Sub-Servicer assume liability for the representations and warranties of the
terminated Sub-Servicer, but no assurance can be given that such an assumption
will occur. In the event of such an assumption, the Master Servicer may in the
exercise of its business judgment release the terminated Sub-Servicer from
liability in respect of such representations and warranties. Any amendments to
a Sub-Servicing Agreement or new Sub-Servicing Agreements may contain
provisions different from those which are in effect in the original
Sub-Servicing Agreement. However, each Agreement will provide that any such
amendment or new agreement may not be inconsistent with or violate such
Agreement.
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COLLECTION PROCEDURES
The Master Servicer, directly or through one or more Sub-Servicers, will
make reasonable efforts to collect all payments called for under the Mortgage
Loans and will, consistent with each Agreement and any Pool Insurance Policy,
Primary Insurance Policy, FHA Insurance, VA Guaranty, Special Hazard Insurance
Policy, Bankruptcy Bond or alternative arrangements, follow such collection
procedures as are customary with respect to mortgage loans that are comparable
to the Mortgage Loans. Consistent with the above, the Master Servicer may, in
its discretion, (i) waive any assumption fee, late payment or other charge in
connection with a Mortgage Loan and (ii) to the extent not inconsistent with
the coverage of such Mortgage Loan by a Pool Insurance Policy, Primary
Insurance Policy, FHA Insurance, VA Guaranty, Special Hazard Insurance Policy,
Bankruptcy Bond or alternative arrangements, if applicable, arrange with a
Mortgagor a schedule for the liquidation of delinquencies running for no more
than 125 days after the applicable due date for each payment or such other
period as is specified in the Agreement. Both the Sub-Servicer and the Master
Servicer remain obligated to make advances during any period of such an
arrangement.
Unless otherwise specified in the related Prospectus Supplement, in any
case in which property securing a conventional Mortgage Loan has been, or is
about to be, conveyed by the mortgagor or obligor, the Master Servicer will, to
the extent it has knowledge of such conveyance or proposed conveyance, exercise
or cause to be exercised its rights to accelerate the maturity of such Mortgage
Loan under any due-on-sale clause applicable thereto, but only if the exercise
of such rights is permitted by applicable law and will not impair or threaten
to impair any recovery under any related Primary Insurance Policy. If these
conditions are not met or if such Mortgage Loan is insured by the FHA or
partially guaranteed by the VA, the Master Servicer will enter into or cause to
be entered into an assumption and modification agreement with the person to
whom such property has been or is about to be conveyed, pursuant to which such
person becomes liable for repayment of the Mortgage Loan and, to the extent
permitted by applicable law, the mortgagor remains liable thereon; provided,
however, that the Master Servicer will not enter into such an agreement if it
would jeopardize the tax status of the Trust Fund. Any fee collected by or on
behalf of the Master Servicer for entering into an assumption agreement will be
retained by or on behalf of the Master Servicer as additional servicing
compensation. In the case of Multifamily Loans, and unless otherwise specified
in the related Prospectus Supplement, the Master Servicer will agree to
exercise any right it may have to accelerate the maturity of a Multifamily Loan
to the extent it has knowledge of any further encumbrance of the related
Mortgaged Property effected in violation of any due-on-encumbrance clause
applicable thereto. See "Certain Legal Aspects of the Mortgage Loans --
Due-on-Sale Clauses." In connection with any such assumption, the terms of the
related Mortgage Loan may not be changed.
With respect to Cooperative Loans, any prospective purchaser will
generally have to obtain the approval of the board of directors of the relevant
Cooperative before purchasing the shares and acquiring rights under the related
proprietary lease or occupancy agreement. See "Certain Legal Aspects of the
Mortgage Loans." This approval is usually based on the purchaser's income and
net worth and numerous other factors. Although the Cooperative's approval is
unlikely to be unreasonably withheld or delayed, the necessity of acquiring
such approval could limit the number of potential purchasers for those shares
and otherwise limit the Trust Fund's ability to sell and realize the value of
those shares.
In general, a "tenant-stockholder" (as defined in Code Section 216(b)(2))
of a corporation that qualifies as a "cooperative housing corporation" within
the meaning of Code Section 216(b)(1) is allowed a deduction for amounts paid
or accrued within his taxable year to the corporation representing his
proportionate share of certain interest expenses and certain real estate taxes
allowable as a deduction under Code Section 216(a) to the corporation under
Code Sections 163 and 164. In order for a corporation to qualify under Code
Section 216(b)(1) for its taxable year in which such items are allowable as a
deduction to the corporation, such Section requires, among other things, that
at least 80% of the gross income of the corporation be derived from its tenant-
stockholders (as defined in Code Section 216(b)(2)). By virtue of this
requirement, the status of a corporation for purposes of Code Section 216(b)(1)
must be determined on a year-to-year basis. Consequently, there can be no
assurance that Cooperatives relating to the Cooperative Loans will qualify
under such Section for any particular year. In the event that such a
Cooperative fails to qualify for one or more years, the value of the collateral
securing any related Cooperative Loans could be significantly impaired because
no deduction would be
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allowable to tenant-stockholders under Code Section 216(a) with respect to
those years. In view of the significance of the tax benefits accorded
tenant-stockholders of a corporation that qualifies under Code Section
216(b)(1), the likelihood that such a failure would be permitted to continue
over a period of years appears remote.
HAZARD INSURANCE
The Master Servicer will require the mortgagor or obligor on each Single
Family Loan, Multifamily Loan or Contract to maintain a hazard insurance policy
providing for no less than the coverage of the standard form of fire insurance
policy with extended coverage customary for the type of Mortgaged Property in
the state in which such Mortgaged Property is located. Such coverage will be in
an amount not less than the replacement value of the improvements or
Manufactured Home securing such Mortgage Loan or the principal balance owing on
such Mortgage Loan, whichever is less. All amounts collected by the Master
Servicer under any hazard policy (except for amounts to be applied to the
restoration or repair of the Mortgaged Property or released to the mortgagor or
obligor in accordance with the Master Servicer's normal servicing procedures)
will be deposited in the related Protected Account. In the event that the
Master Servicer maintains a blanket policy insuring against hazard losses on
all the Mortgage Loans comprising part of a Trust Fund, it will conclusively be
deemed to have satisfied its obligation relating to the maintenance of hazard
insurance. Such blanket policy may contain a deductible clause, in which case
the Master Servicer will be required to deposit from its own funds into the
related Protected Account the amounts which would have been deposited therein
but for such clause. Any additional insurance coverage for Mortgaged Properties
in a Mortgage Pool of Multifamily Loans will be specified in the related
Prospectus Supplement.
In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements or Manufactured Home
securing a Mortgage Loan by fire, lightning, explosion, smoke, windstorm and
hail, riot, strike and civil commotion, subject to the conditions and
exclusions particularized in each policy. Although the policies relating to the
Mortgage Loans may have been underwritten by different insurers under different
state laws in accordance with different applicable forms and therefore may not
contain identical terms and conditions, the basic terms thereof are dictated by
respective state laws, and most such policies typically do not cover any
physical damage resulting from the following: war, revolution, governmental
actions, floods and other water-related causes, earth movement (including
earthquakes, landslides and mud flows), nuclear reactions, wet or dry rot,
vermin, rodents, insects or domestic animals, theft and, in certain cases,
vandalism. The foregoing list is merely indicative of certain kinds of
uninsured risks and is not intended to be all-inclusive. If the Mortgaged
Property securing a Mortgage Loan is located in a federally designated special
flood area at the time of origination, the Master Servicer will require the
mortgagor or obligor to obtain and maintain flood insurance.
The hazard insurance policies covering properties securing the Mortgage
Loans typically contain a clause which in effect requires the insured at all
times to carry insurance of a specified percentage (generally 80% to 90%) of
the full replacement value of the insured property in order to recover the full
amount of any partial loss. If the insured's coverage falls below this
specified percentage, then the insurer's liability in the event of partial loss
will not exceed the larger of (i) the actual cash value (generally defined as
replacement cost at the time and place of loss, less physical depreciation) of
the improvements damaged or destroyed or (ii) such proportion of the loss,
without deduction for depreciation, as the amount of insurance carried bears to
the specified percentage of the full replacement cost of such improvements.
Since the amount of hazard insurance the Master Servicer may cause to be
maintained on the improvements securing the Mortgage Loans declines as the
principal balances owing thereon decrease, and since improved real estate
generally has appreciated in value over time in the past, the effect of this
requirement in the event of partial loss may be that hazard insurance proceeds
will be insufficient to restore fully the damaged property. If specified in the
related Prospectus Supplement, a special hazard insurance policy or an
alternative form of credit enhancement will be obtained to insure against
certain of the uninsured risks described above. See "Credit Enhancement --
Special Hazard Insurance Policies."
The Master Servicer will not require that a standard hazard or flood
insurance policy be maintained on the cooperative dwelling relating to any
Cooperative Loan. Generally, the Cooperative itself is responsible for
maintenance of hazard insurance for the property owned by the Cooperative and
the tenant-stockholders of that Cooperative do not maintain individual hazard
insurance policies. To the extent, however, that a Cooperative and
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the related borrower on a Cooperative Loan do not maintain such insurance or do
not maintain adequate coverage or any insurance proceeds are not applied to the
restoration of damaged property, any damage to such borrower's cooperative
dwelling or such Cooperative's building could significantly reduce the value of
the collateral securing such Cooperative Loan to the extent not covered by
other credit support.
REALIZATION UPON DEFAULTED MORTGAGE LOANS
PRIMARY INSURANCE POLICIES. The Master Servicer will be required to
maintain or cause each Sub-Servicer to maintain, as the case may be, in full
force and effect, to the extent specified in the related Prospectus Supplement,
a Primary Insurance Policy with regard to each Single Family Loan for which
such coverage is required. The Master Servicer will be required not to cancel
or refuse to renew any such Primary Insurance Policy in effect at the time of
the initial issuance of a Series of Certificates that is required to be kept in
force under the applicable Agreement unless the replacement Primary Insurance
Policy for such canceled or nonrenewed policy is maintained with an insurer
whose claims-paying ability is sufficient to maintain the current rating of the
classes of Certificates of such Series that have been rated.
Although the terms and conditions of primary mortgage insurance vary, the
amount of a claim for benefits under a Primary Insurance Policy covering a
Mortgage Loan generally will consist of the insured percentage of the unpaid
principal amount of the covered Mortgage Loan and accrued and unpaid interest
thereon and reimbursement of certain expenses, less (i) all rents or other
payments collected or received by the insured (other than the proceeds of
hazard insurance) that are derived from or in any way related to the Mortgaged
Property, (ii) hazard insurance proceeds in excess of the amount required to
restore the Mortgaged Property and which have not been applied to the payment
of the Mortgage Loan, (iii) amounts expended but not approved by the issuer of
the related Primary Insurance Policy (the "Primary Insurer"), (iv) claim
payments previously made by the Primary Insurer and (v) unpaid premiums.
Primary Insurance Policies reimburse certain losses sustained by reason
of defaults in payments by borrowers. Primary Insurance Policies will not
insure against, and exclude from coverage, a loss sustained by reason of a
default arising from or involving certain matters, including (i) fraud or
negligence in origination or servicing of the Mortgage Loans, including
misrepresentation by the originator, borrower or other persons involved in the
origination of the Mortgage Loan; (ii) failure to construct the Mortgaged
Property subject to the Mortgage Loan in accordance with specified plans; (iii)
physical damage to the Mortgaged Property; and (d) the related Master Servicer
not being approved as a servicer by the Primary Insurer.
RECOVERIES UNDER A PRIMARY INSURANCE POLICY. As conditions precedent to
the filing of or payment of a claim under a Primary Insurance Policy covering a
Mortgage Loan, the insured generally will be required to (i) advance or
discharge (a) all hazard insurance policy premiums and (b) as necessary and
approved in advance by the Primary Insurer, (1) real estate property taxes, (2)
all expenses required to maintain the related Mortgaged Property in at least as
good a condition as existed at the effective date of such Primary Insurance
Policy, ordinary wear and tear excepted, (3) Mortgaged Property sales expenses,
(4) any outstanding liens (as defined in such Primary Insurance Policy) on the
Mortgaged Property and (5) foreclosure costs, including court costs and
reasonable attorneys' fees; (ii) in the event of any physical loss or damage to
the Mortgaged Property, have restored and repaired the Mortgaged Property to at
least as good a condition as existed at the effective date of such Primary
Insurance Policy, ordinary wear and tear excepted; and (iii) tender to the
Primary Insurer good and merchantable title to and possession of the Mortgaged
Property.
In those cases in which a Single Family Loan is serviced by a
Sub-Servicer, the Sub-Servicer, on behalf of itself, the Trustee and
Certificateholders, will present claims to the Primary Insurer, and all
collections thereunder will be deposited in the Protected Account maintained by
the Sub-Servicer. In all other cases, the Master Servicer, on behalf of itself,
the Trustee and the Certificateholders, will present claims to the Primary
Insurer under each Primary Insurance Policy, and will take such reasonable
steps as are necessary to receive payment or to permit recovery thereunder with
respect to defaulted Mortgage Loans. As set forth above, all collections by or
on behalf of the Master Servicer under any Primary Insurance Policy and, when
the Mortgaged Property has not been restored, the hazard insurance policy, are
to be deposited in the Protected Account, subject to withdrawal as heretofore
described.
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If the Mortgaged Property securing a defaulted Mortgage Loan is damaged
and proceeds, if any, from the related hazard insurance policy are insufficient
to restore the damaged Mortgaged Property to a condition sufficient to permit
recovery under the related Primary Insurance Policy, if any, the Master
Servicer is not required to expend its own funds to restore the damaged
Mortgaged Property unless it determines (i) that such restoration will increase
the proceeds to Certificateholders on liquidation of the Mortgage Loan after
reimbursement of the Master Servicer for its expenses and (ii) that such
expenses will be recoverable by it from related Insurance Proceeds or
Liquidation Proceeds.
If recovery on a defaulted Mortgage Loan under any related Primary
Insurance Policy is not available for the reasons set forth in the preceding
paragraph, or if the defaulted Mortgage Loan is not covered by a Primary
Insurance Policy, the Master Servicer will be obligated to follow or cause to
be followed such normal practices and procedures as it deems necessary or
advisable to realize upon the defaulted Mortgage Loan. If the proceeds of any
liquidation of the Mortgaged Property securing the defaulted Mortgage Loan are
less than the principal balance of such Mortgage Loan plus interest accrued
thereon that is payable to Certificateholders, the Trust Fund will realize a
loss in the amount of such difference plus the aggregate of expenses incurred
by the Master Servicer in connection with such proceedings and which are
reimbursable under the Agreement.
If the Master Servicer or its designee recovers Insurance Proceeds which,
when added to any related Liquidation Proceeds and after deduction of certain
expenses reimbursable to the Master Servicer, exceed the principal balance of
such Mortgage Loan plus interest accrued thereon that is payable to
Certificateholders, the Master Servicer will be entitled to withdraw or retain
from the Protected Account amounts representing its normal servicing
compensation with respect to such Mortgage Loan. In the event that the Master
Servicer has expended its own funds to restore the damaged Mortgaged Property
and such funds have not been reimbursed under the related hazard insurance
policy, it will be entitled to withdraw from the Protected Account out of
related Liquidation Proceeds or Insurance Proceeds an amount equal to such
expenses incurred by it, in which event the Trust Fund may realize a loss up to
the amount so charged. See "Credit Enhancement."
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
Unless otherwise specified in the related Prospectus Supplement, a Master
Servicer's primary servicing compensation with respect to a Series of
Certificates will come from the monthly payment to it, out of each interest
payment on a Mortgage Loan, of an amount equal to the percentage per annum
described in the Prospectus Supplement of the outstanding principal balance
thereof. Since the Master Servicer's primary compensation is a percentage of
the outstanding principal balance of each Mortgage Loan, such amounts will
decrease as the Mortgage Loans amortize. In addition to primary compensation,
the Master Servicer or the Sub-Servicers will be entitled to retain all
assumption fees and late payment charges, to the extent collected from
Mortgagors, and, unless otherwise provided in the related Prospectus Supplement
or Agreement, any prepayment penalties and any interest or other income which
may be earned on funds held in any Accounts. Unless otherwise specified in the
related Prospectus Supplement, any Sub-Servicer will receive a portion of the
Master Servicer's primary compensation as its sub-servicing compensation.
In addition to amounts payable to any Sub-Servicer, to the extent
specified in the related Agreement, the Master Servicer will pay from its
servicing compensation certain expenses incurred in connection with its
servicing of the Mortgage Loans, including, without limitation, payment in
certain cases of premiums for insurance policies, guarantees, sureties or other
forms of credit enhancement, payment of the fees and disbursements of the
Trustee and independent accountants, payment of expenses incurred in connection
with distributions and reports to Certificateholders, and payment of certain
other expenses. The Master Servicer will be entitled to reimbursement of
expenses incurred in enforcing the obligations of Sub-Servicers and Sellers
under certain limited circumstances. In addition, as indicated in the preceding
section, the Master Servicer will be entitled to reimbursement for certain
expenses incurred by it in connection with any defaulted Mortgage Loan as to
which it has determined that all recoverable Liquidation Proceeds and Insurance
Proceeds have been received.
EVIDENCE AS TO COMPLIANCE
Each Agreement will provide that on or before a specified date in each
year, a firm of independent public accountants will furnish a statement to the
Trustee to the effect that, on the basis of the examination by such
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firm conducted substantially in compliance with the Uniform Single Audit
Program for Mortgage Bankers or the Audit Program for Mortgages serviced for
FHLMC, the servicing by or on behalf of the Master Servicer of mortgage loans,
agency securities or private mortgage-backed securities, under pooling and
servicing agreements substantially similar to each other (including the related
Agreement) was conducted in compliance with such agreements except for any
significant exceptions or errors in records that, in the opinion of the firm,
the Uniform single Audit Program for Mortgage Bankers or the Audit Program for
Mortgages serviced for FHLMC requires it to report. In rendering its statement
such firm may rely, as to matters relating to the direct servicing of mortgage
loans, agency securities or private mortgage-backed securities by
Sub-Servicers, upon comparable statements for examinations conducted
substantially in compliance with the Uniform Single Audit Program for Mortgage
Bankers or the Audit Program for Mortgages serviced for FHLMC or FNMA (rendered
within one year of such statement) of firms of independent public accountants
with respect to the related Sub-Servicer.
Each Agreement will also provide for delivery to the Trustee, on or
before a specified date in each year, of an annual statement signed by an
officer of each Master Servicer to the effect that such Master Servicer has
fulfilled its obligations under the Agreement throughout the preceding year.
Copies of the annual accountants' statement and the statement of officers
of each Master Servicer may be obtained by Certificateholders of the related
Series without charge upon written request to the Master Servicer at the
address set forth in the related Prospectus Supplement.
CERTAIN MATTERS REGARDING THE MASTER SERVICER AND THE SELLER
One or more Master Servicers under each Agreement will be named in the
related Prospectus Supplement. Each entity serving as Master Servicer may have
normal business relationships with the Seller or the Seller's affiliates.
Unless otherwise provided in the related Prospectus Supplement, each
Agreement will provide that a Master Servicer may not resign from its
obligations and duties under the Agreement except upon a determination that its
duties thereunder are no longer permissible under applicable law. No such
resignation will become effective until the Trustee or a successor servicer has
assumed the Master Servicer's obligations and duties under the Agreement.
Each Agreement will further provide that neither the Master Servicer, in
certain instances, the Seller nor any director, officer, employee, or agent of
the Master Servicer or the Seller will be under any liability to the Trustee,
the related Trust Fund or Certificateholders for any action taken or for
refraining from the taking of any action in good faith pursuant to the
Agreement, or for errors in judgment; provided, however, that neither the
Master Servicer, the Seller nor any such person will be protected against any
breach of warranties or representations made in the Agreement or any liability
which would otherwise be imposed by reason of willful misfeasance, bad faith or
gross negligence in the performance of duties thereunder or by reason of
reckless disregard of obligations and duties thereunder. Each Agreement will
further provide that the Master Servicer, in certain instances, the Seller and
any director, officer, employee or agent of the Master Servicer or the Seller
will be entitled to indemnification by the related Trust Fund and will be held
harmless against any loss, liability or expense incurred in connection with any
legal action relating to the Agreement or the Certificates, other than any
loss, liability or expense related to any specific Mortgage Loan or Mortgage
Loans (except any such loss, liability or expense otherwise reimbursable
pursuant to the Agreement) and any loss, liability or expense incurred by
reason of willful misfeasance, bad faith or gross negligence in the performance
of duties thereunder or by reason of reckless disregard of obligations and
duties thereunder. In addition, each Agreement will provide that neither the
Master Servicer nor, in certain instances, the Seller will be under any
obligation to appear in, prosecute or defend any legal action which is not
incidental to its respective responsibilities under the Agreement and which in
its opinion may involve it in any expense or liability. The Master Servicer or
the Seller may, however, in its discretion undertake any such action which it
may deem necessary or desirable with respect to the Agreement and the rights
and duties of the parties thereto and the interests of the Certificateholders
thereunder. In such event, the legal expenses and costs of such action and any
liability resulting therefrom will be expenses, costs and liabilities of the
Trust Fund and the Master Servicer or the Seller, as the case may be, will be
entitled to be reimbursed therefor out of funds otherwise distributable to
Certificateholders.
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Any person into which the Master Servicer may be merged or consolidated,
or any person resulting from any merger or consolidation to which the Master
Servicer is a party, or any person succeeding to the business of the Master
Servicer, will be the successor of the Master Servicer under each Agreement,
provided that such person is qualified to sell mortgage loans to, and service
mortgage loans on behalf of, FNMA or FHLMC and further provided that such
merger, consolidation or succession does not adversely affect the then current
rating or ratings of the class or classes of Certificates of such Series that
have been rated.
EVENTS OF DEFAULT
Unless otherwise specified in the related Prospectus Supplement or
Agreement, "Events of Default" under each Agreement will include (i) any
failure by the Master Servicer to cause to be deposited in the Certificate
Account any amount so required to be deposited pursuant to the Agreement, and
such failure continues unremedied for two business days or such other time
period as is specified in the Agreement; (ii) any failure by the Master
Servicer duly to observe or perform in any material respect any of its other
covenants or agreements in the Agreement which continues unremedied for sixty
days or such other time period as is specified in the Agreement after the
giving of written notice of such failure to the Master Servicer by the Trustee,
or to the Master Servicer and the Trustee by the holders of Certificates of any
class evidencing not less than 25% of the aggregate principal amount or
interests ("Percentage Interests") evidenced by such class; and (iii) certain
events of insolvency, readjustment of debt, marshaling of assets and
liabilities or similar proceeding and certain actions by or on behalf of the
Master Servicer indicating its insolvency, reorganization or inability to pay
its obligations.
If specified in the Prospectus Supplement, the Agreement will permit the
Trustee to sell the Mortgage Assets and the other assets of the Trust Fund in
the event that payments in respect thereto are insufficient to make payments
required in the Agreement. The assets of the Trust Fund will be sold only under
the circumstances and in the manner specified in the Prospectus Supplement.
RIGHTS UPON EVENT OF DEFAULT
Except as otherwise specified in the related Agreement, so long as an
Event of Default under an Agreement remains unremedied, the Trustee may, and at
the direction of holders of Certificates evidencing Percentage Interests
aggregating not less than 25% of the principal of the related Trust Fund and
under such circumstances as may be specified in such Agreement, the Trustee
shall, terminate all of the rights and obligations of the Master Servicer under
the Agreement relating to such Trust Fund and in and to the Mortgage Loans,
whereupon, unless otherwise specified in the related Prospectus Supplement, the
Trustee will succeed to all of the responsibilities, duties and liabilities of
the Master Servicer under the Agreement, including, if specified in the
Prospectus Supplement, the obligation to make advances, and will be entitled to
similar compensation arrangements. In the event that the Trustee is unwilling
or unable so to act, it may appoint, or petition a court of competent
jurisdiction for the appointment of, a Mortgage Loan servicing institution with
a net worth of at least $10,000,000 to act as successor to the Master Servicer
under the Agreement. Pending such appointment, the Trustee is obligated to act
in such capacity. The Trustee and any such successor may agree upon the
servicing compensation to be paid, which in no event may be greater than the
compensation payable to the Master Servicer under the Agreement.
Except as otherwise specified in the related Agreement, no
Certificateholder, solely by virtue of such holder's status as a
Certificateholder, will have any right under any Agreement to institute any
proceeding with respect to such Agreement, unless such holder previously has
given to the Trustee written notice of default and unless the holders of
Certificates of any class of such Series evidencing not less than 25% of the
aggregate Percentage Interests constituting such class have made written
request upon the Trustee to institute such proceeding in its own name as
Trustee thereunder and have offered to the Trustee reasonable indemnity, and
the Trustee for 60 days has neglected or refused to institute any such
proceeding.
AMENDMENT
Unless otherwise specified in the Prospectus Supplement, each Agreement
may be amended by the Seller, each Master Servicer and the Trustee, without the
consent of any of the Certificateholders, (i) to cure any ambiguity; (ii) to
correct or supplement any provision therein which may be defective or
inconsistent with any
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other provision therein; or (iii) to make any other revisions with respect to
matters or questions arising under the Agreement which are not inconsistent
with the provisions thereof, provided that such action will not adversely
affect in any material respect the interests of any Certificateholder. In
addition, to the extent provided in the related Agreement, an Agreement may be
amended without the consent of any of the Certificateholders, to change the
manner in which the Certificate Account, the Protected Account or any other
Accounts are maintained, provided that any such change does not adversely
affect the then current rating on the class or classes of Certificates of such
Series that have been rated. In addition, if a REMIC election is made with
respect to a Trust Fund, the related Agreement may be amended to modify,
eliminate or add to any of its provisions to such extent as may be necessary to
maintain the qualification of the related Trust Fund as a REMIC, provided that
the Trustee has received an opinion of counsel to the effect that such action
is necessary or helpful to maintain such qualification. Unless otherwise
specified in the Prospectus Supplement, each Agreement may also be amended by
the Seller, each Master Servicer and the Trustee with consent of holders of
Certificates of such Series evidencing not less than 66% of the aggregate
Percentage Interests of each class affected thereby for the purpose of adding
any provisions to or changing in any manner or eliminating any of the
provisions of the Agreement or of modifying in any manner the rights of the
holders of the related Certificates; provided, however, that no such amendment
may (i) reduce in any manner the amount of or delay the timing of, payments
received on Mortgage Assets which are required to be distributed on any
Certificate without the consent of the holder of such Certificate, or (ii)
reduce the aforesaid percentage of Certificates of any class of holders which
are required to consent to any such amendment without the consent of the
holders of all Certificates of such class covered by such Agreement then
outstanding. If a REMIC election is made with respect to a Trust Fund, the
Trustee will not be entitled to consent to an amendment to the related
Agreement without having first received an opinion of counsel to the effect
that such amendment will not cause such Trust Fund to fail to qualify as a
REMIC.
TERMINATION; OPTIONAL TERMINATION
Unless otherwise specified in the related Agreement, the obligations
created by each Agreement for each Series of Certificates will terminate upon
the payment to the related Certificateholders of all amounts held in any
Accounts or by the Master Servicer and required to be paid to them pursuant to
such Agreement following the later of (i) the final payment or other
liquidation of the last of the Mortgage Assets subject thereto or the
disposition of all property acquired upon foreclosure or deed in lieu of
foreclosure of any such Mortgage Assets remaining in the Trust Fund and (ii)
the purchase by the Master Servicer or other entity specified in the related
Prospectus Supplement including, if REMIC treatment has been elected, by the
holder of the residual interest in the REMIC (see "Certain Federal Income Tax
Consequences" below), from the related Trust Fund of all of the remaining
Mortgage Assets and all property acquired in respect of such Mortgage Assets.
Unless otherwise specified in the related Prospectus Supplement, any such
purchase of Mortgage Assets and property acquired in respect of Mortgage Assets
evidenced by a Series of Certificates will be made at the option of the Master
Servicer or other entity at a price, and in accordance with the procedures,
specified in the Prospectus Supplement. The exercise of such right will effect
early retirement of the Certificates of that Series, but the right of the
Master Servicer or other entity to so purchase is subject to the principal
balance of the related Mortgage Assets being less than the percentage specified
in the related Prospectus Supplement of the aggregate principal balance of the
Mortgage Assets at the Cut-off Date for the Series. The foregoing is subject to
the provision that if a REMIC election is made with respect to a Trust Fund,
any repurchase pursuant to clause (ii) above will be made only in connection
with a "qualified liquidation" of the REMIC within the meaning of Section
860F(g)(4) of the Code.
THE TRUSTEE
The Trustee under each Agreement will be named in the applicable
Prospectus Supplement. The commercial bank or trust company serving as Trustee
may have normal banking relationships with the Seller, each Master Servicer and
any of their respective affiliates.
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CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS
The following discussion contains summaries, which are general in nature,
of certain legal matters relating to the Mortgage Loans. Because such legal
aspects are governed primarily by applicable state law (which laws may differ
substantially), the summaries do not purport to be complete or to reflect the
laws of any particular state, or to encompass the laws of all states in which
the security for the Mortgage Loans is situated. The summaries are qualified in
their entirety by reference to the appropriate laws of the states in which
Mortgage Loans may be originated.
GENERAL
SINGLE FAMILY LOANS AND MULTIFAMILY LOANS. The Single Family Loans and
Multifamily Loans will be secured by mortgages, deeds of trust, security deeds
or deeds to secure debt, depending upon the prevailing practice in the state in
which the property subject to the loan is located. A mortgage creates a lien
upon the real property encumbered by the mortgage, which lien is generally not
prior to the lien for real estate taxes and assessments. Priority between
mortgages depends on their terms and generally on the order of recording with a
state or county office. There are two parties to a mortgage, the mortgagor, who
is the borrower and owner of the mortgaged property, and the mortgagee, who is
the lender. The mortgagor delivers to the mortgagee a note or bond and the
mortgage. Although a deed of trust is similar to a mortgage, a deed of trust
formally has three parties, the borrower-property owner called the trustor
(similar to a mortgagor), a lender (similar to a mortgagee) called the
beneficiary, and a third-party grantee called the trustee. Under a deed of
trust, the borrower grants the property, irrevocably until the debt is paid, in
trust, generally with a power of sale, to the trustee to secure payment of the
obligation. A security deed and a deed to secure debt are special types of
deeds which indicate on their face that they are granted to secure an
underlying debt. By executing a security deed or deed to secure debt, the
grantor conveys title to, as opposed to merely creating a lien upon, the
subject property to the grantee until such time as the underlying debt is
repaid. The mortgagee's authority under a mortgage, the trustee's authority
under a deed of trust and the grantee's authority under a security deed or deed
to secure debt are governed by law and, with respect to some deeds of trust,
the directions of the beneficiary.
CONDOMINIUMS. Certain of the Mortgage Loans may be loans secured by
condominium units. The condominium building may be a multi-unit building or
buildings, or a group of buildings whether or not attached to each other,
located on property subject to condominium ownership. Condominium ownership is
a form of ownership of real property wherein each owner is entitled to the
exclusive ownership and possession of his or her individual condominium unit
and also owns a proportionate undivided interest in all parts of the
condominium building (other than the individual condominium units) and all
areas or facilities, if any, for the common use of the condominium units. The
condominium unit owners appoint or elect the condominium association to govern
the affairs of the condominium.
COOPERATIVES. Certain of the Mortgage Loans may be Cooperative Loans. The
Cooperative (i) owns all the real property that comprises the project,
including the land and the apartment building comprised of separate dwelling
units and common areas or (ii) leases the land generally by a long-term ground
lease and owns the apartment building. The Cooperative is directly responsible
for project management and, in most cases, payment of real estate taxes and
hazard and liability insurance. If there is a blanket mortgage on the
Cooperative and/or underlying land, as is generally the case, the Cooperative,
as project mortgagor, is also responsible for meeting these mortgage
obligations. A blanket mortgage is ordinarily incurred by the Cooperative in
connection with the construction or purchase of the Cooperative's apartment
building. The interest of the occupants under proprietary leases or occupancy
agreements to which the Cooperative is a party are generally subordinate to the
interest of the holder of the blanket mortgage in that building. If the
Cooperative is unable to meet the payment obligations arising under its blanket
mortgage, the mortgagee holding the blanket mortgage could foreclose on that
mortgage and terminate all subordinate proprietary leases and occupancy
agreements. In addition, the blanket mortgage on a Cooperative may provide
financing in the form of a mortgage that does not fully amortize with a
significant portion of principal being due in one lump sum at final maturity.
The inability of the Cooperative to refinance this mortgage and its consequent
inability to make such final payment could lead to foreclosure by the mortgagee
providing the financing. A foreclosure in either event by the holder of the
blanket mortgage could eliminate or significantly diminish the value of any
collateral held by the lender who financed the purchase by
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an individual tenant-stockholder of Cooperative shares or, in the case of a
Trust Fund including Cooperative Loans, the collateral securing the Cooperative
Loans.
The Cooperative is owned by tenant-stockholders who, through ownership of
stock, shares or membership certificates in the corporation, receive
proprietary leases or occupancy agreements which confer exclusive rights to
occupy specific units. Generally, a tenant-stockholder of a Cooperative must
make a monthly payment to the Cooperative representing such
tenant-stockholder's pro rata share of the Cooperative's payments for its
blanket mortgage, real property taxes, maintenance expenses and other capital
or ordinary expenses. An ownership interest in a Cooperative and accompanying
rights is financed through a Cooperative share loan evidenced by a promissory
note and secured by a security interest in the occupancy agreement or
proprietary lease and in the related Cooperative shares. The lender takes
possession of the share certificate and a counterpart of the proprietary lease
or occupancy agreement, and a financing statement covering the proprietary
lease or occupancy agreement and the Cooperative shares is filed in the
appropriate state and local offices to perfect the lender's interest in its
collateral. Subject to the limitations discussed below, upon default of the
tenant-stockholder, the lender may sue for judgment on the promissory note,
dispose of the collateral at a public or private sale or otherwise proceed
against the collateral or tenant-stockholder as an individual as provided in
the security agreement covering the assignment of the proprietary lease or
occupancy agreement and the pledge of Cooperative shares.
CONTRACTS. Each Contract evidences both (a) the obligation of the obligor
to repay the loan evidenced thereby, and (b) the grant of a security interest
in the Manufactured Home to secure repayment of such loan. The Contracts
generally are "chattel paper" as defined in the UCC in effect in the states in
which the Manufactured Homes initially were registered. Pursuant to the UCC,
the rules governing the sale of chattel paper are similar to those governing
the perfection of a security interest in chattel paper. Unless otherwise
specified in the Prospectus Supplement, under the Agreement, the Seller will
transfer or cause the transfer of physical possession of the Contracts to the
Trustee or its custodian. In addition the Seller will make or cause to be made
an appropriate filing of a UCC-1 financing statement in the appropriate states
to give notice of the Trustee's ownership of the Contracts.
Under the laws of most states, manufactured housing constitutes personal
property and is subject to the motor vehicle registration laws of the state or
other jurisdiction in which the unit is located. In a few states, where
certificates of title are not required for Manufactured Homes, security
interests are perfected by the filing of a financing statement under Article 9
of the UCC. Such financing statements are effective for five years and must be
renewed at the end of each five years. The certificate of title laws adopted by
the majority of states provide that ownership of motor vehicles and
manufactured housing shall be evidenced by a certificate of title issued by the
motor vehicles department (or a similar entity) of such state. In the states
which have enacted certificate of title laws, a security interest in a unit of
manufactured housing, so long as it is not attached to land in so permanent a
fashion as to become a fixture, is generally perfected by the recording of such
interest on the certificate of title to the unit in the appropriate motor
vehicle registration office or by delivery of the required documents and
payment of a fee to such office, depending on state law. Unless otherwise
specified in the related Prospectus Supplement, the Master Servicer will be
required to effect such notation or delivery of the required documents and
fees, and to obtain possession of the certificate of title, as appropriate
under the laws of the state in which any Manufactured Home is registered. If
the Master Servicer fails, due to clerical errors or otherwise, to effect such
notation or delivery, or files the security interest under the wrong law (for
example, under a motor vehicle title statute rather than under the UCC, in a
few states), the Trustee may not have a first priority security interest in the
Manufactured Home securing a Contract.
As manufactured homes have become larger and often have been attached to
their sites without any apparent intention to move them, courts in many states
have held that manufactured homes may, under certain circumstances, become
subject to real estate title and recording laws. As a result, a security
interest in a manufactured home could be rendered subordinate to the interests
of other parties claiming an interest in the home under applicable state real
estate law. In order to perfect a security interest in a Manufactured Home
under real estate laws, the holder of the security interest must file either a
"fixture filing" under the provisions of the UCC or a real estate mortgage
under the real estate laws of the state where the home is located. These
filings must be made in the real estate records office of the county where the
home is located. Generally, Contracts will contain provisions prohibiting the
obligor from permanently attaching the Manufactured Home to its site. So long
as the obligor does not violate this agreement, a security interest in the
Manufactured Home will be governed by the certificate of title laws or the UCC,
and the notation of the security interest on the certificate of title or
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the filing of a UCC financing statement will be effective to maintain the
priority of the security interest in the Manufactured Home. If, however, a
Manufactured Home is permanently attached to its site, other parties could
obtain an interest in the Manufactured Home which is prior to the security
interest originally retained by the Seller and transferred to the Seller.
The Seller will assign or cause to be assigned a security interest in the
Manufactured Homes to the Trustee, on behalf of the Certificateholders. Unless
otherwise specified in the related Prospectus Supplement, neither the Seller,
the Master Servicer nor the Trustee will amend the certificates of title to
identify the Trustee, on behalf of the Certificateholders, as the new secured
party and, accordingly, the Seller or the Lender will continue to be named as
the secured party on the certificates of title relating to the Manufactured
Homes. In most states, such assignment is an effective conveyance of such
security interest without amendment of any lien noted on the related
certificate of title and the new secured party succeeds to the Seller's rights
as the secured party. However, in some states there exists a risk that, in the
absence of an amendment to the certificate of title, such assignment of the
security interest might not be held effective against creditors of the Seller
or Lender.
In the absence of fraud, forgery or permanent affixation of the
Manufactured Home to its site by the Manufactured Home owner, or administrative
error by state recording officials, the notation of the lien of the Trustee on
the certificate of title or delivery of the required documents and fees should
be sufficient to protect the Trustee against the rights of subsequent
purchasers of a Manufactured Home or subsequent lenders who take a security
interest in the Manufactured Home. If there are any Manufactured Homes as to
which the security interest assigned to the Seller and the Trustee is not
perfected, such security interest would be subordinate to, among others,
subsequent purchasers for value of Manufactured Homes and holders of perfected
security interests. There also exists a risk in not identifying the Trustee, on
behalf of the Certificateholders as the new secured party on the certificate of
title that, through fraud or negligence, the security interest of the Trustee
could be released.
If the owner of a Manufactured Home moves it to a state other than the
state in which such Manufactured Home initially is registered, under the laws
of most states the perfected security interest in the Manufactured Home would
continue for four months after such relocation and thereafter until the owner
re-registers the Manufactured Home in such state. If the owner were to relocate
a Manufactured Home to another state and re-register the Manufactured Home in
such state, and if steps are not taken to re-perfect the Trustee's security
interest in such state, the security interest in the Manufactured Home would
cease to be perfected. A majority of states generally require surrender of a
certificate of title to re-register a Manufactured Home; accordingly, the
Trustee must surrender possession if it holds the certificate of title to such
Manufactured Home or, in the case of Manufactured Homes registered in states
which provide for notation of lien, the Master Servicer would receive notice of
surrender if the security interest in the Manufactured Home is noted on the
certificate of title. Accordingly, the Trustee would have the opportunity to
re-perfect its security interest in the Manufactured Home in the state of
relocation. In states which do not require a certificate of title for
registration of a Manufactured Home, re-registration could defeat perfection.
Similarly, when an obligor under a manufactured housing conditional sales
contract sells a Manufactured Home, the obligee must surrender possession of
the certificate of title or it will receive notice as a result of its lien
noted thereon and accordingly will have an opportunity to require satisfaction
of the related manufactured housing conditional sales contract before release
of the lien. The Master Servicer will be obligated to take such steps, at the
Master Servicer's expense, as are necessary to maintain perfection of security
interests in the Manufactured Homes.
Under the laws of most states, liens for repairs performed on a
Manufactured Home take priority even over a perfected security interest. The
Seller will obtain the representation of the Lender that it has no knowledge of
any such liens with respect to any Manufactured Home securing a Contract.
However, such liens could arise at any time during the term of a Contract. No
notice will be given to the Trustee or Certificateholders in the event such a
lien arises.
FORECLOSURE/REPOSSESSION
SINGLE FAMILY LOANS AND MULTIFAMILY LOANS. Foreclosure of a deed of trust
is generally accomplished by a non-judicial sale under a specific provision in
the deed of trust which authorizes the trustee to sell the property at public
auction upon any default by the borrower under the terms of the note or deed of
trust. In some states, the trustee must record a notice of default and send a
copy to the borrower-trustor, to any person who has
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recorded a request for a copy of any notice of default and notice of sale, to
any successor in interest to the borrower-trustor, to the beneficiary of any
junior deed of trust and to certain other persons. Before such non-judicial
sale takes place, typically a notice of sale must be posted in a public place
and published during a specific period of time in one or more newspapers,
posted on the property, and sent to parties having an interest of record in the
property.
Foreclosure of a mortgage is generally accomplished by judicial action.
The action is initiated by the service of legal pleadings upon all parties
having an interest in the real property. Delays in completion of the
foreclosure may occasionally result from difficulties in locating necessary
parties. When the mortgagee's right to foreclosure is contested, the legal
proceedings necessary to resolve the issue can be time-consuming. After the
completion of a judicial foreclosure proceeding, the court generally issues a
judgment of foreclosure and appoints a referee or other court officer to
conduct the sale of the property. In general, the borrower, or any other person
having a junior encumbrance on the real estate, may, during a statutorily
prescribed reinstatement period, cure a monetary default by paying the entire
amount in arrears plus other designated costs and expenses incurred in
enforcing the obligation. Generally, state law controls the amount of
foreclosure expenses and costs, including attorney's fees, which may be
recovered by a lender. After the reinstatement period has expired without the
default having been cured, the borrower or junior lienholder no longer has the
right to reinstate the loan and must pay the loan in full to prevent the
scheduled foreclosure sale. If the mortgage is not reinstated, a notice of sale
must be posted in a public place and, in most states, published for a specific
period of time in one or more newspapers. In addition, some state laws require
that a copy of the notice of sale be posted on the property and sent to all
parties having an interest in the real property.
Although foreclosure sales are typically public sales, frequently no
third party purchaser bids in excess of the lender's lien because of the
difficulty of determining the exact status of title to the property, the
possible deterioration of the property during the foreclosure proceedings and a
requirement that the purchaser pay for the property in cash or by cashier's
check. Thus the foreclosing lender often purchases the property from the
trustee or referee for an amount equal to the principal amount outstanding
under the loan, accrued and unpaid interest and the expenses of foreclosure.
Thereafter, the lender will assume the burden of ownership, including obtaining
hazard insurance and making such repairs at its own expense as are necessary to
render the property suitable for sale. The lender will commonly obtain the
services of a real estate broker and pay the broker's commission in connection
with the sale of the property. Depending upon market conditions, the ultimate
proceeds of the sale of the property may not equal the lender's investment in
the property.
Courts have imposed general equitable principles upon foreclosure, which
are generally designed to mitigate the legal consequences to the borrower of
the borrower's defaults under the loan documents. Some courts have been faced
with the issue of whether federal or state constitutional provisions reflecting
due process concerns for fair notice require that borrowers under deeds of
trust receive notice longer than that prescribed by statute. For the most part,
these cases have upheld the notice provisions as being reasonable or have found
that the sale by a trustee under a deed of trust does not involve sufficient
state action to afford constitutional protection to the borrower.
In the case of foreclosure on a building which was converted from a
rental building to a building owned by a Cooperative under a non-eviction plan,
some states require that a purchaser at a foreclosure sale take the property
subject to rent control and rent stabilization laws which apply to certain
tenants who elected to remain in the building but who did not purchase shares
in the Cooperative when the building was so converted.
COOPERATIVE LOANS. The Cooperative shares owned by the tenant-stockholder
and pledged to the lender are, in almost all cases, subject to restrictions on
transfer as set forth in the Cooperative's Certificate of Incorporation and
Bylaws, as well as the proprietary lease or occupancy agreement, and may be
canceled by the Cooperative for failure by the tenant-stockholder to pay rent
or other obligations or charges owed by such tenant-stockholder, including
mechanics' liens against the cooperative apartment building incurred by such
tenant-stockholder. The proprietary lease or occupancy agreement generally
permits the Cooperative to terminate such lease or agreement in the event an
obligor fails to make payments or defaults in the performance of covenants
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required thereunder. Typically, the lender and the Cooperative enter into a
recognition agreement which establishes the rights and obligations of both
parties in the event of a default by the tenant-stockholder on its obligations
under the proprietary lease or occupancy agreement. A default by the
tenant-stockholder under the proprietary lease or occupancy agreement will
usually constitute a default under the security agreement between the lender
and the tenant-stockholder.
The recognition agreement generally provides that, in the event that the
tenant-stockholder has defaulted under the proprietary lease or occupancy
agreement, the Cooperative will take no action to terminate such lease or
agreement until the lender has been provided with an opportunity to cure the
default. The recognition agreement typically provides that if the proprietary
lease or occupancy agreement is terminated, the Cooperative will recognize the
lender's lien against proceeds from the sale of the Cooperative apartment,
subject, however, to the Cooperative's right to sums due under such proprietary
lease or occupancy agreement. The total amount owed to the Cooperative by the
tenant-stockholder, which the lender generally cannot restrict and does not
monitor, could reduce the value of the collateral below the outstanding
principal balance of the Cooperative Loan and accrued and unpaid interest
thereon.
Recognition agreements also provide that in the event of a foreclosure on
a Cooperative Loan, the lender must obtain the approval or consent of the
Cooperative as required by the proprietary lease before transferring the
Cooperative shares or assigning the proprietary lease.
In some states, foreclosure on the Cooperative shares is accomplished by
a sale in accordance with the provisions of Article 9 of the UCC and the
security agreement relating to those shares. Article 9 of the UCC requires that
a sale be conducted in a "commercially reasonable" manner. Whether a
foreclosure sale has been conducted in a "commercially reasonable" manner will
depend on the facts in each case. In determining commercial reasonableness, a
court will look to the notice given the debtor and the method, manner, time,
place and terms of the foreclosure. Generally, a sale conducted according to
the usual practice of banks selling similar collateral will be considered
reasonably conducted.
Article 9 of the UCC provides that the proceeds of the sale will be
applied first to pay the costs and expenses of the sale and then to satisfy the
indebtedness secured by the lender's security interest. The recognition
agreement, however, generally provides that the lender's right to reimbursement
is subject to the right of the Cooperative to receive sums due under the
proprietary lease or occupancy agreement. If there are proceeds remaining, the
lender must account to the tenant-stockholder for the surplus. Conversely, if a
portion of the indebtedness remains unpaid, the tenant-stockholder is generally
responsible for the deficiency. See "Anti-Deficiency Legislation and Other
Limitations on Lenders" below.
CONTRACTS. The Master Servicer on behalf of the Trustee, to the extent
required by the related agreement, may take action to enforce the Trustee's
security interest with respect to Contracts in default by repossession and
resale of the Manufactured Homes securing such Contracts in default. So long as
the Manufactured Home has not become subject to the real estate law, a creditor
can repossess a Manufactured Home securing a Contract by voluntary surrender,
by "self-help" repossession that is "peaceful" (I.E., without breach of the
peace) or, in the absence of voluntary surrender and the ability to repossess
without breach of the peace, by judicial process. The holder of a Contract must
give the debtor a number of days' notice, generally varying from 10 to 30 days
depending on the state, prior to commencement of any repossession. The UCC and
consumer protection laws in most states place restrictions on repossession
sales, including requiring prior notice to the debtor and commercial
reasonableness in effecting such a sale. The law in most states also requires
that the debtor be given notice of any sale prior to resale of the unit so that
the debtor may redeem at or before such resale. In the event of such
repossession and resale of a Manufactured Home, the Trustee would be entitled
to be paid out of the sale proceeds before such proceeds could be applied to
the payment of the claims of unsecured creditors or the holders of subsequently
perfected security interests or, thereafter, to the debtor.
Under the laws applicable in most states, a creditor is entitled to
obtain a deficiency judgment from a debtor for any deficiency on repossession
and resale of the Manufactured Home securing such a debtor's loan. However,
some states impose prohibitions or limitations on deficiency judgments.
Certain other statutory provisions, including federal and state
bankruptcy and insolvency laws and general equitable principles, may limit or
delay the ability of a lender to repossess and resell collateral.
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RIGHTS OF REDEMPTION
SINGLE FAMILY LOANS AND MULTIFAMILY LOANS. In some states, after sale
pursuant to a deed of trust or foreclosure of a mortgage, the borrower and
foreclosed junior lienors are given a statutory period in which to redeem the
property from the foreclosure sale. In some states, redemption may occur only
upon payment of the entire principal balance of the loan, accrued interest and
expenses of foreclosure. In other states, redemption may be authorized if the
former borrower pays only a portion of the sums due. The effect of a statutory
right of redemption would defeat the title of any purchaser from the lender
subsequent to foreclosure or sale under a deed of trust. Consequently, the
practical effect of the redemption right is to force the lender to retain the
property and pay the expenses of ownership until the redemption period has run.
CONTRACTS. While state laws do not usually require notice to be given
debtors prior to repossession, many states do require delivery of a notice of
default and of the debtor's right to cure defaults before repossession. The law
in most states also requires that the debtor be given notice of sale prior to
the resale of the home so that the owner may redeem at or before resale. In
addition, the sale must comply with the requirements of the UCC. Manufactured
Homes are most often resold through private sale.
ANTI-DEFICIENCY LEGISLATION AND OTHER LIMITATIONS ON LENDERS
Certain states have adopted statutory prohibitions restricting the right
of the beneficiary or mortgagee to obtain a deficiency judgment against
borrowers financing the purchase of their residence or following sale under a
deed of trust or certain other foreclosure proceedings. A deficiency judgment
is a personal judgment against the borrower equal in most cases to the
difference between the amount due to the lender and the fair market value of
the real property sold at the foreclosure sale. As a result of these
prohibitions, it is anticipated that in many instances the Master Servicer will
not seek deficiency judgments against defaulting mortgagors. Under the laws
applicable in most states, a creditor is entitled to obtain a deficiency
judgment for any deficiency following possession and resale of a Manufactured
Home. However, some states impose prohibitions or limitations on deficiency
judgments in such cases.
In addition to anti-deficiency and related legislation, numerous other
federal and state statutory provisions, including the federal bankruptcy laws
and state laws affording relief to debtors, may interfere with or affect the
ability of the secured mortgage lender to realize upon its security. For
example, in a proceeding under the federal Bankruptcy Code, a lender may not
foreclose on a mortgaged property without the permission of the bankruptcy
court. The rehabilitation plan proposed by the debtor may provide, if the court
determines that the value of the mortgaged property is less than the principal
balance of the mortgage loan, for the reduction of the secured indebtedness to
the value of the mortgaged property as of the date of the commencement of the
bankruptcy, rendering the lender a general unsecured creditor for the
difference, and also may reduce the monthly payments due under such mortgage
loan, change the rate of interest and alter the mortgage loan repayment
schedule. The effect of any such proceedings under the federal Bankruptcy Code,
including but not limited to any automatic stay, could result in delays in
receiving payments on the Mortgage Loans underlying a Series of Certificates
and possible reductions in the aggregate amount of such payments. Some states
also have homestead exemption laws which would protect a principal residence
from a liquidation in bankruptcy.
Federal and local real estate tax laws provide priority to certain tax
liens over the lien of a mortgage or secured party. Numerous federal and state
consumer protection laws impose substantive requirements upon mortgage lenders
and manufactured housing lenders in connection with the origination, servicing
and enforcement of Single Family Loans, Cooperative Loans and Contracts. These
laws include the federal Truth-in-Lending Act, Real Estate Settlement
Procedures Act, Equal Credit Opportunity Act, Fair Credit Billing Act, Fair
Credit Reporting Act and related statutes and regulations. These federal and
state laws impose specific statutory liabilities upon lenders who fail to
comply with the provisions of the law. In some cases, this liability may affect
assignees of the loans or contracts.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade Commission
(the "FTC Rule") has the effect of subjecting a seller (and certain related
creditors and their assignees) in a consumer credit transaction and any
assignee of the creditor to all claims and defenses which the debtor in the
transaction could assert against the seller of the goods. Liability under the
FTC Rule is limited to the amounts paid by a debtor on the contract, and the
holder of the contract may also be unable to collect amounts still due
thereunder.
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Most of the Contracts in a Mortgage Pool will be subject to the
requirements of the FTC Rule. Accordingly, the Trustee, as holder of the
Contracts, will be subject to any claims or defenses that the purchaser of the
related Manufactured Home may assert against the seller of the Manufactured
Home, subject to a maximum liability equal to the amounts paid by the obligor
on the Contract. If an obligor is successful in asserting any such claim or
defense, and if the Lender had or should have had knowledge of such claim or
defense, the Master Servicer will have the right to require the Lender to
repurchase the Contract because of a breach of its representation and warranty
that no claims or defenses exist which would affect the obligor's obligation to
make the required payments under the Contract.
Generally, Article 9 of the UCC governs foreclosure on Cooperative shares
and the related proprietary lease or occupancy agreement. Some courts have
interpreted section 9-504 of the UCC to prohibit a deficiency award unless the
creditor establishes that the sale of the collateral (which, in the case of a
Cooperative Loan, would be the shares of the Cooperative and the related
proprietary lease or occupancy agreement) was conducted in a commercially
reasonable manner.
DUE-ON-SALE CLAUSES
Unless otherwise provided in the related Prospectus Supplement, each
conventional Mortgage Loan will contain a due-on-sale clause which will
generally provide that if the mortgagor or obligor sells, transfers or conveys
the Mortgaged Property, the loan or contract may be accelerated by the
mortgagor or secured party. The Garn-St Germain Depository Institutions Act of
1982 (the "Garn-St Germain Act"), subject to certain exceptions, preempts state
constitutional, statutory and case law prohibiting the enforcement of
due-on-sale clauses. As to loans secured by an owner-occupied residence (which
would include a Manufactured Home), the Garn-St Germain Act sets forth nine
specific instances in which a mortgagee covered by the Act may not exercise its
rights under a due-on-sale clause, notwithstanding the fact that a transfer of
the property may have occurred. The inability to enforce a due-on-sale clause
may result in transfer of the related Mortgaged Property to an uncreditworthy
person, which could increase the likelihood of default.
PREPAYMENT CHARGES
Under certain state laws, prepayment charges may not be imposed after a
certain period of time following origination of Single Family Loans,
Cooperative Loans or Contracts with respect to prepayments on loans secured by
liens encumbering owner-occupied residential properties. Since many of the
Mortgaged Properties will be owner-occupied, it is anticipated that prepayment
charges may not be imposed with respect to many of the Single Family Loans,
Cooperative Loans and Contracts. The absence of such a restraint on prepayment,
particularly with respect to fixed rate Single Family Loans, Cooperative Loans
or Contracts having higher Mortgage Rates or APR's, may increase the likelihood
of refinancing or other early retirement of such loans or contracts. Legal
restrictions, if any, on prepayment of Multifamily Loans will be described in
the related Prospectus Supplement.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980, enacted in March 1980 ("Title V"), provides that state usury
limitations shall not apply to certain types of residential first mortgage
loans originated by certain lenders after March 31, 1980. The Office of Thrift
Supervision, as successor to the Federal Home Loan Bank Board, is authorized to
issue rules and regulations and to publish interpretations governing
implementation of Title V. The statute authorized the states to reimpose
interest rate limits by adopting, before April 1, 1983, a law or constitutional
provision which expressly rejects an application of the federal law. In
addition, even where Title V is not so rejected, any state is authorized by the
law to adopt a provision limiting discount points or other charges on mortgage
loans covered by Title V. Certain states have taken action to reimpose interest
rate limits and/or to limit discount points or other charges.
Title V also provides that, subject to the following conditions, state
usury limitations will not apply to any loan which is secured by a first lien
on certain kinds of manufactured housing. The Contracts would be covered if
they satisfy certain conditions, among other things, governing the terms of any
prepayment, late charges and deferral fees and requiring a 30-day notice period
prior to instituting any action leading to repossession of
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or foreclosure with respect to the related unit. Title V authorized any state
to reimpose limitations on interest rates and finance charges by adopting
before April 1, 1983 a law or constitutional provision which expressly rejects
application of the federal law. Fifteen states adopted such a law prior to the
April 1, 1983 deadline. In addition, even where Title V was not so rejected,
any state is authorized by the law to adopt a provision limiting discount
points or other charges on loans covered by Title V. In any state in which
application of Title V was expressly rejected or a provision limiting discount
points or other charges has been adopted, no Contract which imposes finance
charges or provides for discount points or charges in excess of permitted
levels will be included in any Trust Fund.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT
Generally, under the terms of the Soldiers' and Sailors' Civil Relief Act
of 1940, as amended (the "Relief Act"), a borrower who enters military service
after the origination of such borrower's mortgage loan (including a borrower
who is a member of the National Guard or is in reserve status at the time of
the origination of the mortgage loan and is later called to active duty) may
not be charged interest above an annual rate of 6% during the period of such
borrower's active duty status, unless a court orders otherwise upon application
of the lender. It is possible that such interest rate limitation could have an
effect, for an indeterminate period of time, on the ability of the Master
Servicer to collect full amounts of interest on certain of the Mortgage Loans.
Unless otherwise provided in the applicable Prospectus Supplement, any
shortfall in interest collections resulting from the application of the Relief
Act could result in losses to the holders of the Certificates. In addition, the
Relief Act imposes limitations which would impair the ability of the Master
Servicer to foreclose on an affected Mortgage Loan during the borrower's period
of active duty status. Thus, in the event that such a Mortgage Loan goes into
default, there may be delays and losses occasioned by the inability to realize
upon the Mortgaged Property in a timely fashion.
PRODUCT LIABILITY AND RELATED LITIGATION
Certain environmental and product liability claims may be asserted
alleging personal injury or property damage from the existence of certain
chemical substances which may be present in building materials. For example,
formaldehyde and asbestos have been and in some cases are incorporated into
many building materials utilized in manufactured and other housing. As a
consequence, lawsuits may arise from time to time asserting claims against
manufacturers or builders of the housing, suppliers of component parts, and
related persons in the distribution process. Plaintiffs have won such judgments
in certain such lawsuits.
Under the FTC Rule described above, the holder of any Contract secured by
a Manufactured Home with respect to which a product liability claim has been
successfully asserted may be liable to the obligor for the amount paid by the
obligor on the related Contract and may be unable to collect amounts still due
under the Contract. Unless otherwise described in the related Prospectus
Supplement, the successful assertion of such claim constitutes a breach of a
representation or warranty of the Lender, and the Certificateholders would
suffer a loss only to the extent that (i) the Lender breached its obligation to
repurchase the Contract in the event an obligor is successful in asserting such
a claim, and (ii) the Lender, the Seller or the Trustee were unsuccessful in
asserting any claim of contribution or subrogation on behalf of the
Certificateholders against the manufacturer or other persons who were directly
liable to the plaintiff for the damages. Typical products liability insurance
policies held by manufacturers and component suppliers of manufactured homes
may not cover liabilities arising from formaldehyde and certain other chemicals
in manufactured housing, with the result that recoveries from such
manufacturers, suppliers or other persons may be limited to their corporate
assets without the benefit of insurance.
To the extent described in the Prospectus Supplement, the Mortgage Loans
may include installment sales contracts entered into with the builders of the
homes located on the Mortgaged Properties. The Mortgagors in some instances may
have claims and defenses against the builders which could be asserted against
the Trust Fund.
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ENVIRONMENTAL CONSIDERATIONS
Environmental conditions may diminish the value of the Mortgage Assets
and give rise to liability of various parties. There are many federal and state
environmental laws concerning hazardous waste, hazardous substances, gasoline,
radon and other materials which may affect the property securing the Mortgage
Assets. For example, under the federal Comprehensive Environmental Response
Compensation and Liability Act, as amended, and possibly under state law in
certain states, a secured party which takes a deed in lieu of foreclosure or
purchases a mortgaged property at a foreclosure sale may become liable in
certain circumstances for the costs of a remedial action ("Cleanup Costs") if
hazardous wastes or hazardous substances have been released or disposed of on
the property. Such Cleanup Costs may be substantial. It is possible that such
costs could become a liability of the Trust Fund and reduce the amounts
otherwise distributable to the Certificateholders if a Mortgaged Property
securing a Mortgage Loan became the property of the Trust Fund in certain
circumstances and if such Cleanup Costs were incurred. Moreover, certain states
by statute impose a lien for any Cleanup Costs incurred by such state on the
property that is the subject of such Cleanup Costs (a "Superlien"). All
subsequent liens on such property are subordinated to such Superlien and, in
some states, even prior recorded liens are subordinated to such Superliens. In
the latter states, the security interest of the Trustee in a property that is
subject to such a Superlien could be adversely affected.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain of the anticipated
federal income tax consequences of the purchase, ownership and disposition of
the Certificates offered hereby. The discussion, and the opinions referred to
below, are based on laws, regulations, rulings and decisions now in effect (or,
in the case of certain regulations, proposed), all of which are subject to
change or possibly differing interpretations. Because tax consequences may vary
based upon the status or tax attributes of the owner of a Certificate,
prospective investors should consult their own tax advisors in determining the
federal, state, local and other tax consequences to them of the purchase,
ownership and disposition of Certificates. For purposes of this tax discussion
(except with respect to information reporting, or where the context indicates
otherwise), the terms "Certificateholder" and "holder" mean the beneficial
owner of a Certificate and the term "Mortgage Loan" includes Agency Securities
and Private Mortgage-Backed Securities.
REMIC ELECTIONS
Under the Code, an election may be made with respect to each Trust Fund
related to a series of Certificates to treat such Trust Fund or certain assets
of such Trust Fund as a REMIC. The Prospectus Supplement for each series of
Certificates will indicate whether a REMIC election will be made with respect
to the related Trust Fund. To the extent provided in the Prospectus Supplement
for a series, Certificateholders may also have the benefit of a Reserve Account
and of certain agreements (each, a "Yield Supplement Agreement") under which
payment will be made from the Reserve Account in the event that interest
accrued on the Mortgage Loans at their Mortgage Rates is insufficient to pay
interest on the Certificates of such Series (a "Basis Risk Shortfall"). If a
REMIC election is to be made, the Prospectus Supplement will designate the
Certificates of such series or the interests composing such Certificates as
"regular interests" ("REMIC Regular Certificates," which where the context so
requires includes a reference to each interest composing a Certificate where
such interest has been designated as a regular interest, in lieu of such
Certificates) in the REMIC (within the meaning of Section 860G(a)(l) of the
Code) or as the REMIC Residual Certificates in the REMIC (within the meaning of
Section 860G(a)(2) of the Code). The terms "REMIC Certificates" and "Non-REMIC
Certificates" denote, respectively, Certificates (or the interests composing
Certificates) of a series with respect to which a REMIC election will, or will
not, be made. The discussion below is divided into two parts, the first part
applying only to REMIC Certificates and the second part applying only to
Non-REMIC Certificates.
REMIC CERTIFICATES
With respect to each series of REMIC Certificates, the Trustee will agree
in the Agreement to elect to treat the related Trust Fund or certain assets of
such Trust Fund as a REMIC. Qualification as a REMIC requires ongoing
compliance with certain conditions. Upon the issuance of each series of REMIC
Certificates, Stroock
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& Stroock & Lavan LLP, counsel to the Seller, will deliver its opinion
generally to the effect that, with respect to each series of REMIC Certificates
for which a REMIC election is to be made, under then existing law, and assuming
a proper and timely REMIC election and ongoing compliance with the provisions
of the Agreement and applicable provisions of the Code and applicable Treasury
regulations, the related Trust Fund or certain assets of such Trust Fund will
be a REMIC and the REMIC Certificates will be considered to evidence ownership
of "regular interests" or "residual interests" within the meaning of the REMIC
provisions of the Code.
To the extent provided in the Prospectus Supplement for a series, holders
of REMIC Regular Certificates who are entitled to payments from the Reserve
Account in the event of a Basis Risk Shortfall will be required to allocate
their purchase price between their beneficial ownership interests in the
related REMIC regular interests and Yield Supplement Agreements, and will be
required to report their income realized with respect to each, calculated
taking into account such allocation. In general, such allocation would be based
on the respective fair market values of the REMIC regular interests and the
related Yield Supplement Agreements on the date of purchase of the related
REMIC Regular Certificate. However, a portion of the purchase price of a REMIC
Regular Certificate should be allocated to accrued but unpaid interest. No
representation is or will be made as to the fair market value of the Yield
Supplement Agreements or the relative values of the REMIC regular interests and
the Yield Supplement Agreements, upon initial issuance of the related REMIC
Regular Certificates or at any time thereafter. Holders of REMIC Regular
Certificates are advised to consult their own tax advisors concerning the
determination of such fair market values. Under the Agreement, holders of
applicable REMIC Regular Certificates will agree that, for federal income tax
purposes, they will be treated as owners of the respective regular interests
and of the corresponding Yield Supplement Agreement.
STATUS OF REMIC CERTIFICATES. The REMIC Certificates will be "real estate
assets" for purposes of Section 856(c)(4)(A) of the Code and assets described
in Section 7701(a)(19)(C) of the Code (assets qualifying under one or both of
those sections, applying each section separately, "qualifying assets") to the
extent that the REMIC's assets are qualifying assets, but not to the extent
that the REMIC's assets consist of Yield Supplement Agreements. However, if at
least 95 percent of the REMIC's assets are qualifying assets, then 100 percent
of the REMIC Certificates will be qualifying assets. Similarly, income on the
REMIC Certificates will be treated as "interest on obligations secured by
mortgages on real property" within the meaning of Section 856(c)(3)(B) of the
Code, subject to the limitations of the preceding two sentences. In addition to
Mortgage Loans, the REMIC's assets will include payments on Mortgage Loans held
pending distribution to holders of REMIC Certificates, amounts in Reserve
Accounts (if any), other credit enhancements (if any), and possibly buydown
funds ("Buydown Funds"). The Mortgage Loans will be qualifying assets under the
foregoing sections of the Code except to the extent provided in the Prospectus
Supplement. The regulations under Sections 860A through 860G of the Code (the
"REMIC Regulations") treat credit enhancements as part of the mortgage or pool
of mortgages to which they relate, and therefore credit enhancements generally
should be qualifying assets. Regulations issued in conjunction with the REMIC
Regulations provide that amounts paid on Mortgage Loans and held pending
distribution to holders of REMIC Certificates ("cash flow investments") will be
treated as qualifying assets. It is unclear whether amounts in a Reserve
Account or Buydown Funds would also constitute qualifying assets. The
Prospectus Supplement for each series will indicate (if applicable) that it has
Buydown Funds. The REMIC Certificates will not be "residential loans" for
purposes of the residential loan requirement of Section 593(g)(4)(B) of the
Code.
TIERED REMIC STRUCTURES
For certain series of Certificates, two or more separate elections may be
made to treat designated portions of the related Trust Fund as REMICs ("Tiered
REMICs") for federal income tax purposes. Upon the issuance of any such series
of Certificates, Stroock & Stroock & Lavan LLP will deliver its opinion
generally to the effect that, assuming compliance with all provisions of the
related Agreement and applicable provisions of the Code and applicable Treasury
regulations and rulings, the Tiered REMICs will each qualify under then
existing law as a REMIC and the REMIC Certificates issued by the Tiered REMICs,
respectively, will be considered to evidence ownership of "regular interests"
or "residual interests" in the related REMIC within the meaning of the REMIC
provisions of the Code.
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Solely for purposes of determining whether the REMIC Certificates will be
"real estate assets" within the meaning of Section 856(c)(4)(A) of the Code,
and assets described in Section 7701(a)(19)(C) of the Code, and whether the
income on such Certificates is interest described in Section 856(c)(3)(B) of
the Code, the Tiered REMICs will be treated as one REMIC.
REMIC REGULAR CERTIFICATES
CURRENT INCOME ON REMIC REGULAR CERTIFICATES -- GENERAL. Except as
otherwise indicated herein, the REMIC Regular Certificates will be treated for
federal income tax purposes (but not necessarily for accounting or other
purposes) as debt instruments that are issued by the REMIC on the date of
issuance of the REMIC Regular Certificates and not as ownership interests in
the REMIC or the REMIC's assets. Holders of REMIC Regular Certificates who
would otherwise report income under a cash method of accounting will be
required to report income with respect to REMIC Regular Certificates under an
accrual method.
Payments of interest on REMIC Regular Certificates may be based on a
fixed rate, a variable rate as permitted by the REMIC Regulations, or may
consist of a specified portion of the interest payments on qualified mortgages
where such portion does not vary during the period the REMIC Regular
Certificate is outstanding. The definition of a variable rate for purposes of
the REMIC Regulations is based on the definition of a qualified floating rate
for purposes of the rules governing original issue discount set forth in
Sections 1271 through 1275 of the Code and the regulations thereunder (the "OID
Regulations") with certain modifications and permissible variations. See "REMIC
Regular Certificates -- Current Income on REMIC Regular Certificates --
Original Issue Discount -- Variable Rate REMIC Regular Certificates," below,
for a discussion of the definition of a qualified floating rate for purposes of
the OID Regulations. In contrast to the OID Regulations, for purposes of the
REMIC Regulations, a qualified floating rate does not include any multiple of a
qualified floating rate (also excluding multiples of qualified floating rates
that themselves would constitute qualified floating rates under the OID
Regulations), and the characterization of a variable rate that is subject to a
cap, floor or similar restriction as a qualified floating rate for purposes of
the REMIC Regulations will not depend upon the OID Regulations relating to
caps, floors, and similar restrictions. See "REMIC Regular Certificates --
Current Income on REMIC Regular Certificates -- Original Issue Discount --
Variable Rate REMIC Regular Certificates," below, for a discussion of the OID
Regulations relating to caps, floors and similar restrictions. A qualified
floating rate, as defined above for purposes of the REMIC Regulations (a "REMIC
qualified floating rate"), qualifies as a variable rate for purposes of the
REMIC Regulations if such REMIC qualified floating rate is set at a "current
rate" as defined in the OID Regulations. In addition, a rate equal to the
highest, lowest or an average of two or more REMIC qualified floating rates
qualifies as a variable rate for REMIC purposes. A REMIC Regular Certificate
may also have a variable rate based on a weighted average of the interest rates
on some or all of the qualified mortgages held by the REMIC where each
qualified mortgage taken into account has a fixed rate or a variable rate that
is permissible under the REMIC Regulations. Further, a REMIC Regular
Certificate may have a rate that is the product of a REMIC qualified floating
rate or a weighted average rate and a fixed multiplier, is a constant number of
basis points more or less than a REMIC qualified floating rate or a weighted
average rate, or is the product, plus or minus a constant number of basis
points, of a REMIC qualified floating rate or a weighted average rate and a
fixed multiplier. An otherwise permissible variable rate for a REMIC Regular
Certificate, described above, will not lose its character as such because it is
subject to a floor or a cap, including a "funds available cap" as that term is
defined in the REMIC Regulations. Lastly, a REMIC Regular Certificate will be
considered as having a permissible variable rate if it has a fixed or otherwise
permissible variable rate during one or more payment or accrual periods and
different fixed or otherwise permissible variable rates during other payment or
accrual periods.
ORIGINAL ISSUE DISCOUNT. REMIC Regular Certificates of certain series may
be issued with "original issue discount" within the meaning of Section 1273(a)
of the Code. Holders of REMIC Regular Certificates issued with original issue
discount generally must include original issue discount in gross income for
federal income tax purposes as it accrues, in advance of receipt of the cash
attributable to such income, under a method that takes account of the
compounding of interest. The Code requires that information with respect to the
original issue discount accruing on any REMIC Regular Certificate be reported
periodically to the Internal Revenue Service and to certain categories of
holders of such REMIC Regular Certificates.
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Each Trust Fund will report original issue discount, if any, to the
holders of REMIC Regular Certificates based on the OID Regulations. OID
Regulations concerning contingent payment debt instruments do not apply to the
REMIC Regular Certificates.
The OID Regulations provide that, in the case of a debt instrument such
as a REMIC Regular Certificate, (i) the amount and rate of accrual of original
issue discount will be calculated based on a reasonable assumed prepayment rate
(the "Prepayment Assumption"), and (ii) adjustments will be made in the amount
and rate of accrual of such discount to reflect differences between the actual
prepayment rate and the Prepayment Assumption. The method for determining the
appropriate assumed prepayment rate will eventually be set forth in Treasury
regulations, but those regulations have not yet been issued. The applicable
legislative history indicates, however, that such regulations will provide that
the assumed prepayment rate for securities such as the REMIC Regular
Certificates will be the rate used in pricing the initial offering of the
securities. The Prospectus Supplement for each series of REMIC Regular
Certificates will specify the Prepayment Assumption, but no representation is
made that the REMIC Regular Certificates will, in fact, prepay at a rate based
on the Prepayment Assumption or at any other rate.
In general, a REMIC Regular Certificate will be considered to be issued
with original issue discount if its stated redemption price at maturity exceeds
its issue price. Except as discussed below under "Payment Lag REMIC Regular
Certificates; Initial Period Considerations," and "Qualified Stated Interest,"
and in the case of certain Variable Rate REMIC Regular Certificates (as defined
below) and accrual certificates, the stated redemption price at maturity of a
REMIC Regular Certificate is its principal amount. The issue price of a REMIC
Regular Certificate is the initial offering price to the public (excluding bond
houses and brokers) at which a substantial amount of the class of REMIC Regular
Certificates was sold. The issue price will be reduced if any portion of such
price is allocable to a related Yield Supplement Agreement. Notwithstanding the
general definition of original issue discount, such discount will be considered
to be zero for any REMIC Regular Certificate on which such discount is less
than 0.25% of its stated redemption price at maturity multiplied by its
weighted average life. The weighted average life of a REMIC Regular Certificate
apparently is computed for purposes of this DE MINIMIS rule as the sum, for all
distributions included in the stated redemption price at maturity of the REMIC
Regular Certificate, of the amounts determined by multiplying (i) the number of
complete years (rounding down for partial years) from the Closing Date to the
date on which each such distribution is expected to be made, determined under
the Prepayment Assumption, by (ii) a fraction, the numerator of which is the
amount of such distribution and the denominator of which is the REMIC Regular
Certificate's stated redemption price at maturity. The OID Regulations provide
that holders will include any DE MINIMIS original issue discount ratably as
payments of stated principal are made on the REMIC Regular Certificates.
The holder of a REMIC Regular Certificate issued with original issue
discount must include in gross income the sum of the "daily portions" of such
original issue discount for each day during its taxable year on which it held
such REMIC Regular Certificate. In the case of an original holder of a REMIC
Regular Certificate, the daily portions of original issue discount are
determined first by calculating the portion of the original issue discount that
accrued during each period (an "accrual period") that begins on the day
following a Distribution Date (or in the case of the first such period, begins
on the Closing Date) and ends on the next succeeding Distribution Date. The
original issue discount accruing during each accrual period is then allocated
ratably to each day during such period to determine the daily portion of
original issue discount for that day.
The portion of the original issue discount that accrues in any accrual
period will equal the excess, if any, of (i) the sum of (A) the present value,
as of the end of the accrual period, of all of the distributions to be made on
the REMIC Regular Certificate, if any, in future periods and (B) the
distributions made on the REMIC Regular Certificate during the accrual period
that are included in such REMIC Regular Certificate's stated redemption price
at maturity, over (ii) the adjusted issue price of such REMIC Regular
Certificate at the beginning of the accrual period. The present value of the
remaining distributions referred to in the preceding sentence will be
calculated (i) assuming that the REMIC Regular Certificates will be prepaid in
future periods at a rate computed in accordance with the Prepayment Assumption
and (ii) using a discount rate equal to the original yield to maturity of the
REMIC Regular Certificates. For these purposes, the original yield to maturity
of the REMIC Regular Certificates will be calculated based on their issue price
and assuming that the REMIC Regular Certificates will be prepaid in accordance
with the Prepayment Assumption. The adjusted issue price of a REMIC Regular
Certificate at the beginning of any accrual period will equal the issue price
of such REMIC Regular Certificate, increased by the portion of the original
issue discount that has accrued during prior accrual
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periods, and reduced by the amount of any distributions made on such REMIC
Regular Certificate in prior accrual periods that were included in such REMIC
Regular Certificate's stated redemption price at maturity.
The daily portions of original issue discount may increase or decrease
depending on the extent to which the actual rate of prepayments diverges from
the Prepayment Assumption. If original issue discount accruing during any
accrual period computed as described above is negative, it is likely that a
holder will be entitled to offset such amount only against positive original
issue discount accruing on such REMIC Regular Certificate in future accrual
periods. Although not entirely free from doubt, such a holder may be entitled
to deduct a loss to the extent that its remaining basis would exceed the
maximum amount of future payments to which such holder is entitled. It is
unclear whether the Prepayment Assumption is taken into account for this
purpose.
A subsequent holder that purchases a REMIC Regular Certificate issued
with original issue discount at a cost that is less than its remaining stated
redemption price at maturity will also generally be required to include in
gross income, for each day on which it holds such REMIC Regular Certificate,
the daily portions of original issue discount with respect to the REMIC Regular
Certificate, calculated as described above. However, if (i) the excess of the
remaining stated redemption price at maturity over such cost is less than (ii)
the aggregate amount of such daily portions for all days after the date of
purchase until final retirement of such REMIC Regular Certificate, then such
daily portions will be reduced proportionately in determining the income of
such holder.
QUALIFIED STATED INTEREST. Interest payable on a REMIC Regular
Certificate which qualifies as "qualified stated interest" for purposes of the
OID Regulations will not be includable in the stated redemption price at
maturity of the REMIC Regular Certificate. Accordingly, if the interest on a
REMIC Regular Certificate does not constitute "qualified stated interest," the
REMIC Regular Certificate will have original issue discount. Interest payments
will not qualify as qualified stated interest unless the interest payments are
"unconditionally payable." The OID Regulations state that interest is
unconditionally payable if reasonable legal remedies exist to compel timely
payment, or the debt instrument otherwise provides terms and conditions that
make the likelihood of late payment (other than a late payment that occurs
within a reasonable grace period) or nonpayment of interest a remote
contingency, as defined in the OID Regulations. It is unclear whether the terms
and conditions of the Mortgage Loans underlying the REMIC Regular Certificates
or the terms and conditions of the REMIC Regular Certificates are considered
when determining whether the likelihood of late payment or nonpayment of
interest is a remote contingency. Any terms or conditions that do not reflect
arm's length dealing or that the holder does not intend to enforce are not
considered.
PREMIUM. A purchaser of a REMIC Regular Certificate that purchases such
REMIC Regular Certificate at a cost greater than its remaining stated
redemption price at maturity will be considered to have purchased such REMIC
Regular Certificate at a premium, and may, under Section 171 of the Code, elect
to amortize such premium under a constant yield method over the life of the
REMIC Regular Certificate. The Prepayment Assumption is probably taken into
account in determining the life of the REMIC Regular Certificate for this
purpose. Except as provided in regulations, amortizable premium will be treated
as an offset to interest income on the REMIC Regular Certificate.
PAYMENT LAG REMIC REGULAR CERTIFICATES; INITIAL PERIOD CONSIDERATIONS.
Certain REMIC Regular Certificates will provide for distributions of interest
based on a period that is the same length as the interval between Distribution
Dates but ends prior to each Distribution Date. Any interest that accrues prior
to the Closing Date may be treated under the OID Regulations either (i) as part
of the issue price and the stated redemption price at maturity of the REMIC
Regular Certificates or (ii) as not included in the issue price or the stated
redemption price. The OID Regulations provide a special application of the DE
MINIMIS rule for debt instruments with long first accrual periods where the
interest payable for the first period is at a rate which is effectively less
than that which applies in all other periods. In such cases, for the sole
purpose of determining whether original issue discount is DE MINIMIS, the OID
Regulations provide that the stated redemption price is equal to the
instrument's issue price plus the greater of the amount of foregone interest or
the excess (if any) of the instrument's stated principal amount over its issue
price.
VARIABLE RATE REMIC REGULAR CERTIFICATES. Under the OID Regulations,
REMIC Regular Certificates paying interest at a variable rate (a "Variable Rate
REMIC Regular Certificate") are subject to special rules. A Variable Rate REMIC
Regular Certificate will qualify as a "variable rate debt instrument" if (i)
its issue price does not exceed the total noncontingent principal payments due
under the Variable Rate REMIC Regular Certificate by more than a specified DE
MINIMIS amount; (ii) it provides for stated interest, paid or compounded at
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least annually, at (a) one or more qualified floating rates, (b) a single fixed
rate and one or more qualified floating rates, (c) a single objective rate or
(d) a single fixed rate and a single objective rate that is a qualified inverse
floating rate; and (iii) it does not provide for any principal payments that
are contingent, as defined in the OID Regulations, except as provided in (i),
above. Because the OID Regulations relating to contingent payment debt
instruments do not apply to REMIC regular interests, principal payments on the
REMIC Regular Certificates should not be considered contingent for this
purpose.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Rate REMIC Regular Certificate is denominated. A multiple of a
qualified floating rate will generally not itself constitute a qualified
floating rate for purposes of the OID Regulations. However, a variable rate
equal to (i) the product of a qualified floating rate and a fixed multiple that
is greater than 0.65 but not more than 1.35 or (ii) the product of a qualified
floating rate and a fixed multiple that is greater than 0.65 but not more than
1.35, increased or decreased by a fixed rate will constitute a qualified
floating rate for purposes of the OID Regulations. In addition, under the OID
Regulations, two or more qualified floating rates that can reasonably be
expected to have approximately the same values throughout the term of the
Variable Rate REMIC Regular Certificate will be treated as a single qualified
floating rate (a "Presumed Single Qualified Floating Rate"). Two or more
qualified floating rates with values within 25 basis points of each other as
determined on the Variable Rate REMIC Regular Certificate's issue date will be
conclusively presumed to be a Presumed Single Qualified Floating Rate.
Notwithstanding the foregoing, a variable rate that would otherwise constitute
a qualified floating rate, but which is subject to one or more restrictions
such as a cap or floor, will not be a qualified floating rate for purposes of
the OID Regulations unless the restriction is fixed throughout the term of the
Variable Rate REMIC Regular Certificate or the restriction is not reasonably
expected as of the issue date to significantly affect the yield of the Variable
Rate REMIC Regular Certificate.
An "objective rate" is a rate that is not itself a qualified floating
rate but which is determined using a single fixed formula and which is based
upon objective financial or economic information. The OID Regulations also
provide that other variable rates may be treated as objective rates if so
designated by the Internal Revenue Service in the future. An interest rate on a
REMIC Regular Certificate that is the weighted average of the interest rates on
some or all of the qualified mortgages held by the REMIC should constitute an
objective rate. Despite the foregoing, a variable rate of interest on a
Variable Rate REMIC Regular Certificate will not constitute an objective rate
if it is reasonably expected that the average value of such rate during the
first half of the Variable Rate REMIC Regular Certificate's term will be either
significantly less than or significantly greater than the average value of the
rate during the final half of the Variable Rate REMIC Regular Certificate's
term. Further, an objective rate does not include a rate that is based on
information that is within the control of the issuer (or a party related to the
issuer) or that is unique to the circumstances of the issuer (or a party
related to the issuer). An objective rate will qualify as a "qualified inverse
floating rate" if such rate is equal to a fixed rate minus a qualified floating
rate and variations in the rate can reasonably be expected to inversely reflect
contemporaneous variations in the qualified floating rate. The OID Regulations
also provide that if a Variable Rate REMIC Regular Certificate provides for
stated interest at a fixed rate for an initial period of less than one year
followed by a variable rate that is either a qualified floating rate or an
objective rate and if the variable rate on the Variable Rate REMIC Regular
Certificate's issue date is intended to approximate the fixed rate, then the
fixed rate and the variable rate together will constitute either a single
qualified floating rate or objective rate, as the case may be (a "Presumed
Single Variable Rate"). If the value of the variable rate and the initial fixed
rate are within 25 basis points of each other as determined on the Variable
Rate REMIC Regular Certificate's issue date, the variable rate will be
conclusively presumed to approximate the fixed rate.
For Variable Rate REMIC Regular Certificates that qualify as a "variable
rate debt instrument" under the OID Regulations and provide for interest at
either a single qualified floating rate, a single objective rate, a Presumed
Single Qualified Floating Rate or a Presumed Single Variable Rate throughout
the term (a "Single Variable Rate REMIC Regular Certificate"), original issue
discount is computed as described in "REMIC Regular Certificates -- Current
Income on REMIC Regular Certificates -- Original Issue Discount" based on the
following: (i) stated interest on the Single Variable Rate REMIC Regular
Certificate which is unconditionally payable in cash or property (other than
debt instruments of the issuer) at least annually will constitute qualified
stated interest; (ii) by assuming that the variable rate on the Single Variable
Rate REMIC Certificate is a fixed rate equal to: (a) in the case of a Single
Variable Rate REMIC Regular Certificate with a qualified floating rate
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or a qualified inverse floating rate, the value, as of the issue date, of the
qualified floating rate or the qualified inverse floating rate or (b) in the
case of a Single Variable Rate REMIC Regular Certificate with an objective rate
(other than a qualified inverse floating rate), a fixed rate which reflects the
reasonably expected yield for such Single Variable Rate REMIC Regular
Certificate; and (iii) the qualified stated interest allocable to an accrual
period is increased (or decreased) if the interest actually paid during an
accrual period exceeds (or is less than) the interest assumed to be paid under
the assumed fixed rate described in (ii), above.
In general, any Variable Rate REMIC Regular Certificate other than a
Single Variable Rate REMIC Regular Certificate (a "Multiple Variable Rate REMIC
Regular Certificate") that qualifies as a "variable rate debt instrument" will
be converted into an "equivalent" fixed rate debt instrument for purposes of
determining the amount and accrual of original issue discount and qualified
stated interest on the Multiple Variable Rate REMIC Regular Certificate. The
OID Regulations generally require that such a Multiple Variable Rate REMIC
Regular Certificate be converted into an "equivalent" fixed rate debt
instrument by substituting any qualified floating rate or qualified inverse
floating rate provided for under the terms of the Multiple Variable Rate REMIC
Regular Certificate with a fixed rate equal to the value of the qualified
floating rate or qualified inverse floating rate, as the case may be, as of the
Multiple Variable Rate REMIC Regular Certificate's issue date. Any objective
rate (other than a qualified inverse floating rate) provided for under the
terms of the Multiple Variable Rate REMIC Regular Certificate is converted into
a fixed rate that reflects the yield that is reasonably expected for the
Multiple Variable Rate REMIC Regular Certificate. (A Multiple Variable Rate
REMIC Regular Certificate may not bear more than one objective rate.) In the
case of a Multiple Variable Rate REMIC Regular Certificate that qualifies as a
"variable rate debt instrument" and provides for stated interest at a fixed
rate in addition to either one or more qualified floating rates or a qualified
inverse floating rate, the fixed rate is initially converted into a qualified
floating rate (or a qualified inverse floating rate, if the Multiple Variable
Rate REMIC Regular Certificate provides for a qualified inverse floating rate).
Under such circumstances, the qualified floating rate or qualified inverse
floating rate that replaces the fixed rate must be such that the fair market
value of the Multiple Variable Rate REMIC Regular Certificate as of the
Multiple Variable Rate REMIC Regular Certificate's issue date is approximately
the same as the fair market value of an otherwise identical debt instrument
that provides for either the qualified floating rate or qualified inverse
floating rate rather than the fixed rate. Subsequent to converting the fixed
rate into either a qualified floating rate or a qualified inverse floating
rate, the Multiple Variable Rate REMIC Regular Certificate is then converted
into an "equivalent" fixed rate debt instrument in the manner described above.
Once the Multiple Variable Rate REMIC Regular Certificate is converted
into an "equivalent" fixed rate debt instrument pursuant to the foregoing
rules, the amounts of original issue discount and qualified stated interest, if
any, are determined for the "equivalent" fixed rate debt instrument by applying
the original issue discount rules to the "equivalent" fixed rate debt
instrument in the manner described in "REMIC Regular Certificates -- Current
Income on REMIC Regular Certificates -- Original Issue Discount". A holder of
the Multiple Variable Rate REMIC Regular Certificate will account for such
original issue discount and qualified stated interest as if the holder held the
"equivalent" fixed rate debt instrument. In each accrual period, appropriate
adjustments will be made to the amount of qualified stated interest or original
issue discount assumed to have been accrued or paid with respect to the
"equivalent" fixed rate debt instrument in the event that such amounts differ
from the actual amount of interest accrued or paid on the Multiple Variable
Rate REMIC Regular Certificate during the accrual period.
If a Variable Rate REMIC Regular Certificate does not qualify as a
"variable rate debt instrument" under the OID Regulations, then the Variable
Rate REMIC Regular Certificate would be treated as a contingent payment debt
obligation. It is not clear under current law how a Variable Rate REMIC Regular
Certificate would be taxed if such REMIC Regular Certificate were treated as a
contingent payment debt obligation since the OID Regulations relating to
contingent payment debt obligations do not apply to REMIC regular interests.
INTEREST-ONLY REMIC REGULAR CERTIFICATES. The Trust Fund intends to
report income from interest-only REMIC Regular Certificates to the Internal
Revenue Service and to holders of interest-only REMIC Regular Certificates
based on the assumption that the stated redemption price at maturity is equal
to the sum of all payments determined under the Prepayment Assumption. As a
result, such interest-only REMIC Regular Certificates will be treated as having
original issue discount.
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MARKET DISCOUNT. A holder that acquires a REMIC Regular Certificate at a
market discount (that is, a discount that exceeds any unaccrued original issue
discount) will recognize gain upon receipt of a principal distribution,
regardless of whether the distribution is scheduled or is a prepayment. In
particular, the REMIC Regular Certificateholder will be required to allocate
that principal distribution first to the portion of the market discount on such
REMIC Regular Certificate that has accrued but has not previously been
includable in income, and will recognize ordinary income to that extent. In
general terms, unless Treasury regulations when issued provide otherwise,
market discount on a REMIC Regular Certificate may be treated, at the REMIC
Certificateholder's election, as accruing either (i) under a constant yield
method, taking into account the Prepayment Assumption, or (ii) in proportion to
accruals of original issue discount (or, if there is no original issue
discount, in proportion to stated interest at the Pass-Through Rate).
In addition, a holder may be required to defer deductions for a portion
of the holder's interest expense on any debt incurred or continued to purchase
or carry a REMIC Regular Certificate purchased with market discount. The
deferred portion of any interest deduction would not exceed the portion of the
market discount on the REMIC Regular Certificate that accrues during the
taxable year in which such interest would otherwise be deductible and, in
general, would be deductible when such market discount is included in income
upon receipt of a principal distribution on, or upon the sale of, the REMIC
Regular Certificate. The Code requires that information necessary to compute
accruals of market discount be reported periodically to the Internal Revenue
Service and to certain categories of holders of REMIC Regular Certificates.
Notwithstanding the above rules, market discount on a REMIC Regular
Certificate will be considered to be zero if such discount is less than 0.25%
of the remaining stated redemption price at maturity of such REMIC Regular
Certificate multiplied by its weighted average remaining life. Weighted average
remaining life presumably is calculated in a manner similar to weighted average
life (described above under "Current Income on REMIC Regular Certificates --
Original Issue Discount"), taking into account distributions (including
prepayments) prior to the date of acquisition of such REMIC Regular Certificate
by the subsequent purchaser. If market discount on a REMIC Regular Certificate
is treated as zero under this rule, the actual amount of such discount must be
allocated to the remaining principal distributions on the REMIC Regular
Certificate in proportion to the amounts of such principal distributions, and
when each such distribution is made, gain equal to the discount, if any,
allocated to the distribution will be recognized.
ELECTION TO TREAT ALL INTEREST UNDER THE CONSTANT YIELD RULES. The OID
Regulations provide that the holder of a debt instrument issued after April 4,
1994 may elect to include in gross income all interest that accrues on such
debt instrument using the constant yield method. For purposes of this election,
interest includes stated interest, original issue discount, and market
discount, as adjusted to account for any premium. Holders of REMIC Regular
Certificates should consult their own tax advisors regarding the availability
or advisability of such an election.
SINGLE-CLASS REMICS. In the case of "single-class REMICs," certain
expenses of the REMIC will be allocated to the holders of the REMIC Regular
Certificates. The deductibility of such expenses may be subject to certain
limitations. See "Deductibility of Trust Fund Expenses" below.
SALES OF REMIC REGULAR CERTIFICATES. If a REMIC Regular Certificate is
sold, the seller will recognize gain or loss equal to the difference between
the amount realized on the sale and its adjusted basis in the REMIC Regular
Certificate. A holder's adjusted basis in a REMIC Regular Certificate generally
equals the cost of the REMIC Regular Certificate to the holder, increased by
income reported by the holder with respect to the REMIC Regular Certificate and
reduced (but not below zero) by distributions on the REMIC Regular Certificate
received by the holder and by amortized premium. Except as indicated in the
next two paragraphs, any such gain or loss generally will be capital gain or
loss provided the REMIC Regular Certificate is held as a capital asset.
Gain from the sale of a REMIC Regular Certificate that might otherwise be
capital gain will be treated as ordinary income to the extent that such gain
does not exceed the excess, if any, of (i) the amount that would have been
includable in the seller's income with respect to the REMIC Regular Certificate
had income accrued thereon at a rate equal to 110% of "the applicable Federal
rate" (generally, an average of current yields on Treasury securities),
determined as of the date of purchase of the REMIC Regular Certificate, over
(ii) the amount actually includable in the seller's income. In addition, gain
recognized on the sale of a REMIC Regular Certificate by a seller who purchased
the REMIC Regular Certificate at a market discount would be taxable as ordinary
income in an amount not exceeding the portion of such discount that accrued
during the period the REMIC
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Regular Certificate was held by such seller, reduced by any market discount
includable in income under the rules described above under "Current Income on
REMIC Regular Certificates -- Market Discount."
REMIC Regular Certificates will be "evidences of indebtedness" within the
meaning of Section 582(c)(1) of the Code, so that gain or loss recognized from
a sale of a REMIC Regular Certificate by a bank or other financial institution
to which such section applies would be ordinary income or loss.
TERMINATION. The REMIC will terminate, if not earlier, shortly following
the REMIC's receipt of the final payment in respect of the underlying qualified
mortgages. The last distribution on a REMIC Regular Certificate should be
treated as a payment in full retirement of a debt instrument.
TAX TREATMENT OF YIELD SUPPLEMENT AGREEMENTS
Whether a REMIC Regular Certificateholder of a series will have a
separate contractual right to payments under a Yield Supplement Agreement, and
the tax treatment of such payments, if any, will be addressed in the related
Prospectus Supplement.
REMIC RESIDUAL CERTIFICATES
Because the REMIC Residual Certificates will be treated as "residual
interests" in the REMIC, each holder of a REMIC Residual Certificate will be
required to take into account its daily portion of the taxable income or net
loss of the REMIC for each day during the calendar year on which it holds its
REMIC Residual Certificate. The daily portion is determined by allocating to
each day in a calendar quarter a ratable portion of the taxable income or net
loss of the REMIC for that quarter and allocating such daily amounts among the
holders on such day in proportion to their holdings. All income or loss of the
REMIC taken into account by a REMIC Residual Certificateholder must be treated
as ordinary income or loss as the case may be. Income from residual interests
is "portfolio income" which cannot be offset by "passive activity losses" in
the hands of individuals or other persons subject to the passive loss rules.
The Code also provides that all residual interests must be issued on the
REMIC's startup day and designated as such. For this purpose, "startup day"
means the day on which the REMIC issues all of its regular and residual
interests, and under the REMIC Regulations may, in the case of a REMIC to which
property is contributed over a period of up to ten consecutive days, be any day
designated by the REMIC within such period.
The taxable income of the REMIC, for purposes of determining the amounts
taken into account by holders of REMIC Residual Certificates, is determined in
the same manner as in the case of an individual, with certain exceptions. The
accrual method of accounting must be used and the taxable year of the REMIC
must be the calendar year. The basis of property contributed to the REMIC in
exchange for regular or residual interests is its fair market value immediately
after the transfer. The REMIC Regulations determine the fair market value of
the contributed property by deeming it equal to the aggregate issue prices of
all regular and residual interests in the REMIC.
A REMIC Regular Certificate will be considered indebtedness of the REMIC.
Market discount on any of the Mortgage Loans held by the REMIC must be included
in the income of the REMIC as it accrues, rather than being included in income
only upon sale of the Mortgage Loans or as principal on the Mortgage Loans is
paid. The REMIC is not entitled to any personal exemptions or to deductions for
taxes paid to foreign countries and U.S. possessions, charitable contributions
or net operating losses, or to certain other deductions to which individuals
are generally entitled. Income or loss in connection with a "prohibited
transaction" is disregarded. See "Prohibited Transactions."
As previously discussed, the timing of recognition of negative original
issue discount, if any, on a REMIC Regular Certificate is uncertain. As a
result, the timing of recognition of the related REMIC taxable income is also
uncertain. Although not entirely free from doubt, the related REMIC taxable
income may be recognized when the adjusted issue price of such REMIC Regular
Certificate would exceed the maximum amount of future payments with respect to
such REMIC Regular Certificate. It is unclear whether the Prepayment Assumption
is taken into account for this purpose.
A REMIC Residual Certificate has a tax basis in its holder's hands that
is distinct from the REMIC's basis in its assets. The tax basis of a REMIC
Residual Certificate in its holder's hands will be its cost (I.E., the
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purchase price of the REMIC Residual Certificate), and will be reduced (but not
below zero) by the holder's share of cash distributions and losses and
increased by its share of taxable income from the REMIC.
If, in any year, cash distributions to a holder of a REMIC Residual
Certificate exceed its share of the REMIC's taxable income, the excess will
constitute a return of capital to the extent of the holder's basis in its REMIC
Residual Certificate. A return of capital is not treated as income for federal
income tax purposes, but will reduce the tax basis of the holder in its REMIC
Residual Certificate (but not below zero). If a REMIC Residual Certificate's
basis is reduced to zero, any cash distributions with respect to that REMIC
Residual Certificate in any taxable year in excess of its share of the REMIC's
income would be taxable to the holder as gain on the sale or exchange of its
interest in the REMIC.
The losses of the REMIC taken into account by a holder of a REMIC
Residual Certificate in any quarter may not exceed the holder's basis in its
REMIC Residual Certificate. Any excess losses may be carried forward
indefinitely to future quarters subject to the same limitation.
There is no REMIC counterpart to the partnership election under Code
Section 754 to increase or decrease the partnership's basis in its assets by
reference to the adjusted basis to subsequent partners of their partnership
interest. Consequently, a subsequent purchaser of a REMIC Residual Certificate
at a premium will not be able to use the premium to reduce his share of the
REMIC's taxable income.
MISMATCHING OF INCOME AND DEDUCTIONS; EXCESS INCLUSIONS. The taxable
income recognized by the holder of a REMIC Residual Certificate in any taxable
year will be affected by, among other factors, the relationship between the
timing of recognition of interest and discount income (or deductions for
amortization of premium) with respect to qualified mortgages, on the one hand,
and the timing of deductions for interest (including original issue discount)
on the REMIC Regular Certificates, on the other. In the case of multiple
classes of REMIC Regular Certificates issued at different yields, and having
different weighted average lives, taxable income recognized by the holders of
REMIC Residual Certificates may be greater than cash flow in earlier years of
the REMIC (with a corresponding taxable loss or less taxable income than cash
flow in later years). This may result from the fact that interest expense
deductions, expressed as a percentage of the outstanding principal amount of
the REMIC Regular Certificates, will increase over time as the shorter term,
lower yielding classes of REMIC Regular Certificates are paid, whereas interest
income from the Mortgage Loans may not increase over time as a percentage of
the outstanding principal amount of the Mortgage Loans.
In the case of Tiered REMICs, the OID Regulations provide that the
regular interests in the REMIC which directly owns the Mortgage Loans (the
"Lower Tier REMIC") will be treated as a single debt instrument for purposes of
the original issue discount provisions. Therefore, the Trust Fund will
calculate the taxable income of Tiered REMICs by treating the Lower Tier REMIC
regular interests as a single debt instrument.
Any "excess inclusions" with respect to a REMIC Residual Certificate will
be subject to certain special rules. The excess inclusions with respect to a
REMIC Residual Certificate are equal to the excess, if any, of its share of
REMIC taxable income for the quarterly period over the sum of the daily
accruals for such quarterly period. The daily accrual for any day on which the
REMIC Residual Certificate is held is determined by allocating to each day in a
quarter its allocable share of the product of (A) 120% of the long-term
applicable Federal rate (for quarterly compounding) that would have applied to
the REMIC Residual Certificates (if they were debt instruments) on the closing
date under Code Section 1274(d)(1) and (B) the adjusted issue price of such
REMIC Residual Certificates at the beginning of a quarterly period. For this
purpose, the adjusted issue price of such REMIC Residual Certificate at the
beginning of a quarterly period is the issue price of such Certificates plus
the amount of the daily accruals of REMIC taxable income for all prior
quarters, decreased by any distributions made with respect to such Certificates
prior to the beginning of such quarterly period.
The excess inclusions of a REMIC Residual Certificate may not be offset
by other deductions, including net operating loss carryforwards, on a holder's
return.
Recently enacted provisions governing the relationship between excess
inclusions and the alternative minimum tax provide that (i) the alternative
minimum taxable income of a taxpayer is based on the taxpayer's regular taxable
income computed without regard to the rule that taxable income cannot be less
than the amount of excess inclusions, (ii) the alternative minimum taxable
income of a taxpayer for a taxable year cannot be less than the amount of
excess inclusions for that year, and (iii) the amount of any alternative
minimum tax net operating loss is computed without regard to any excess
inclusions. While these provisions are generally effective
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for tax years beginning after December 31, 1986, a taxpayer may elect to have
these provisions apply only with respect to tax years beginning after August
20, 1996.
If the holder of a REMIC Residual Certificate is an organization subject
to the tax on unrelated business income imposed by Code Section 511, the excess
inclusions will be treated as unrelated business taxable income of such holder
for purposes of Code Section 511. In addition, the Code provides that under
Treasury regulations, if a real estate investment trust ("REIT") owns a REMIC
Residual Certificate, to the extent excess inclusions of the REIT exceed its
real estate investment trust taxable income (excluding net capital gains), the
excess inclusions would be allocated among the shareholders of the REIT in
proportion to the dividends received by the shareholders from the REIT. Excess
inclusions derived by regulated investment companies ("RICs"), common trust
funds, and subchapter T cooperatives must be allocated to the shareholders of
such entities using rules similar to those applicable to REITs. The Internal
Revenue Service has not yet adopted or proposed such regulations as to REITs,
RICs, or similar entities. A life insurance company cannot adjust its reserve
with respect to variable contracts to the extent of any excess inclusion,
except as provided in regulations.
The Internal Revenue Service has authority to promulgate regulations
providing that if the aggregate value of the REMIC Residual Certificates is not
considered to be "significant," then the entire share of REMIC taxable income
of a holder of a REMIC Residual Certificate may be treated as excess inclusions
subject to the foregoing limitations. This authority has not been exercised to
date.
The REMIC is subject to tax at a rate of 100 percent on any net income it
derives from "prohibited transactions." In general, "prohibited transaction"
means the disposition of a qualified mortgage other than pursuant to specified
exceptions, the receipt of income as compensation for services, the receipt of
income from a source other than a qualified mortgage or certain other permitted
investments, or gain from the disposition of an asset representing a temporary
investment of payments on the qualified mortgages pending distribution on the
REMIC Certificates. In addition, a tax is imposed on the REMIC equal to 100
percent of the value of certain property contributed to the REMIC after its
"startup day." No REMIC in which interests are offered hereunder will accept
contributions that would cause it to be subject to such tax. This provision
will not affect a REMIC's ability in accordance with the Agreement to accept
substitute Mortgage Loans or to sell defective Mortgage Loans.
A REMIC is subject to a tax (deductible from its income) on any "net
income from foreclosure property" (determined in accordance with Section
857(b)(4)(B) of the Code as if the REMIC were a REIT).
Any tax described in the two preceding paragraphs that may be imposed on
the Trust Fund initially would be borne by the REMIC Residual Certificates in
the related REMIC rather than by the REMIC Regular Certificates, unless
otherwise specified in the Prospectus Supplement.
DEALERS' ABILITY TO MARK TO MARKET REMIC RESIDUAL CERTIFICATES. Treasury
regulations provide that all REMIC Residual Certificates acquired on or after
January 4, 1995 are not securities and cannot be marked to market pursuant to
Section 475 of the Code.
TRANSFERS OF REMIC RESIDUAL CERTIFICATES
TAX ON DISPOSITION OF REMIC RESIDUAL CERTIFICATES. The sale of a REMIC
Residual Certificate by a holder will result in gain or loss equal to the
difference between the amount realized on the sale and the adjusted basis of
the REMIC Residual Certificate.
If the seller of a REMIC Residual Certificate held the REMIC Residual
Certificate as a capital asset, the gain or loss generally will be capital gain
or loss. However, under Code Section 582(c), the sale of a REMIC Residual
Certificate by certain banks and other financial institutions will be
considered a sale of property other than a capital asset, resulting in ordinary
income or loss. Although the tax treatment with respect to a REMIC Residual
Certificate that has unrecovered basis after all funds of the Trust Fund have
been distributed is unclear, the holder presumably would be entitled to claim a
loss in the amount of the unrecovered basis.
The Code provides that, except as provided in Treasury regulations (which
have not yet been issued), if a holder sells a REMIC Residual Certificate and
acquires the same or other REMIC Residual Certificates, residual interests in
another REMIC, or any similar interests in a "taxable mortgage pool" (as
defined in Section 7701 (i) of the Code) during the period beginning six months
before, and ending six months after, the date of
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such sale, such sale will be subject to the "wash sale" rules of Section 1091
of the Code. In that event, any loss realized by the seller on the sale
generally will not be currently deductible.
A tax is imposed on the transfer of any residual interest in a REMIC to a
"disqualified organization." The tax is imposed on the transferor, or, where
the transfer is made through an agent of the disqualified organization, on the
agent. "Disqualified organizations" include for this purpose the United States,
any State or political subdivision thereof, any foreign government, any
international organization or agency or instrumentality of the foregoing (with
an exception for certain taxable instrumentalities of the United States, of a
State or of a political subdivision thereof), any rural electrical and
telephone cooperative, and any tax-exempt entity (other than certain farmers'
cooperatives) not subject to the tax on unrelated business income.
The amount of tax to be paid by the transferor on a transfer to a
disqualified organization is equal to the present value of the total
anticipated excess inclusions for periods after such transfer with respect to
the interest transferred multiplied by the highest corporate rate of tax. The
transferor (or agent, as the case may be) will be relieved of liability so long
as the transferee furnishes an affidavit that it is not a disqualified
organization and the transferor or agent does not have actual knowledge that
the affidavit is false. Under the REMIC Regulations, an affidavit will be
sufficient if the transferee furnishes (A) a social security number, and states
under penalties of perjury that the social security number is that of the
transferee, or (B) a statement under penalties of perjury that it is not a
disqualified organization.
TREATMENT OF PAYMENTS TO A TRANSFEREE IN CONSIDERATION OF TRANSFER OF A
REMIC RESIDUAL CERTIFICATE. The federal income tax consequences of any
consideration paid to a transferee on a transfer of an interest in a REMIC
Residual Certificate are unclear. The preamble to the REMIC Regulations
indicates that the Internal Revenue Service is considering the tax treatment of
these types of residual interests. A transferee of such an interest should
consult its own tax advisors.
RESTRICTIONS ON TRANSFER; HOLDING BY PASS-THROUGH ENTITIES. An entity or
segregated pool of assets cannot qualify as a REMIC absent reasonable
arrangements designed to ensure that (1) residual interests in such entity or
segregated pool are not held by disqualified organizations and (2) information
necessary to calculate the tax due on transfers to disqualified organizations
(I.E., a computation of the present value of the excess inclusions) is made
available by the REMIC. The governing instruments of a Trust Fund will contain
provisions designed to ensure the foregoing, and any transferee of a REMIC
Residual Certificate must execute and deliver an affidavit stating that neither
the transferee nor any person for whose account such transferee is acquiring
the REMIC Residual Certificate is a disqualified organization. In addition, as
to the requirement that reasonable arrangements be made to ensure that
disqualified organizations do not hold a residual interest in the REMIC, the
REMIC Regulations require that notice of the prohibition be provided either
through a legend on the certificate that evidences ownership, or through a
conspicuous statement in the prospectus or other offering document used to
offer the residual interest for sale. As to the requirement that sufficient
information be made available to calculate the tax on transfers to disqualified
organizations (or the tax, discussed below, on pass-through entities, interests
in which are held by disqualified organizations), the REMIC Regulations further
require that such information also be provided to the Internal Revenue Service.
A tax is imposed on "pass-through entities" holding residual interests
where a disqualified organization is a record holder of an interest in the
pass-through entity. "Pass-through entity" is defined for this purpose to
include RICs, REITs, common trust funds, partnerships, trusts, estates and
subchapter T cooperatives. Except as provided in regulations, nominees holding
interests in a "pass-through entity" for another person will also be treated as
"pass-through entities" for this purpose. The tax is equal to the amount of
excess inclusions allocable to the disqualified organization for the taxable
year multiplied by the highest corporate rate of tax, and is deductible by the
"pass-through entity" against the gross amount of ordinary income of the
entity.
The Agreement provides that any attempted transfer of a beneficial or
record interest in a REMIC Residual Certificate will be null and void unless
the proposed transferee provides to the Trustee an affidavit that such
transferee is not a disqualified organization.
For taxable years beginning after December 31, 1997, all partners of
certain "electing large partnerships" having 100 or more partners will be
treated as disqualified organizations for purposes of the tax imposed on
pass-through entities if such partnerships hold residual interests in a REMIC.
In addition, 70 percent of an electing large partnership's miscellaneous
itemized deductions, including deductions for servicing and guaranty
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fees and any expenses of the REMIC will be disallowed, although the remaining
deductions will not be subject to the 2 percent floor applicable to individual
partners. See "Deductibility of Trust Fund Expenses" below.
The REMIC Regulations provide that a transfer of a "noneconomic residual
interest" will be disregarded for all federal income tax purposes unless
impeding the assessment or collection of tax was not a significant purpose of
the transfer. A residual interest will be treated as a "noneconomic residual
interest" unless, at the time of the transfer (1) the present value of the
expected future distributions on the residual interest at least equals the
product of (x) the present value of all anticipated excess inclusions with
respect to the residual interest and (y) the highest corporate tax rate, and
(2) the transferor reasonably expects that for each anticipated excess
inclusion, the transferee will receive distributions from the REMIC, at or
after the time at which taxes on such excess inclusion accrue, sufficient to
pay the taxes thereon. A significant purpose to impede the assessment or
collection of tax exists if the transferor, at the time of the transfer, either
knew or should have known (had "improper knowledge") that the transferee would
be unwilling or unable to pay taxes due on its share of the taxable income of
the REMIC. A transferor will be presumed not to have improper knowledge if (i)
the transferor conducts, at the time of the transfer, a reasonable
investigation of the financial condition of the transferee and, as a result of
the investigation, the transferor finds that the transferee has historically
paid its debts as they came due and finds no significant evidence to indicate
that the transferee will not continue to pay its debts as they come due in the
future, and (ii) the transferee represents to the transferor that (A) the
transferee understands that it might incur tax liabilities in excess of any
cash received with respect to the residual interest and (B) the transferee
intends to pay the taxes associated with owning the residual interest as they
come due. Any transferee of a REMIC Residual Certificate must execute and
deliver to the transferor an affidavit containing the representations described
in (ii) above. A different formulation of this rule applies to transfers of
REMIC Residual Certificates by or to foreign transferees. See "Foreign
Investors" below.
DEDUCTIBILITY OF TRUST FUND EXPENSES
A holder of REMIC Certificates that is an individual, estate or trust
will be subject to the limitation with respect to certain itemized deductions
described in Code Section 67, to the extent that such deductions, in the
aggregate, do not exceed two percent of the holder's adjusted gross income, and
such holder may not be able to deduct such fees and expenses to any extent in
computing such holder's alternative minimum tax liability. In addition, the
amount of itemized deductions otherwise allowable for the taxable year for an
individual whose adjusted gross income exceeds the "applicable amount"
($100,000 (or $50,000 in the case of a separate return by a married
individual), adjusted for changes in the cost of living subsequent to 1990)
will be reduced by the lesser of (i) 3 percent of the excess of adjusted gross
income over the applicable amount, or (ii) 80 percent of the amount of itemized
deductions otherwise allowable for such taxable year. Such deductions will
include servicing, guarantee, and administrative fees paid to the Master
Servicer of the Mortgage Loans. These deductions will be allocated entirely to
the holders of the REMIC Residual Certificates in the case of REMIC Trust Funds
with multiple classes of REMIC Regular Certificates that do not pay their
principal amounts ratably. As a result, the REMIC will report additional
taxable income to holders of REMIC Residual Certificates in an amount equal to
their allocable share of such deductions, and individuals, estates, or trusts
holding an interest in such REMIC Residual Certificates may have taxable income
in excess of the cash received. In the case of a "single-class REMIC," the
expenses will be allocated, under Treasury regulations, among the holders of
the REMIC Regular Certificates and the REMIC Residual Certificates on a daily
basis in proportion to the relative amounts of income accruing to each
Certificateholder on that day. In the case of a holder of a REMIC Regular
Certificate who is an individual or a "pass-through interest holder" (including
certain pass-through entities, but not including REITs), the deductibility of
such expenses will be subject to the limitations described above. The reduction
or disallowance of these deductions may have a significant impact on the yield
of REMIC Regular Certificates to such a holder. In general terms, a
single-class REMIC is one that either (i) would qualify, under existing
Treasury regulations, as a grantor trust if it were not a REMIC (treating all
interests as ownership interests, even if they would be classified as debt for
federal income purposes) or (ii) is similar to such a trust and which is
structured with the principal purpose of avoiding the single-class REMIC rules.
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FOREIGN INVESTORS
REMIC REGULAR CERTIFICATES. Except as discussed below, a holder of a
REMIC Regular Certificate who is not a "United States person" (as defined
below) generally will not be subject to United States income or withholding tax
in respect of a distribution on a REMIC Regular Certificate, provided that (i)
the holder complies to the extent necessary with certain identification
requirements, including timely delivery of a statement, signed by the holder of
the REMIC Regular Certificate under penalties of perjury, certifying that the
holder of the REMIC Regular Certificate is not a United States person and
providing the name and address of the holder, (ii) the holder is not a
"10-percent shareholder" within the meaning of Code Section 871(h)(3)(B), which
could be interpreted to apply to a holder of a REMIC Regular Certificate who
holds a direct or indirect 10 percent interest in the REMIC Residual
Certificates, (iii) the holder is not a "controlled foreign corporation" (as
defined in the Code) related to the REMIC or related to a 10 percent holder of
a residual interest in the REMIC, and (iv) the holder is not engaged in a
United States trade or business, or otherwise subject to federal income tax as
a result of any direct or indirect connection to the United States other than
through its ownership of a REMIC Regular Certificate. For these purposes, the
term "United States person" means (i) a citizen or resident of the United
States, (ii) a corporation, partnership or other entity created or organized in
or under the laws of the United States or any political subdivision thereof,
(iii) an estate whose income is includable in gross income for United States
federal income taxation regardless of its source, and (iv) a trust for which
one or more United States fiduciaries have the authority to control all
substantial decisions and for which a court of the United States can exercise
primary supervision over the trust's administration. For years beginning before
January 1, 1997, the term "United States person" shall include a trust whose
income is includible in gross income for United States federal income taxation
regardless of source, in lieu of trusts described in (iv) above, unless the
trust elects to have its United States status determined under the criteria set
forth in (iv) above for tax years ending after August 20, 1996. Recently issued
Treasury regulations (the "Final Withholding Regulations"), which are generally
effective with respect to payments made after December 31, 1998, consolidate
and modify the current certification requirements and means by which a holder
may claim exemption from United States federal income tax withholding and
provide certain presumptions regarding the status of holders when payments to
the holders cannot be reliably associated with appropriate documentation
provided to the payor. All holders should consult their tax advisers regarding
the application of the Final Withholding Regulations.
REMIC RESIDUAL CERTIFICATES. The Conference Report to the Tax Reform Act
of 1986 states that amounts paid to foreign persons with respect to residual
interests should be considered interest for purposes of the withholding rules.
Interest paid to a foreign person which is not effectively connected with a
trade or business of the foreign person in the United States is subject to a
30% withholding tax. The withholding tax on interest does not apply, however,
to "portfolio interest" (if certain certifications as to beneficial ownership
are made, as discussed above under "Foreign Investors -- Regular Certificates")
or to the extent a tax treaty reduces or eliminates the tax. Treasury
regulations provide that amounts paid with respect to residual interests
qualify as portfolio interest only if interest on the qualified mortgages held
by the REMIC qualifies as portfolio interest. Generally, interest on Mortgage
Loans held by a Trust Fund will not qualify as portfolio interest, although
interest on the Private Mortgage-Backed Securities, other pass-through
certificates, or REMIC regular interests held by a Trust Fund may qualify. In
any case, a holder of a REMIC Residual Certificate will not be entitled to the
portfolio interest exception from the 30% withholding tax (or to any treaty
exemption or rate reduction) for that portion of a payment that constitutes
excess inclusions. Generally, the withholding tax will be imposed when REMIC
gross income is paid or distributed to the holder of a residual interest or
there is a disposition of the residual interest.
The REMIC Regulations provide that a transfer of a REMIC Residual
Certificate to a foreign transferee will be disregarded for all federal income
tax purposes if the transfer has "tax avoidance potential." A transfer to a
foreign transferee will be considered to have tax avoidance potential unless at
the time of the transfer, the transferor reasonably expects that (1) the future
distributions on the REMIC Residual Certificate will equal at least 30 percent
of the anticipated excess inclusions and (2) such amounts will be distributed
at or after the time at which the excess inclusion accrues, but not later than
the close of the calendar year following the calendar year of accrual. A safe
harbor in the REMIC Regulations provides that the reasonable expectation
requirement will be satisfied if the above test would be met at all assumed
prepayment rates for the Mortgage Loans from 50 percent of the Prepayment
Assumption to 200 percent of the Prepayment Assumption. A transfer by a foreign
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transferor to a domestic transferee will likewise be disregarded under the
REMIC Regulations if the transfer would have the effect of allowing the foreign
transferor to avoid the tax on accrued excess inclusions.
BACKUP WITHHOLDING
Distributions made on the REMIC Certificates and proceeds from the sale
of REMIC Certificates to or through certain brokers may be subject to a
"backup" withholding tax of 31 percent of "reportable payments" (including
interest accruals, original issue discount, and, under certain circumstances,
distributions in reduction of principal amount) unless, in general, the holder
of the REMIC Certificate complies with certain procedures or is an exempt
recipient. Any amounts so withheld from distributions on the REMIC Certificates
would be refunded by the Internal Revenue Service or allowable as a credit
against the holder's federal income tax.
REMIC ADMINISTRATIVE MATTERS
The federal information returns for a Trust Fund (Form 1066 and Schedules
Q thereto) must be filed as if the Trust Fund were a partnership for federal
income tax purposes. Information on Schedule Q must be provided to holders of
REMIC Residual Certificates with respect to every calendar quarter. Each holder
of a REMIC Residual Certificate will be required to treat items on its federal
income tax returns consistently with their treatment on the Trust Fund's
information returns unless the holder either files a statement identifying the
inconsistency or establishes that the inconsistency resulted from an incorrect
schedule received from the Trust Fund. The Trust Fund also will be subject to
the procedural and administrative rules of the Code applicable to partnerships,
including the determination of any adjustments to, among other things, items of
REMIC taxable income by the Internal Revenue Service. Holders of REMIC Residual
Certificates will have certain rights and obligations with respect to any
administrative or judicial proceedings involving the Internal Revenue Service.
Under the Code and Regulations, a REMIC generally is required to designate a
tax matters person. Generally, subject to various limitations, the tax matters
person has authority to act on behalf of the REMIC and the holders of the REMIC
Residual Certificates in connection with administrative determinations and
judicial review respecting returns of taxable income of the REMIC. Treasury
regulations exempt from certain of these procedural rules REMICs having no more
than one residual interest holder.
Unless otherwise indicated in the Prospectus Supplement, and to the
extent allowable, the Seller or its designee will act as the tax matters person
for each REMIC. Each holder of a REMIC Residual Certificate, by the acceptance
of its interest in the REMIC Residual Certificate, agrees that the Seller or
its designee will act as the holder's fiduciary in the performance of any
duties required of the holder in the event that the holder is the tax matters
person.
NON-REMIC CERTIFICATES
The discussion under this heading applies only to a series of
Certificates with respect to which a REMIC election is not made.
TAX STATUS OF THE TRUST FUND. Upon the issuance of each series of
Non-REMIC Certificates, Stroock & Stroock & Lavan LLP, counsel to the Seller,
will deliver its opinion to the effect that, under then current law, assuming
compliance with the Agreement, the related Trust Fund will be classified for
federal income tax purposes as a grantor trust and not as an association
taxable as a corporation or a taxable mortgage pool. Accordingly, each holder
of a Non-REMIC Certificate will be treated for federal income tax purposes as
the owner of an undivided interest in the Mortgage Loans included in the Trust
Fund. As further described below, each holder of a Non-REMIC Certificate
therefore must report on its federal income tax return the gross income from
the portion of the Mortgage Loans that is allocable to such Non-REMIC
Certificate and may deduct the portion of the expenses incurred by the Trust
Fund that is allocable to such Non-REMIC Certificate, at the same time and to
the same extent as such items would be reported by such holder if it had
purchased and held directly such interest in the Mortgage Loans and received
directly its share of the payments on the Mortgage Loans and incurred directly
its share of expenses incurred by the Trust Fund when those amounts are
received or incurred by the Trust Fund.
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A holder of a Non-REMIC Certificate that is an individual, estate, or
trust will be allowed deductions for such expenses only to the extent that the
sum of those expenses and the holder's other miscellaneous itemized deductions
exceeds two percent of such holder's adjusted gross income. In addition, the
amount of itemized deductions otherwise allowable for the taxable year for an
individual whose adjusted gross income exceeds the "applicable amount"
($100,000 (or $50,000 in the case of a separate return by a married
individual), adjusted for changes in the cost of living subsequent to 1990)
will be reduced by the lesser of (i) 3 percent of the excess of adjusted gross
income over the applicable amount, or (ii) 80 percent of the amount of itemized
deductions otherwise allowable for such taxable year. A holder of a Non-REMIC
Certificate that is not a corporation cannot deduct such expenses for purposes
of the alternative minimum tax (if applicable). Such deductions will include
servicing, guarantee and administrative fees paid to the servicer of the
Mortgage Loans. As a result, individuals, estates, or trusts holding Non-REMIC
Certificates may have taxable income in excess of the cash received.
STATUS OF THE NON-REMIC CERTIFICATES. The Non-REMIC Certificates
generally will be "real estate assets" for purposes of Section 856(c)(4)(A) of
the Code and "loans... secured by an interest in real property" within the
meaning of Section 7701(a)(19)(C) (v) of the Code, and interest income on the
Non-REMIC Certificates generally will be "interest on obligations secured by
mortgages on real property" within the meaning of Section 856(c)(3)(B) of the
Code. However, the Non-REMIC Certificates may not be qualifying assets under
the foregoing sections of the Code to the extent that the Trust Fund's assets
include Buydown Funds, amounts in a Reserve Account, or payments on mortgages
held pending distribution to Certificateholders. The Non-REMIC Certificates
should not be "residential loans made by the taxpayer" for purposes of the
residential loan requirement of Section 593(g)(4)(B) of the Code.
TAXATION OF NON-REMIC CERTIFICATES UNDER STRIPPED BOND RULES. The federal
income tax treatment of the Non-REMIC Certificates will depend on whether they
are subject to the rules of section 1286 of the Code (the "stripped bond
rules"). The Non-REMIC Certificates will be subject to those rules if stripped
interest-only Certificates are issued. In addition, whether or not stripped
interest-only Certificates are issued, the Internal Revenue Service may contend
that the stripped bond rules apply on the ground that the Master Servicer's
servicing fee, or other amounts, if any, paid to (or retained by) the Master
Servicer or its affiliates, as specified in the applicable Prospectus
Supplement, represent greater than an arm's length consideration for servicing
the Mortgage Loans. In Revenue Ruling 91-46, the Internal Revenue Service
concluded that retained interest in excess of reasonable compensation for
servicing is treated as a "stripped coupon" under the rules of Code Section
1286.
If interest retained for the Master Servicer's servicing fee or other
interest is treated as a "stripped coupon," the Non-REMIC Certificates will
either be subject to the original issue discount rules or the market discount
rules. A holder of a Non-REMIC Certificate will account for any discount on the
Non-REMIC Certificate (other than an interest treated as a "stripped coupon")
as market discount rather than original issue discount if either (i) the amount
of original issue discount with respect to the Non-REMIC Certificate was
treated as zero under the original issue discount DE MINIMIS rule when the
Non-REMIC Certificate was stripped or (ii) no more than 100 basis points
(including any amount of servicing in excess of reasonable servicing) is
stripped off from the Mortgage Loans. If neither of the above exceptions
applies, the original issue discount rules will apply to the Non-REMIC
Certificates. See "REMIC Regular Interests -- Current Income on REMIC Regular
Interests -- Original Issue Discount" and " -- Market Discount" above.
If the original issue discount rules apply, the holder of a Non-REMIC
Certificate (whether a cash or accrual method taxpayer) will be required to
report interest income from the Non-REMIC Certificate in each taxable year
equal to the income that accrues on the Non-REMIC Certificate in that year
calculated under a constant yield method based on the yield of the Non-REMIC
Certificate (or, possibly, the yield of each Mortgage Loan underlying such
Non-REMIC Certificate) to such holder. Such yield would be computed at the rate
that, if used in discounting the holder's share of the payments on the Mortgage
Loans, would cause the present value of those payments to equal the price at
which the holder purchased the Non-REMIC Certificate. With respect to certain
categories of debt instruments, Section 1272(a)(6) of the Code requires that
original issue discount be accrued based on a prepayment assumption determined
in a manner prescribed by forthcoming regulations. The Taxpayer Relief Act of
1997 amended the original issue discount provisions to provide that for "any
pool of debt instruments, the yield on which may be affected by reason of
prepayments," original issue discount shall be accrued based on a prepayment
assumption determined in a manner prescribed by forthcoming regulations. This
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might require the use of the pricing prepayment assumption instead of the
prepayment assumptions used in the underlying transactions.
In the case of a Non-REMIC Certificate acquired at a price equal to the
principal amount of the Mortgage Loans allocable to the Non-REMIC Certificate,
the use of a reasonable prepayment assumption generally would not have any
significant effect on the yield used in calculating accruals of interest
income. In the case, however, of a Non-REMIC Certificate acquired at a discount
or premium (that is, at a price less than or greater than such principal
amount, respectively), the use of a reasonable prepayment assumption would
increase or decrease such yield, and thus accelerate or decelerate the
reporting of interest income, respectively.
If a Mortgage Loan is prepaid in full, the holder of a Non-REMIC
Certificate acquired at a discount or premium generally will recognize ordinary
income or loss equal to the difference between the portion of the prepaid
principal amount of the Mortgage Loan that is allocable to the Non-REMIC
Certificate and the portion of the adjusted basis of the Non-REMIC Certificate
(see "Sales of Non-REMIC Certificates" below) that is allocable to the Mortgage
Loan.
Non-REMIC Certificates of certain series ("Variable Rate Non-REMIC
Certificates") may provide for a Pass-through Rate based on the weighted
average of the interest rates of the Mortgage Loans held by the Trust Fund,
which interest rates may be fixed or variable. In the case of a Variable Rate
Non-REMIC Certificate that is subject to the original issue discount rules, the
daily portions of original issue discount generally will be calculated in the
same manner as discussed above except the principles discussed in "REMIC
Regular Certificates -- Current Income on REMIC Regular Certificates --
Original Issue Discounts -- Variable Rate REMIC Regular Certificates" will be
applied.
TAXATION OF NON-REMIC CERTIFICATES IF STRIPPED BOND RULES DO NOT APPLY.
If the stripped bond rules do not apply to a Non-REMIC Certificate, then the
holder will be required to include in income its share of the interest payments
on the Mortgage Loans in accordance with its tax accounting method. In
addition, if the holder purchased the Non-REMIC Certificate at a discount or
premium, the holder will be required to account for such discount or premium in
the manner described below, as if it had purchased the Mortgage Loans directly.
The treatment of any discount will depend on whether the discount with respect
to the Mortgage Loans is original issue discount as defined in the Code and, in
the case of discount other than original issue discount, whether such other
discount exceeds a DE MINIMIS amount. In the case of original issue discount,
the holder (whether a cash or accrual method taxpayer) will be required to
report as additional interest income in each month the portion of such discount
that accrues in that month, calculated based on a constant yield method. In
general it is not anticipated that the amount of original issue discount to be
accrued in each month, if any, will be significant relative to the interest
paid currently on the Mortgage Loans. However, original issue discount could
arise with respect to a Mortgage Loan ("ARM") that provides for interest at a
rate equal to the sum of an index of market interest rates and a fixed number.
The original issue discount for ARMs generally will be determined under the
principals discussed in "REMIC Regular Certificates -- Current Income on REMIC
Regular Certificates -- Original Issue Discount -- Variable Rate REMIC Regular
Certificates."
If discount on the Mortgage Loans other than original issue discount
exceeds a DE MINIMIS amount (described below), the holder will also generally
be required to include in income in each month the amount of such discount
accrued through such month and not previously included in income, but limited,
with respect to the portion of such discount allocable to any Mortgage Loan, to
the amount of principal on such Mortgage Loan received by the Trust Fund in
that month. Because the Mortgage Loans will provide for monthly principal
payments, such discount may be required to be included in income at a rate that
is not significantly slower (and, under certain circumstances, faster) than the
rate at which such discount accrues (and therefore at a rate not significantly
slower than the rate at which such discount would be included in income if it
were original issue discount). The holder may elect to accrue such discount
under a constant yield method based on the yield of the Non-REMIC Certificate
to such holder. In the absence of such an election, it may be necessary to
accrue such discount under a more rapid straight-line method. Under the DE
MINIMIS rule, market discount with respect to a Non-REMIC Certificate will be
considered to be zero if it is less than the product of (i) 0.25% of the
principal amount of the Mortgage Loans allocable to the Non-REMIC Certificate
and (ii) the weighted average life (determined using complete years) of the
Mortgage Loans remaining at the time of purchase of the Non-REMIC Certificate.
See "REMIC Regular Certificates -- Current Income on REMIC Regular Certificates
- -- Market Discount."
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If a holder purchases a Non-REMIC Certificate at a premium, such holder
may elect under Section 171 of the Code to amortize, as an offset to interest
income, the portion of such premium that is allocable to a Mortgage Loan under
a constant yield method based on the yield of the Mortgage Loan to such holder,
provided that such Mortgage Loan was originated after September 27, 1985.
Premium allocable to a Mortgage Loan originated on or before that date should
be allocated among the principal payments on the Mortgage Loan and allowed as
an ordinary deduction as principal payments are made or, perhaps, upon
termination.
It is not clear whether the foregoing adjustments for discount or premium
would be made based on the scheduled payments on the Mortgage Loans or taking
account of a reasonable prepayment assumption.
If a Mortgage Loan is prepaid in full, the holder of a Non-REMIC
Certificate acquired at a discount or premium will recognize ordinary income or
loss equal to the difference between the portion of the prepaid principal
amount of the Mortgage Loan that is allocable to the Non-REMIC Certificate and
the portion of the adjusted basis of the Non-REMIC Certificate (see "Sales of
Non-REMIC Certificates" below) that is allocable to the Mortgage Loan.
SALES OF NON-REMIC CERTIFICATES. A holder that sells a Non-REMIC
Certificate will recognize gain or loss equal to the difference between the
amount realized in the sale and its adjusted basis in the Non-REMIC
Certificate. In general, such adjusted basis will equal the holder's cost for
the Non-REMIC Certificate, increased by the amount of any income previously
reported with respect to the Non-REMIC Certificate and decreased by the amount
of any losses previously reported with respect to the Non-REMIC Certificate and
the amount of any distributions received thereon. Any such gain or loss
generally will be capital gain or loss if the assets underlying the Non-REMIC
Certificate were held as capital assets, except that, for a Non-REMIC
Certificate to which the stripped bond rules do not apply and that was acquired
with more than a DE MINIMIS amount of discount other than original issue
discount (see "Taxation of Non-REMIC Certificates if Stripped Bond Rules Do Not
Apply" above), such gain will be treated as ordinary interest income to the
extent of the portion of such discount that accrued during the period in which
the seller held the Non-REMIC Certificate and that was not previously included
in income.
FOREIGN INVESTORS. A holder of a Non-REMIC Certificate who is not a
"United States person" (as defined below) and is not subject to federal income
tax as a result of any direct or indirect connection to the United States other
than its ownership of a Non-REMIC Certificate will not be subject to United
States income or withholding tax in respect of payments of interest or original
issue discount on a Non-REMIC Certificate to the extent attributable to
Mortgage Loans that were originated after July 18, 1984, provided that the
holder complies to the extent necessary with certain identification
requirements (including delivery of a statement, signed by the holder of the
Non-REMIC Certificate under penalties of perjury, certifying that such holder
is not a United States person and providing the name and address of such
holder). Recently issued Treasury regulations (the "Final Withholding
Regulations"), which are generally effective with respect to payments made
after December 31, 1998, consolidate and modify the current certification
requirements and means by which a holder may claim exemption from United States
federal income tax withholding and provide certain presumptions regarding the
status of holders when payments to the holders cannot be reliably associated
with appropriate documentation provided to the payor. All holders should
consult their tax advisers regarding the application of the Final Withholding
Regulations. Interest or original issue discount on a Non-REMIC Certificate
attributable to Mortgage Loans that were originated prior to July 19, 1984 will
be subject to a 30% withholding tax (unless such tax is reduced or eliminated
by an applicable tax treaty). For these purposes, the term "United States
person" means a citizen or a resident of the United States, a corporation,
partnership or other entity created or organized in, or under the laws of, the
United States or any political subdivision thereof, an estate the income of
which is subject to United States federal income taxation regardless of its
source, and a trust for which one or more United States fiduciaries have the
authority to control all substantial decisions and for which a court of the
United States can exercise primary supervision over the trust's administration.
For years beginning before January 1, 1997, the term "United States person"
shall include a trust whose income is includible in gross income for United
States federal income taxation regardless of source, in lieu of trusts just
described, unless the trust elects to have its United States status determined
under the criteria described in the previous sentence for tax years ending
after August 20, 1996.
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TAXABLE MORTGAGE POOLS
Effective January 1, 1992, certain entities classified as "taxable
mortgage pools" are subject to corporate level tax on their net income. A
"taxable mortgage pool" is generally defined as an entity that meets the
following requirements: (i) the entity is not a REMIC (or, after September 1,
1997 a FASIT, as defined in Section 860L of the Code), (ii) substantially all
of the assets of the entity are debt obligations, and more than 50 percent of
such debt obligations consists of real estate mortgages (or interests therein),
(iii) the entity is the obligor under debt obligations with two or more
maturities, and (iv) payments on the debt obligations on which the entity is
the obligor bear a relationship to the payments on the debt obligations which
the entity holds as assets. With respect to requirement (iii), the Code
authorizes the Internal Revenue Service to provide by regulations that equity
interests may be treated as debt for purposes of determining whether there are
two or more maturities. If a Series of Non-REMIC Certificates were treated as
obligations of a taxable mortgage pool, the Trust Fund would be ineligible to
file consolidated returns with any other corporation and could be liable for
corporate tax. Treasury regulations do not provide for the recharacterization
of equity as debt for purposes of determining whether an entity has issued debt
with two maturities, except in the case of transactions structured to avoid the
taxable mortgage pool rules.
ERISA CONSIDERATIONS
A fiduciary of a pension, profit-sharing, retirement or other employee
benefit plan subject to Title I of ERISA, should consider the fiduciary
standards under ERISA in the context of the plan's particular circumstances
before authorizing an investment of a portion of such plan's assets in the
Certificates. Accordingly, pursuant to Section 404 of ERISA, such fiduciary
should consider among other factors (i) whether the investment is for the
exclusive benefit of plan participants and their beneficiaries; (ii) whether
the investment satisfies the applicable diversification requirements; (iii)
whether the investment is in accordance with the documents and instruments
governing the plan; and (iv) whether the investment is prudent, considering the
nature of the investment. Fiduciaries of plans also should consider ERISA's
prohibition on improper delegation of control over, or responsibility for, plan
assets.
In addition, benefit plans subject to ERISA, as well as individual
retirement accounts or certain types of Keogh plans not subject to ERISA but
subject to Section 4975 of the Code (each, a "Plan"), are prohibited from
engaging in a broad range of transactions involving Plan assets and persons
having certain specified relationships to a Plan ("parties in interest" and
"disqualified persons"). Such transactions are treated as "prohibited
transactions" under Sections 406 of ERISA and excise taxes are imposed upon
such persons by Section 4975 of the Code. The Seller, Bear, Stearns & Co. Inc.,
each Master Servicer or other servicer, any Pool Insurer, any Special Hazard
Insurer, the Trustee, and certain of their affiliates might be considered
"parties in interest" or "disqualified persons" with respect to a Plan. If so,
the acquisition, holding or disposition of Certificates by or on behalf of such
Plan could be considered to give rise to a "prohibited transaction" within the
meaning of ERISA and the Code unless an exemption is available. Furthermore, if
an investing Plan's assets were deemed to include the Mortgage Assets and not
merely an interest in the Certificates, transactions occurring in the
management of Mortgage Assets might constitute prohibited transactions and the
fiduciary investment standards of ERISA could apply to the assets of the Trust
Fund, unless an administrative exemption applies.
In DOL Regulation ss.2510.3-101 (the "Regulation"), the U.S. Department
of Labor has defined what constitutes Plan assets for purposes of ERISA and
Section 4975 of the Code. The Regulation provides that if a Plan makes an
investment in an "equity interest" in an entity, the assets of the entity will
be considered the assets of such Plan unless certain exceptions apply. The
Seller can give no assurance that the Certificates will qualify for any of the
exceptions under the Regulation. As a result, the Mortgage Assets may be
considered the assets of any Plan which acquires a Certificate, unless some
administrative exemption is available.
The U.S. Department of Labor has issued an administrative exemption,
Prohibited Transaction Class Exemption 83-1 ("PTCE 83-1"), which, under certain
conditions, exempts from the application of the prohibited transaction rules of
ERISA and the excise tax provisions of Section 4975 of the Code transactions
involving a Plan in connection with the operation of a "mortgage pool" and the
purchase, sale and holding of "mortgage
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pool pass-through certificates." A "mortgage pool" is defined as an investment
pool, consisting solely of interest bearing obligations secured by first or
second mortgages or deeds of trust on single-family residential property,
property acquired in foreclosure and undistributed cash. A "mortgage pool
pass-through certificate" is defined as a certificate which represents a
beneficial undivided interest in a mortgage pool which entitles the holder to
pass-through payments of principal and interest from the Mortgage Loans.
For the exemption to apply, PTCE 83-1 requires that (i) the Seller and
the Trustee maintain a system of insurance or other protection for the Mortgage
Loans and the property securing such Mortgage Loans, and for indemnifying
holders of Certificates against reductions in pass-through payments due to
defaults in loan payments or property damage in an amount at least equal to the
greater of 1% of the aggregate principal balance of the Mortgage Loans, or 1%
of the principal balance of the largest covered pooled Mortgage Loan; (ii) the
Trustee may not be an affiliate of the Seller; and (iii) the payments made to
and retained by the Seller in connection with the Trust Fund, together with all
funds inuring to its benefit for administering the Trust Fund, represent no
more than "adequate consideration" for selling the Mortgage Loans, plus
reasonable compensation for services provided to the Trust Fund.
In addition, PTCE 83-1 exempts the initial sale of Certificates to a Plan
with respect to which the Seller, the Special Hazard Insurer, the Pool Insurer,
the Master Servicer, or other servicer, or the Trustee is a party in interest
if the Plan does not pay more than fair market value for such Certificate and
the rights and interests evidenced by such Certificate are not subordinated to
the rights and interests evidenced by other Certificates of the same pool. PTCE
83-1 also exempts from the prohibited transaction rules any transactions in
connection with the servicing and operation of the Mortgage Pool, provided that
any payments made to the Master Servicer in connection with the servicing of
the Trust Fund are made in accordance with a binding agreement, copies of which
must be made available to prospective investors.
In the case of any Plan with respect to which the Seller, the Master
Servicer, the Special Hazard Insurer, the Pool Insurer, or the Trustee is a
fiduciary, PTCE 83-1 will only apply if, in addition to the other requirements:
(i) the initial sale, exchange or transfer of Certificates is expressly
approved by an independent fiduciary who has authority to manage and control
those plan assets being invested in Certificates; (ii) the Plan pays no more
for the Certificates than would be paid in an arm's length transaction; (iii)
no investment management, advisory or underwriting fee, sale commission, or
similar compensation is paid to the Seller with regard to the sale, exchange or
transfer of Certificates to the Plan; (iv) the total value of the Certificates
purchased by such Plan does not exceed 25% of the amount issued; and (v) at
least 50% of the aggregate amount of Certificates is acquired by persons
independent of the Seller, the Trustee, the Master Servicer, and the Special
Hazard Insurer or Pool Insurer.
Before purchasing Certificates, a fiduciary of a Plan should confirm that
the Trust Fund is a "mortgage pool," that the Certificates constitute "mortgage
pool pass-through certificates," and that the conditions set forth in PTCE 83-1
would be satisfied. In addition to making its own determination as to the
availability of the exemptive relief provided in PTCE 83-1, the Plan fiduciary
should consider the availability of any other prohibited transaction
exemptions. The Plan fiduciary also should consider its general fiduciary
obligations under ERISA in determining whether to purchase any Certificates on
behalf of a Plan.
In addition to PTCE 83-1, the U.S. Department of Labor has issued an
individual exemption, Prohibited Transaction Exemption 90-30 ("PTE 90-30"), to
Bear, Stearns & Co. Inc., which is applicable to Certificates which meet its
requirements whenever Bear, Stearns & Co. Inc. or its affiliate is the sole
underwriter, manager or co-manager of an underwriting syndicate, or is the
selling or placement agent. PTE 90-30 generally exempts certain transactions
from the application of certain of the prohibited transaction provisions of
ERISA and the Code provided that certain conditions set forth in PTE 90-30 are
satisfied. The exempted transactions include certain transactions relating to
the servicing and operation of investment trusts holding assets of the
following general categories: single and multifamily residential or commercial
mortgages, motor vehicle receivables, consumer or commercial receivables and
guaranteed government mortgage pool certificates and the purchase, sale and
holding of mortgage-backed or asset- backed pass-through certificates
representing beneficial ownership interests in the assets of such investment
trusts.
PTE 90-30 sets forth seven general conditions which must be satisfied for
a transaction involving the purchase, sale and holding of the Certificates to
be eligible for exemptive relief thereunder. First, the acquisition of
Certificates by certain Plans must be on terms that are at least as favorable
to the Plan as they would be in
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an arm's length transaction with an unrelated party. Second, the rights and
interests evidenced by the Certificates must not be subordinated to the rights
and interests evidenced by other certificates of the same trust. Third, the
Certificates at the time of acquisition by the Plan must be rated in one of the
three highest generic rating categories by Standard & Poor's Structured Rating
Group, Moody's Investors Service Inc., Duff & Phelps Credit Rating Co. or Fitch
Investors Services, L.P. ("National Credit Rating Agencies"). Fourth, the
Trustee cannot be an affiliate of any member of the "Restricted Group" which
consists of any underwriter as defined in PTE 90-30, the Seller, the Master
Servicer, each servicer, the Pool Insurer, the Special Hazard Insurer and any
obligor with respect to obligations or receivables constituting more than 5% of
the aggregate unamortized principal balance of the obligations or receivables
as of the date of initial issuance of the Certificates. Fifth, the sum of all
payments made to and retained by such underwriters must represent not more than
reasonable compensation for underwriting the Certificates; the sum of all
payments made to and retained by the Seller pursuant to the assignment of the
obligations or receivables to the related Trust Fund must represent not more
than the fair market value of such obligations; and the sum of all payments
made to and retained by the Master Servicer and any servicer must represent not
more than reasonable compensation for such person's services under the Trust
Agreement and reimbursement of such person's reasonable expenses in connection
therewith. Sixth, (i) the investment pool consists only of assets of the type
enumerated in the exemption and which have been included in other investment
pools; (ii) certificates evidencing interests in such other investment pools
have been rated in one of the three highest generic rating categories by one of
the National Credit Rating Agencies for at least one year prior to a Plan's
acquisition of certificates; and (iii) certificates evidencing interests in
such other investment pools have been purchased by investors other than Plans
for at least one year prior to a Plan's acquisition of certificates. Finally,
the investing Plan must be an accredited investor as defined in Rule 501(a)(1)
of Regulation D of the Commission under the Securities Act of 1933, as amended.
The Seller assumes that only Plans which are accredited investors under the
federal securities laws will be permitted to purchase the Certificates.
If the general conditions of PTE 90-30 are satisfied, such exemption may
provide an exemption from the restrictions imposed by ERISA and the Code in
connection with the direct or indirect sale, exchange, transfer, holding or the
direct or indirect acquisition or disposition in the secondary market of the
Certificates by Plans. However, no exemption is provided from the restrictions
of ERISA for the acquisition or holding of a Certificate on behalf of an
"Excluded Plan" by any person who is a fiduciary with respect to the assets of
such Excluded Plan. For purposes of the Certificates, an Excluded Plan is a
Plan sponsored by any member of the Restricted Group. In addition, each Plan's
investment in each class of Certificates cannot exceed 25% of the outstanding
Certificates in the class, and after the Plan's acquisition of the
Certificates, no more than 25% of the assets over which the fiduciary has
investment authority are invested in Certificates of a trust containing assets
which are sold or serviced by the same entity. Finally, in the case of initial
issuance (but not secondary market transactions), at least 50% of each class of
Certificates, and at least 50% of the aggregate interests in the trust, must be
acquired by persons independent of the Restricted Group.
Before purchasing a Certificate in reliance on any of these exemptions or
any other exemption, a fiduciary of a Plan should itself confirm that
requirements set forth in such exemption would be satisfied.
One or more exemptions may be available, with respect to certain
prohibited transactions to which neither PTCE 83-1 nor PTE 90-30 is applicable,
depending in part upon the type of Plan fiduciary making the decision to
acquire Certificates and the circumstances under which such decision is made,
including, but not limited to PTCE 90-1 (regarding investments by insurance
company pooled separate accounts), PTCE 91-38 (regarding investments by bank
collective investments funds), PTCE 84-14 (regarding transactions effected by
"qualified professional asset managers"), PTCE 95-60 (regarding investments by
insurance company general accounts) and PTCE 96-23 (regarding transactions
effected by "in-house asset managers"). However, even if the conditions
specified in either of these exemptions are met, the scope of the relief
provided by these exemptions might or might not cover all acts which might be
construed as prohibited transactions.
Any Plan fiduciary considering whether to purchase a Certificate on
behalf of a Plan should consult with its counsel regarding the applicability of
the fiduciary responsibility and prohibited transaction provisions of ERISA and
the Code to such investment.
Each Prospectus Supplement will contain information concerning
considerations relating to ERISA and the Code that are applicable to the
related Certificates.
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LEGAL INVESTMENT
SMMEA
Unless otherwise indicated in the related Prospectus Supplement and for
so long as they are rated in one of the two highest rating categories by a
least one nationally recognized statistical rating organization, the
Certificates will constitute "mortgage related securities" for purposes of
SMMEA, and as such, absent state legislation described below, will be legal
investments for persons, trusts, corporations, partnerships, associations,
business trusts and business entities (including depository institutions, life
insurance companies and pension funds) created pursuant to or existing under
the laws of the United States or of any state (including the District of
Columbia and Puerto Rico) whose authorized investments are subject to state
regulation to the same extent that under applicable law obligations issued by
or guaranteed as to principal and interest by the United States or any agency
or instrumentality thereof constitute legal investments for such entities.
Under SMMEA, if a state enacted legislation prior to October 4, 1991
specifically limiting the legal investment authority of any such entities with
respect to "mortgage related securities," the Certificates will constitute
legal investments for entities subject to such legislation only to the extent
provided therein. Certain states adopted legislation which limits the ability
of insurance companies domiciled in these states to purchase mortgage-related
securities, such as the Certificates.
SMMEA also amended the legal investment authority of federally-chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal with Certificates
without limitation as to the percentage of their assets represented thereby,
federal credit unions may invest in Certificates, and national banks may
purchase Certificates for their own account without regard to the limitations
generally applicable to investment securities set forth in 12 U.S.C. ss. 24
(Seventh), subject in each case to such regulations as the applicable federal
regulatory authority may prescribe. In this connection, federal credit unions
should review the National Credit Union Administration ("NCUA") Letter to
Credit Unions No. 96, as modified by Letter to Credit Unions No. 108, which
included guidelines to assist federal credit unions in making investment
decisions for mortgage related securities, and the NCUA's regulation
"Investment and Deposit Activities" (12 C.F.R. Part 703), (whether or not the
class of Certificates under consideration for purchase constitutes a "mortgage
related security").
FFIEC POLICY STATEMENT
The Board of Governors of the Federal Reserve System, the Federal Deposit
Insurance Corporation, the Comptroller of the Currency and the Office of Thrift
Supervision have adopted the Federal Financial Institutions Examination
Council's Supervisory Policy Statement on Securities Activities (the "Policy
Statement"). Although the National Credit Union Administration has not yet
adopted the Policy Statement, it has adopted other regulations affecting
mortgage-backed securities and is expected to consider adoption of the Policy
Statement. The Policy Statement, among other things, places responsibility on a
depository institution to develop and monitor appropriate policies and
strategies regarding the investment, sale and trading of securities and
restricts an institution's ability to engage in certain types of transactions.
The Policy Statement and any applicable modifications or supplements
thereto should be reviewed prior to the purchase of any Certificates by a
depository institution. The summary of the Policy Statement contained herein
does not purport to be complete and should not be relied upon for purposes of
making any regulatory determinations. In addition, any regulator may adopt
modifications or supplements to the Policy Statement or additional restrictions
on the purchase of mortgage-backed or other securities. Investors are urged to
consult their own legal advisors prior to making any determinations with
respect to the Policy Statement or other regulatory requirements.
The Policy Statement provides that a "high-risk mortgage security" is not
suitable as an investment portfolio holding for a depository institution. A
high-risk mortgage security must be reported in the trading account at market
value or as an asset held for sale at the lower of cost or market value and
generally may only be acquired to reduce an institution's interest rate risk.
However, an institution with strong capital and earnings and adequate liquidity
that has a closely supervised trading department is not precluded from
acquiring high-risk mortgage securities for trading purposes.
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A depository institution must ascertain and document prior to purchase
and no less frequently than annually thereafter that a nonhigh-risk mortgage
security held for investment remains outside the high-risk category. If an
institution is unable to make these determinations through internal analysis,
it must use information derived from a source that is independent of the party
from whom the product is being purchased. The institution is responsible for
ensuring that the assumptions underlying the analysis and resulting
calculations are reasonable. Reliance on analyses and documentation from a
securities dealer or other outside party without internal analyses by the
institution is unacceptable.
In general, a high-risk mortgage security is a mortgage derivative
product possessing greater price volatility than a benchmark fixed rate 30-year
mortgage-backed pass-through security. Mortgage derivative products include
CMOs, REMICs, CMO and REMIC residuals and stripped mortgage-backed securities.
A mortgage derivative product that, at the time of purchase or at a subsequent
testing date, meets any one of three tests will be considered a high-risk
mortgage security. When the characteristics of a mortgage derivative product
are such that the first two tests cannot be applied (such as interest-only
strips), the mortgage derivative product remains subject to the third test.
The three tests of a high-risk mortgage security are as follows: (i) the
mortgage derivative product has an expected weighted average life greater than
10.0 years; (ii) the expected weighted average life of the mortgage derivative
product: (a) extends by more than 4.0 years, assuming an immediate and
sustained parallel shift in the yield curve of plus 300 basis points, or (b)
shortens by more than 6.0 years, assuming an immediate and sustained parallel
shift in the yield curve of minus 300 basis points; and (iii) the estimated
change in the price of the mortgage derivative product is more than 17%, due to
an immediate and sustained parallel shift in the yield curve of plus or minus
300 basis points.
When performing the price sensitivity test, the same prepayment
assumptions and same cash flows that were used to estimate average life
sensitivity must be used. The discount rate assumptions should be determined by
(i) assuming that the discount rate for the security equals the yield on a
comparable average life U.S. Treasury security plus a constant spread, (ii)
calculating the spread over Treasury rates from the bid side of the market for
the mortgage derivative product, and (iii) assuming the spread remains constant
when the Treasury curve shifts up or down 300 basis points. Discounting the
cash flows by their respective discount rates estimates a price in the plus or
minus 300 basis point environments. The initial price must be determined by the
offer side of the market and used as the base price from which the 17% price
sensitivity test will be measured.
Generally, a floating-rate debt class will not be subject to the average
life and average life sensitivity tests described above if it bears a rate
that, at the time of purchase or at a subsequent testing date, is below the
contractual cap on the instrument. An institution may purchase interest rate
contracts that effectively uncap the instrument. For purposes of the Policy
Statement, a CMO floating-rate debt class is a debt class whose rate adjusts at
least annually on a one-for-one basis with the debt class's index. The index
must be a conventional, widely-used market interest rate index such as the
London Interbank Offered Rate ("LIBOR"). Inverse floating rate debt classes are
not included in the definition of a floating rate debt class.
Securities and other products, whether carried on or off balance sheet
(such as CMO swaps but excluding servicing assets), having characteristics
similar to those of high-risk mortgage securities, will be subject to the same
supervisory treatment as high-risk mortgage securities. Long-maturity holdings
of zero coupon, stripped and deep discount OID products which are
disproportionately large in relation to the total investment portfolio or total
capital of a depository institution are considered an imprudent investment
practice. Long-maturity generally means a remaining maturity exceeding 10
years.
GENERALLY
There may be other restrictions on the ability of certain investors,
including depository institutions, either to purchase Certificates, to purchase
Certificates representing more than a specified percentage of the investor's
assets, or to purchase certain types of Certificates, such as residual
interests or stripped mortgage-backed securities. Investors should consult
their own legal advisors in determining whether and to what extent the
Certificates constitute legal investments for such investors and comply with
any other applicable requirements.
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METHOD OF DISTRIBUTION
The Certificates offered hereby and by the Prospectus Supplements will be
offered in Series. The distribution of the Certificates may be effected from
time to time in one or more transactions, including negotiated transactions, at
a fixed public offering price or at varying prices to be determined at the time
of sale or at the time of commitment therefor. If so specified in the related
Prospectus Supplement, the Certificates will be distributed in a firm
commitment underwriting, subject to the terms and conditions of the
underwriting agreement, by Bear, Stearns & Co. Inc. ("Bear, Stearns"), an
affiliate of the Seller, acting as underwriter with other underwriters, if any,
named therein. In such event, the Prospectus Supplement may also specify that
the underwriters will not be obligated to pay for any Certificates agreed to be
purchased by purchasers pursuant to purchase agreements acceptable to the
Seller. In connection with the sale of the Certificates, underwriters may
receive compensation from the Seller or from purchasers of the Certificates in
the form of discounts, concessions or commissions. The Prospectus Supplement
will describe any such compensation paid by the Seller.
Alternatively, the Prospectus Supplement may specify that the
Certificates will be distributed by Bear, Stearns acting as agent or in some
cases as principal with respect to Certificates that it has previously
purchased or agreed to purchase. If Bear, Stearns acts as agent in the sale of
Certificates, Bear, Stearns will receive a selling commission with respect to
each Series of Certificates, depending on market conditions, expressed as a
percentage of the aggregate principal balance of the Certificates sold
hereunder as of the Cut-off Date. The exact percentage for each Series of
Certificates will be disclosed in the related Prospectus Supplement. To the
extent that Bear, Stearns elects to purchase Certificates as principal, Bear,
Stearns may realize losses or profits based upon the difference between its
purchase price and the sales price. The Prospectus Supplement with respect to
any Series offered other than through underwriters will contain information
regarding the nature of such offering and any agreements to be entered into
between the Seller and purchasers of Certificates of such Series.
The Seller will indemnify Bear, Stearns and any underwriters against
certain civil liabilities, including liabilities under the Securities Act of
1933, or will contribute to payments Bear, Stearns and any underwriters may be
required to make in respect thereof.
In the ordinary course of business, Bear, Stearns and the Seller may
engage in various securities and financing transactions, including repurchase
agreements to provide interim financing of the Seller's Mortgage Loans pending
the sale of such Mortgage Loans or interests therein, including the
Certificates.
The Seller anticipates that the Certificates will be sold primarily to
institutional investors. Purchasers of Certificates, including dealers, may,
depending on the facts and circumstances of such purchases, be deemed to be
"underwriters" within the meaning of the Securities Act of 1933 in connection
with reoffers and sales by them of Certificates. Holders of Certificates should
consult with their legal advisors in this regard prior to any such reoffer or
sale.
LEGAL MATTERS
The legality of the Certificates of each Series, including certain
federal income tax consequences with respect thereto, will be passed upon for
the Seller by Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New
York 10038.
FINANCIAL INFORMATION
A new Trust Fund will be formed with respect to each Series of
Certificates and no Trust Fund will engage in any business activities or have
any assets or obligations prior to the issuance of the related Series of
Certificates. Accordingly, no financial statements with respect to any Trust
Fund will be included in this Prospectus or in the related Prospectus
Supplement.
RATING
It is a condition to the issuance of the Certificates of each Series
offered hereby and by the Prospectus Supplement that they shall have been rated
in one of the four highest rating categories by the nationally recognized
statistical rating agency or agencies specified in the related Prospectus
Supplement.
-87-
<PAGE>
Ratings on mortgage pass-through certificates address the likelihood of
receipt by certificateholders of all distributions on the underlying mortgage
loans. These ratings address the structural, legal and issuer-related aspects
associated with such certificates, the nature of the underlying mortgage loans
and the credit quality of the guarantor, if any. Ratings on mortgage
pass-through certificates do not represent any assessment of the likelihood of
principal prepayments by mortgagors or of the degree by which such prepayments
might differ from those originally anticipated. As a result, certificateholders
might suffer a lower than anticipated yield, and, in addition, holders of
stripped pass-through certificates under certain scenarios might fail to recoup
their underlying investments.
A security rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the assigning
rating organization. Each security rating should be evaluated independently of
any other security rating.
-88-
<PAGE>
GLOSSARY
Unless the context indicates otherwise, the following terms shall have
the meanings set forth on the page indicated below:
<TABLE>
<CAPTION>
TERM PAGE
- --------------------------------------- -----
<S> <C>
Accounts .............................. 30
APR ................................... 6
ARM ................................... 80
Accrual Certificates .................. 32
Agency Securities ..................... 1
Agreement ............................. 9
Available Funds ....................... 31
Basis Risk Shortfall .................. 64
Bear, Stearns ......................... 87
Bankruptcy Bond ....................... 12
Buydown Funds ......................... 65
Buydown Loans ......................... 5
CMO ................................... 7
Capitalized Interest Account .......... 9
Cede .................................. 35
Certificateholders .................... 1
Certificate Account ................... 47
Certificate Register .................. 31
Certificates .......................... 1
Charter Act ........................... 22
Cleanup Costs ......................... 64
Code .................................. 14
Collateral Value ...................... 18
Commission ............................ 2
Contracts ............................. 1
Cooperative Loans ..................... 1
Cooperatives .......................... 4
Current Principal Amount .............. 32
Cut-off Date .......................... 10
Definitive Certificates ............... 35
Detailed Description .................. 16
Determination Date .................... 31
Distribution Dates .................... 2
DTC ................................... 35
ERISA ................................. 15
Events of Default ..................... 54
FDIC .................................. 28
FHA ................................... 4
FHA Insurance ......................... 30
FHA Loans ............................. 20
FHLMC ................................. 1
FHLMC Act ............................. 23
FHLMC Certificate group ............... 23
FHLMC Certificates .................... 7
Final Withholding Regulations ......... 77
FNMA .................................. 1
</TABLE>
-89-
<PAGE>
<TABLE>
<CAPTION>
FNMA Certificates ........................................ 6
<S> <C>
FTC Rule ................................................. 62
GNMA ..................................................... 1
GNMA Certificates ........................................ 6
GNMA Issuer .............................................. 20
Garn-St Germain Act ...................................... 62
Guaranty Agreement ....................................... 20
HUD ...................................................... 25
Housing Act .............................................. 20
Indirect Participant ..................................... 35
Insurance Proceeds ....................................... 47
Insured Expenses ......................................... 47
Lender ................................................... 1
LIBOR .................................................... 86
Liquidation Expenses ..................................... 47
Liquidation Proceeds ..................................... 47
Loan-to-Value Ratio ...................................... 18
Lockout Periods .......................................... 6
Lower Tier REMIC ......................................... 73
Manufactured Homes ....................................... 20
Manufacturer's Invoice Price ............................. 18
Master Servicer .......................................... 1
Mortgage ................................................. 45
Mortgage Assets .......................................... 1
Mortgage Loans ........................................... 4
Mortgage Pool ............................................ 4
Mortgage Rate ............................................ 5
Mortgaged Properties ..................................... 16
Mortgagors ............................................... 32
Multifamily Loans ........................................ 1
Multiple Variable Rate REMIC Regular Certificate ......... 70
National Credit Rating Agencies .......................... 84
NCUA ..................................................... 85
Non-REMIC Certificates ................................... 15
OID Regulations .......................................... 66
Participants ............................................. 35
Pass-Through Rate ........................................ 2
Plan ..................................................... 82
PMBS Agreement ........................................... 25
PMBS Issuer .............................................. 8
PMBS Servicer ............................................ 8
PMBS Trustee ............................................. 8
Percentage Interests ..................................... 54
Permitted Investments .................................... 41
Policy Statement ......................................... 85
Pool Insurance Policy .................................... 12
Pool Insurer ............................................. 37
Pre-Funding Account ...................................... 8
Pre-Funded Amount ........................................ 8
Pre-Funding Period ....................................... 8
Prepayment Assumption .................................... 67
Presumed Single Qualified Floating Rate .................. 69
Presumed Single Variable Rate ............................ 69
Primary Insurance Policy ................................. 16
</TABLE>
-90-
<PAGE>
<TABLE>
<CAPTION>
Primary Insurer ........................................ 51
<S> <C>
Principal Prepayments .................................. 33
Private Mortgage-Backed Securities ..................... 1
Protected Account ...................................... 46
PTCE 83-1 .............................................. 82
PTE 90-30 .............................................. 83
Purchase Price ......................................... 29
Rating Agency .......................................... 13
Record Date ............................................ 31
Refinance Loan ......................................... 18
Regulation ............................................. 82
Relief Act ............................................. 63
REMIC .................................................. 1
REMIC Certificates ..................................... 64
REMIC Regular Certificates ............................. 14
REMIC Regulations ...................................... 65
REMIC Residual Certificates ............................ 14
REIT ................................................... 74
Reserve Account ........................................ 2
Restricted Group ....................................... 84
Retained Interest ...................................... 30
RICs ................................................... 74
SMMEA .................................................. 13
Seller ................................................. 1
Senior Certificates .................................... 9
Single Family Loans .................................... 1
Single Variable Rate REMIC Regular Certificate ......... 69
Special Hazard Insurance Policy ........................ 12
Special Hazard Insurer ................................. 38
Sub-Servicer ........................................... 13
Sub-Servicing Agreement ................................ 47
Subordinated Certificates .............................. 9
Superlien .............................................. 64
Tiered REMICs .......................................... 65
Title V ................................................ 62
Trust Fund ............................................. 1
Trustee ................................................ 1
UCC .................................................... 35
United States person ................................... 77
VA ..................................................... 4
VA Guarantees .......................................... 30
VA Loans ............................................... 20
Variable Rate Non-REMIC Certificates ................... 80
Variable Rate REMIC Regular Certificate ................ 68
Yield Supplement Agreement ............................. 64
</TABLE>
-91-
<PAGE>
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NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE SELLER OR THE UNDERWRITER. THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN
THE CERTIFICATES OFFERED HEREBY NOR AN OFFER OF SUCH CERTIFICATES TO ANY
PERSON, IN ANY STATE OR OTHER JURISDICTION IN WHICH SUCH OFFER WOULD BE
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT INFORMATION HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS DATE.
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE CERTIFICATES OFFERED HEREBY, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS
TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Summary of Terms ........................................... S-6
Risk Factors ............................................... S-28
Description of the Certificates ............................ S-35
Description of the Underlying Securities ................... S-43
Description of the Underlying Mortgage Loans ............... S-50
Servicing of the Underlying Mortgage Loans ................. S-53
Yield and Prepayment Considerations ........................ S-55
The Pooling Agreement ...................................... S-60
Federal Income Tax Considerations .......................... S-64
Certain State Tax Considerations ........................... S-65
ERISA Considerations ....................................... S-65
Legal Investment ........................................... S-66
Restrictions on Purchase and Transfer of the Residual
Certificates ............................................. S-66
Method of Distribution ..................................... S-67
Legal Matters .............................................. S-68
Certificate Rating ......................................... S-68
Index of Defined Terms ..................................... S-69
Annex I Collateral Information ............................. I-1
Annex II Key to Abbreviation for Underlying Series ......... II-1
Annex III Certain Underlying Servicer Information .......... III-1
PROSPECTUS
Prospectus Supplement ...................................... 2
Available Information ...................................... 2
Incorporation of Certain Documents By Reference ............ 2
Reports to Certificateholders .............................. 3
Summary of Terms ........................................... 4
The Trust Fund ............................................. 16
Use of Proceeds ............................................ 26
The Seller ................................................. 27
Mortgage Loan Program ...................................... 27
Description of the Certificates ............................ 30
Credit Enhancement ......................................... 36
Yield and Prepayment Considerations ........................ 42
The Pooling and Servicing Agreement ........................ 45
Certain Legal Aspects of the Mortgage Loans ................ 56
Certain Federal Income Tax Consequences .................... 64
ERISA Considerations ....................................... 82
Legal Investment ........................................... 85
Method of Distribution ..................................... 87
Legal Matters .............................................. 87
Financial Information ...................................... 87
Rating ..................................................... 87
Glossary ................................................... 89
</TABLE>
$499,453,406
(APPROXIMATE)
BEAR STEARNS
MORTGAGE SECURITIES INC.
SELLER
PASS-THROUGH
CERTIFICATES,
SERIES 1998-2
-------------------------------------------------------
PROSPECTUS SUPPLEMENT
-------------------------------------------------------
BEAR, STEARNS & CO. INC.
MARCH 26, 1998
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