NOMURA ASSET SECURITIES CORP
S-3/A, 1998-01-21
ASSET-BACKED SECURITIES
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<PAGE>
   
    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 21, 1998
    
 
                                                      REGISTRATION NO. 333-22133
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
   
                                 PRE-EFFECTIVE
                                 AMENDMENT NO.3
                                       TO
                                    FORM S-3
    
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
                            ------------------------
                      NOMURA ASSET SECURITIES CORPORATION
        (EXACT NAME OF REGISTRANT AS SPECIFIED IN GOVERNING INSTRUMENTS)
 
               DELAWARE                                 13-3672336
   (STATE OR OTHER JURISDICTION OF                    (IRS EMPLOYER
    INCORPORATION OR ORGANIZATION)                 IDENTIFICATION NO.)
                                      ----
 
                            2 WORLD FINANCIAL CENTER
                             BUILDING B, 21ST FLOOR
                         NEW YORK, NEW YORK 10281-1198
                                 (212) 667-9300
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
                            ------------------------
 
                               ROBERT K. ROTTMANN
                     CHIEF FINANCIAL OFFICER AND TREASURER
                      NOMURA ASSET SECURITIES CORPORATION
                            2 WORLD FINANCIAL CENTER
                             BUILDING B, 21ST FLOOR
                         NEW YORK, NEW YORK 10281-1198
                                 (212) 667-9300
                    (NAME AND ADDRESS OF AGENT FOR SERVICE)
                            ------------------------
 
                                   Copies to:
 
<TABLE>

<S>                                     <C>
          ANNA H. GLICK, ESQ.                       BARRY FUNT, ESQ.
     CADWALADER, WICKERSHAM & TAFT        NOMURA ASSET SECURITIES CORPORATION
            100 MAIDEN LANE                     2 WORLD FINANCIAL CENTER
        NEW YORK, NEW YORK 10038                 BUILDING B, 21ST FLOOR
                                             NEW YORK, NEW YORK 10281-1198
</TABLE>
 
                            ------------------------
 
     APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this Registration Statement becomes effective.
 
     If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. /x/
                            ------------------------
 
                        CALCULATION OF REGISTRATION FEE*
 
<TABLE>
<CAPTION>
                                        PROPOSED          PROPOSED        AMOUNT OF
TITLE OF SECURITIES  AMOUNT BEING   MAXIMUM OFFERING  MAXIMUM AGGREGATE  REGISTRATION
 BEING REGISTERED    REGISTERED(1)   PRICE PER UNIT   OFFERING PRICE(2)     FEE(1)
<S>                  <C>            <C>               <C>                <C>
Mortgage
Pass-Through
Certificates.......   $1,000,000          100%           $1,000,000        $303.03
</TABLE>
 
(1) This registration statement and the registration fee pertain to the initial
    offering of the Mortgage Pass-Through Certificates registered hereunder by
    the registrant and, in addition, cover offers and sales relating to
    market-making transactions by Nomura Securities International, Inc., an
    affiliate of the registrant. The amount of Mortgage Pass-Through
    Certificates which may be initially offered hereunder and the registration
    fee shall not be reduced by any offers and sales relating to any such
    market-making transactions.
(2) Estimated solely for purposes of calculating the registration fee.
 
 * To the extent that any Series of Certificates offered pursuant to this
   Registration Statement evidences a beneficial ownership interest in a Trust
   Fund containing MBS that have been previously offered by the Registrant in a
   registered offering, this Registration Statement is deemed to re-register
   such underlying MBS.
                            ------------------------
 
     THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME

EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
 
     PURSUANT TO RULE 429 OF THE SECURITIES ACT OF 1933, THE PROSPECTUS WHICH IS
PART OF THIS REGISTRATION STATEMENT IS A COMBINED PROSPECTUS AND INCLUDES ALL
THE INFORMATION CURRENTLY REQUIRED IN A PROSPECTUS RELATING TO THE SECURITIES
COVERED BY REGISTRATION STATEMENT NO. 33-65944. SUCH COMBINED PROSPECTUS, WHICH
RELATES TO $319,670,742 PRINCIPAL AMOUNT OF MORTGAGE PASS-THROUGH CERTIFICATES,
CONSTITUTES POST-EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION STATEMENT NO.
33-65944.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
                                EXPLANATORY NOTE
 
     This Registration Statement consists of (i) a form of prospectus supplement
and a base prospectus for a basic series of commercial mortgage pass-through
certificates, (ii) alternate pages from a form of base prospectus for a series
of commercial mortgage pass-through certificates backed by loans secured by
retail properties, (iii) alternate pages from a form of base prospectus for a
series of commercial mortgage pass-through certificates backed by loans secured
by office properties, (iv) alternate pages from a form of base prospectus for a
series of commercial mortgage pass-through certificates backed by loans secured
by hotel properties, (v) alternate pages from a form of base prospectus for a
series of commerical mortgage pass-through certificates backed by loans secured
by senior housing/healthcare properties, (vi) alternate pages from a form of
base prospectus for a series of commercial mortgage pass-through certificates
backed by loans secured by multifamily properties, (vii) alternate pages from a
form of base prospectus for a series of commercial mortgage pass-through
certificates backed by loans secured by mobile home park properties, (viii)
alternate pages from a form of base prospectus for a series of commercial
mortgage pass-through certificates backed by loans secured by industrial
properties, and (ix) alternate pages from a form of base prospectus for a series
of commercial mortgage pass-through certificates backed by loans secured by
mini-warehouse facilities and/or self-storage facilities. Disclosure made on the
alternate pages will be included in the base prospectus for each series of
Certificates backed by loans containing a material concentration of Mortgage
Loans secured by the related types of properties.
<PAGE>
   
                 SUBJECT TO COMPLETION, DATED JANUARY 21, 1998
    
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED            , 199 )
 
                         $                (APPROXIMATE)
 
                 NOMURA ASSET SECURITIES CORPORATION, DEPOSITOR
 
                       [MASTER SERVICER], MASTER SERVICER
                       MORTGAGE PASS-THROUGH CERTIFICATES
               SERIES 199 -  , CLASS A VARIABLE PASS-THROUGH RATE
                            ------------------------
 

    The Series 199 -  Mortgage Pass-Through Certificates (the 'Certificates')
will represent beneficial ownership interests in a trust fund (the 'Trust Fund')
to be created by Nomura Asset Securities Corporation (the 'Depositor'). The
Trust Fund will consist primarily of a pool (the 'Mortgage Pool') of
conventional, [adjustable-rate] [fixed-rate] mortgage loans, with terms to
maturity of not more than      years (the 'Mortgage Loans'), secured by first
liens on [multifamily] [commercial] properties. The Mortgage Loans were
originated or acquired by           (the 'Mortgage Asset Seller') and will be
sold to the Depositor on or prior to the date of initial issuance of the
Certificates.
 
    The Certificates will consist of four classes of Certificates, designated as
the Class A Certificates, Class B Certificates, Class C Certificates and Class R
Certificates (the Class B, Class C and Class R Certificates, collectively, the
'Subordinate Certificates'). [The Class A Certificates will consist of [     ]
subclasses (each a 'Subclass') designated as the [Class IO
                                                        (Continued on next page)
 
    PROSPECTIVE INVESTORS SHOULD REVIEW THE DISCUSSION OF MATERIAL RISKS
APPEARING UNDER THE CAPTIONS 'RISK FACTORS' HEREIN COMMENCING ON PAGE S-11 AND
'RISK FACTORS' IN THE PROSPECTUS COMMENCING ON PAGE 11.
                            ------------------------
 
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
  EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
  SECURITIES AND EXCHANGE 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.
                            ------------------------
 
THE CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE DEPOSITOR,
THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES.
   NEITHER THE CERTIFICATES NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED
     OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
                            ------------------------
 
[CAPTION]
<TABLE>
                                 CLASS CERTIFICATE BALANCE(1)  PASS-THROUGH RATE
<S>                              <C>                           <C>
[Class A-  ]...................               $                        %
[Class IO].....................                                       [2]
[Class PO].....................                                       [3]
[Class Floater]................                                       [4]
[Class Inverse Floater]........                                       [5]
</TABLE>
 
- ------------------
 
[(1) Approximate, subject to adjustment as described herein.]
 
[(2) The Class IO Certificates are interest only certificates, have no principal
     balance and will bear interest on the Class IO Notional Amount (initially

     $        ) as described herein under 'Description of the
     Certificates--Interest.']
 
[(3) The Class PO Certificates are principal only certificates and will not be
     entitled to distributions with respect to interest.]
 
[(4) During the Initial (Floating Index) Based Interest Accrual Period, interest
     will accrue on the Class Floater Certificates at a rate of   % per annum.
     During each (Floating Index) Based Interest Accrual Period thereafter,
     interest will accrue on the Class Floater Certificates at a per annum rate
     equal to the lesser of         . See 'Description of the
     Certificates--Interest' herein.]
 
[(5) During the Initial (Floating Index) Based Interest Accrual Period, interest
     will accrue on the Class Inverse Floater Certificates at a rate of
     approximately   % per annum. During each (Floating Index) Based Interest
     Accrual Period thereafter, interest will accrue on the Class Inverse
     Floater Certificates at a per annum rate determined as described herein,
     subject to a minimum rate of   % and a maximum rate of   %. See
     'Description of the Certificates--Interest' herein.]
                            ------------------------
 
                     NOMURA SECURITIES INTERNATIONAL, INC.
 
                                          , 199
<PAGE>
(continued from cover page)
 
Certificates, the Class PO Certificates, the Class Floater Certificates, the
Class Inverse Floater Certificates and the Class A-  Certificates]]. The Class A
Certificates will evidence approximately an initial   % undivided interest in
the Trust Fund and the Subordinate Certificates, in the aggregate, will evidence
approximately an initial   % undivided interest in the Trust Fund. Only the
Class A Certificates are being offered hereby.
 
     [As more fully described herein, each Mortgage Loan provides for periodic
adjustments (which may occur monthly, quarterly, semi-annually or annually) of
the mortgage interest rate (the 'Mortgage Rate') thereon and the monthly payment
due thereon, in each case subject to the limitations described herein.
Accordingly, a significant increase in the Mortgage Rate and the amount of the
scheduled monthly payment due thereafter may result, which may increase the
likelihood of default on and prepayment of such Mortgage Loan. In most cases,
because the Mortgage Rate on a Mortgage Loan will be subject to adjustment
monthly, while the monthly payment due thereon will be subject to adjustment
annually, in each case subject to the limitations described herein, and because
the application of payment caps limits adjustments to the monthly payments on
certain Mortgage Loans, the Mortgage Loans (and consequently the Class A
Certificates) may be subject to accelerated, reduced or negative amortization.
Certain of the Mortgage Loans continue to be in an initial fixed interest rate
period and have not experienced the first adjustment to their respective
Mortgage Rates.] The characteristics of the Mortgage Loans are more fully
described herein under 'Description of the Mortgage Pool'.
 
     Distributions on the Class A Certificates will be made, to the extent of

available funds, on the       day of each month or, if any such day is not a
business day, on the next succeeding business day, beginning in
                 (each, a 'Distribution Date'). As more fully described herein,
distributions allocable to interest on the Class A Certificates on each
Distribution Date will be based on the then-applicable variable pass-through
rate (the 'Pass-Through Rate') and the aggregate principal balance (the
'Certificate Balance') of such class outstanding immediately prior to such
Distribution Date. The Pass-Through Rate applicable to the Class A Certificates
from time to time will equal the weighted average of the Class A Remittance
Rates (as defined herein) on the Mortgage Loans. The Pass-Through Rate for the
Class A Certificates on the first Distribution Date will be   % per annum and is
expected to change thereafter because the weighted average of the Class A
Remittance Rates is expected to change for succeeding Distribution Dates. [Each
Subclass of the Class A Certificates will bear interest at the Pass-Through Rate
set forth for each Subclass on the cover hereof.] Distributions in respect of
principal of the Class A Certificates will be made as described herein under
'Description of the Certificates--Distributions--Priority' and '--Calculations
of Principal'.
 
               will act a master servicer of the Mortgage Loans (the 'Master
Servicer'). The obligations of the Master Servicer with respect to the
Certificates will be limited to its contractual servicing obligations and the
obligation under certain circumstances to make Advances to the
Certificateholders. If the Master Servicer fails to make any such Advance or
otherwise fails to perform its servicing obligations, the Trustee will be
obligated to assume such servicing obligations and to make such Advance to the
extent described herein. See 'Description of the Certificates--Advances' herein.
The only obligation of the Depositor with respect to the Certificates will be to
obtain from the Mortgage Asset Seller certain representations and warranties
with respect to the Mortgage Loans and to assign to the Trustee the obligation
of the Mortgage Asset Seller to repurchase or substitute for any Mortgage Loan
as to which there exists an uncured material breach of any such representation
or warranty.
 
     It is a condition of the issuance of the Class A Certificates that they be
rated [not lower than] '            ' by                               .
 
     An election will be made to treat the Trust Fund as a 'real estate mortgage
investment conduit' (a 'REMIC') for federal income tax purposes. The Class A
Certificates will constitute 'regular interests' in the REMIC. See 'Certain
Federal Income Tax Consequences' herein and in the Prospectus.
 
     THE YIELD TO MATURITY OF THE CLASS A CERTIFICATES WILL BE SENSITIVE IN
VARYING DEGREES TO THE RATE AND TIMING OF PRINCIPAL PAYMENTS (INCLUDING
PREPAYMENTS) ON THE                   , WHICH MAY BE PREPAID AT ANY TIME WITHOUT
PENALTY. SEE 'RISK FACTORS' HEREIN AND 'RISK FACTORS--AVERAGE LIFE OF
CERTIFICATES; PREPAYMENTS; YIELDS' AND 'YIELD CONSIDERATIONS' IN THE PROSPECTUS.
INVESTORS IN THE CLASS A CERTIFICATES SHOULD CONSIDER THE ASSOCIATED RISKS,
INCLUDING, IN THE CASE OF CLASS A CERTIFICATES PURCHASED AT A DISCOUNT,
[ESPECIALLY THE CLASS PO CERTIFICATES,] THE RISK THAT A SLOWER THAN ANTICIPATED
RATE OF PAYMENTS IN RESPECT OF PRINCIPAL (INCLUDING PREPAYMENTS) ON THE MORTGAGE
LOANS COULD RESULT IN AN ACTUAL YIELD THAT IS LOWER THAN ANTICIPATED AND, IN THE
CASE OF CLASS A CERTIFICATES PURCHASED AT A PREMIUM, [PARTICULARLY THE CLASS
[FLOATER] [IO] CERTIFICATES,] THAT A FASTER THAN ANTICIPATED RATE OF PAYMENTS IN

RESPECT OF PRINCIPAL (INCLUDING PREPAYMENTS) ON THE MORTGAGE LOANS COULD RESULT
IN AN ACTUAL YIELD THAT IS LOWER THAN ANTICIPATED. [INVESTORS IN THE CLASS
[FLOATER] [IO] CERTIFICATES SHOULD ALSO CONSIDER THE RISK THAT A RAPID RATE OF
PAYMENTS IN RESPECT OF PRINCIPAL (INCLUDING PREPAYMENTS) COULD RESULT IN THE
FAILURE OF SUCH INVESTORS TO FULLY RECOVER THEIR INITIAL INVESTMENTS].
 
                                      S-2
<PAGE>
     [THE YIELD TO INVESTORS IN THE CLASS [FLOATER] [INVERSE FLOATER]
CERTIFICATES WILL BE HIGHLY SENSITIVE TO (FLOATING INDEX). RELATIVELY SMALL
INCREASES IN (FLOATING INDEX) WILL HAVE A MATERIAL NEGATIVE EFFECT ON THE YIELD
TO INVESTORS IN THE CLASS FLOATER CERTIFICATES AND HIGH LEVELS OF (FLOATING
INDEX) WILL HAVE A MATERIAL NEGATIVE EFFECT ON THE YIELD TO INVESTORS IN THE
CLASS INVERSE FLOATER CERTIFICATES.]
 
     There is currently no secondary market for the Class A Certificates. Nomura
Securities International, Inc. (the 'Underwriter'), through one or more of its
affiliates, currently expects to make a secondary market in the Class A
Certificates, but has no obligation to do so. There can be no assurance that
such a market will develop or, if it does develop, that it will continue. See
'Method of Distribution' herein.
 
     The Class A Certificates offered hereby will be purchased by the
Underwriter from the Depositor and will be offered by the Underwriter from time
to time to the public in negotiated transactions or otherwise at varying prices
to be determined at the time of sale. Proceeds to the Depositor from the sale of
the Class A Certificates will be   % of the initial aggregate principal balance
thereof as of        1, 199 (the 'Cut-off Date') plus accrued interest from the
Cut-off Date at a rate of   % per annum, before deducting expenses payable by
the Depositor.
 
     The Class A Certificates are offered by the Underwriter, subject to prior
sale, when, as and if delivered to and accepted by the Underwriter and subject
to approval of certain legal matters by counsel. It is expected that delivery of
the Class A Certificates [(other than the Class        Certificates)] will be
made against payment therefor on or about           , 199 , [at the offices of
the Underwriter, 2 World Financial Center--Building B, New York, New York] [in
book-entry form through the facilities of The Depository Trust Company].
 
     [If and to the extent required by applicable law or regulation, this
Prospectus Supplement and the Prospectus will also be used by the Underwriter
after the completion of the offering in connection with offers and sales related
to market-making transactions in the Offered Certificates in which the
Underwriter acts as principal. The Underwriter may also act as agent in such
transactions. Sales will be made at negotiated prices determined at the time of
sale.]
 
     THE CLASS A CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLEMENT CONSTITUTE
PART OF A SEPARATE SERIES OF CERTIFICATES ISSUED BY THE DEPOSITOR AND ARE BEING
OFFERED PURSUANT TO ITS PROSPECTUS DATED                   , 199 , 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. SALES OF THE CLASS A

CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
 
     UNTIL            , 199 , ALL DEALERS EFFECTING TRANSACTIONS IN THE CLASS A
CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS SUPPLEMENT AND THE PROSPECTUS TO WHICH IT RELATES. THIS
DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
 
                                      S-3
<PAGE>
                        SUMMARY OF PROSPECTUS SUPPLEMENT
 
     The following summary of material information does not contain all the
material information regarding the Certificates and is qualified in its entirety
by reference to the detailed information appearing elsewhere in this Prospectus
Supplement and in the accompanying Prospectus. Certain capitalized terms used in
this Summary are defined elsewhere in this Prospectus Supplement or in the
Prospectus. An Index of Principal Definitions appears at the end of this
Prospectus Supplement and at end of the Prospectus.
 
   
<TABLE>
<S>                 <C>
Title of
  Certificates..... Nomura Asset Securities Corporation, Mortgage Pass-Through
                    Certificates, Series 199 , Variable Pass-Through Rate (the
                    'Certificates').
 
[Amount............ The Class A Certificates have the approximate aggregate
                    initial principal balances set forth on the cover of this
                    Prospectus Supplement, subject to a permitted upward or
                    downward variance of up to    % [, except that the Class IO
                    Certificates will have no principal balance].
 
Depositor.......... Nomura Asset Securities Corporation, a Delaware corporation
                    and a wholly-owned subsidiary of Nomura Asset Capital
                    Corporation, and an affiliate of Nomura Securities
                    International, Inc. (the 'Underwriter'). See 'The Depositor'
                    in the Prospectus.
 
Master Servicer....          , a           . See 'Pooling and Servicing
                                      Agreement-- The Master Servicer' herein.
 
Trustee............          , a                   .
 
Issuer............. The issuer of the Certificates is the Trust Fund.
 
Cut-off Date.......          1, 199 .
 
Delivery Date......          , 199 .
 
Denominations...... The Class A Certificates will be issuable in registered

                    form, in denominations of $               and integral
                    multiples of $               in excess thereof [, with one
                    Certificate of such class evidencing an additional amount
                    equal to the remainder of the Certificate Balance thereof].
 
                    [The Class A Certificates (other than the Class
                    Certificates) are issuable in book-entry form in minimum
                    denominations of approximately $[            ] and integral
                    multiples of $1,000 in excess thereof, and will be
                    represented by certificates registered in the name of Cede &
                    Co. ('Cede'), as the nominee of the depository, The
                    Depository Trust Company ('DTC' and, together with any
                    successor depository, the 'Depository'), which will be the
                    'Certificateholder' of the Book-Entry Certificates, as such
                    term is used herein. A person acquiring an interest in
                    Book-Entry Certificates (a 'Certificateowner') will not be
                    entitled to receive a certificate representing such
                    Book-Entry Certificateowner's interest therein except in the
                    event that Definitive Certificates (as defined herein) are
                    issued for all Class A Certificates under the limited
                    circumstances described herein. Until such time, the rights
                    of Certificateowners may only be exercised through DTC and
                    its participating organizations, except as otherwise
                    specified herein. See 'Description of the
                    Certificates--General,' '--Registration at The Depository
                    Trust Company' and '--Definitive Certificates' herein.]
 
The Mortgage
  Pool............. The Mortgage Pool will consist of           conventional,
                    [adjustable] [fixed] rate Mortgage Loans secured by first
                    liens on [multifamily] [commercial] properties (the
                    'Mortgaged Properties') located in   different states. The
                    Mortgage Loans will have an aggregate principal balance as
                    of the Cut-off Date of $            and individual principal
                    balances at origination of at least $            but not
                    more than $            , with an average principal balance
                    at origination of approximately $            . The Mortgage
                    Loans will have terms to maturity from the date of
                    origination or modification of not more than        years,
                    and a weighted average remaining term to maturity of
                    approximately    months as of
</TABLE>
    
 
                                      S-4
<PAGE>
 
<TABLE>
<S>                 <C>
                    the Cut-off Date. The Mortgage Loans will bear interest at
                    Mortgage Rates of at least        % per annum but not more
                    than           % per annum, with a weighted average Mortgage
                    Rate of approximately        % per annum as of the Cut-off

                    Date. The Mortgage Loans will be acquired by the Depositor
                    on or before the Delivery Date. In connection with its
                    acquisition of the Mortgage Loans, the Depositor will be
                    assigned (and will in turn assign to the Trustee for the
                    benefit of the holders of the Certificates) certain rights
                    in respect of representations and warranties described
                    herein that were made by the Mortgage Asset Seller.
 
                    of the Mortgage Loans, representing        % of the Mortgage
                    Loans by aggregate principal balance as of the Cut-off Date,
                    provide for scheduled payments of principal and/or interest
                    ('Monthly Payments') to be due on the first day of each
                    month; the remainder of the Mortgage Loans provide for
                    Monthly Payments to be due on the 5th, 10th or 15th day of
                    each month (the date in any month on which a Monthly Payment
                    on a Mortgage Loan is first due, the 'Due Date'). [The rate
                    per annum at which interest accrues on each Mortgage Loan is
                    subject to adjustment on specified Due Dates (each such
                    date, an 'Interest Rate Adjustment Date') by adding a fixed
                    percentage amount (a 'Gross Margin') to be value of the
                    then-applicable Index (as described below) subject, in the
                    case of substantially all of the Mortgage Loans, to maximum
                    and minimum lifetime Mortgage Rates as described herein.
                              of the Mortgage Loans, representing    % of the
                    Mortgage Loans by aggregate principal balance as of the
                    Cut-off Date, provide for Interest Rate Adjustment Dates to
                    occur monthly; the reminder of the Mortgage Loans provide
                    for adjustments to the Mortgage Rate to occur quarterly,
                    semi-annually or annually. Each of the Mortgage Loans
                    provides for an initial fixed interest rate period;    of
                    the Mortgage Loans, representing    % of the Mortgage Loans
                    by aggregate principal balance as of the Cut-off Date, have
                    not yet experienced their first Interest Rate Adjustment
                    Date. The latest initial Interest Rate Adjustment Date for
                    any Mortgage Loan is scheduled to occur on           .]
 
                    [The amount of the Monthly Payment of each Mortgage Loan is
                    also subject to adjustment on specified Due Dates (each such
                    date, a 'Payment Adjustment Date') to an amount that would
                    amortize the outstanding principal balance of the Mortgage
                    Loan over its then remaining amortization schedule and pay
                    interest at the applicable Mortgage Rate, subject, in the
                    case of several Mortgage Loans, to payment caps, which limit
                    the amount by which the Monthly Payment may adjust on any
                    Payment Adjustment Date as described herein.      of the
                    Mortgage Loans, representing      % of the Mortgage Loans
                    (by aggregate principal balance as of the Cut-off Date,
                    provide for Payment Adjustment Dates to occur annually,
                    while the remainder of the Mortgage Loans provide for
                    adjustments of the Monthly Payment to occur monthly,
                    quarterly or semi-annually.]
 
                    [Only in the case of      Mortgage Loans, representing
                         % of the Mortgage Loans by aggregate principal balance

                    as of the Cut-off Date, does a Payment Adjustment Date
                    immediately follow each Interest Rate Adjustment Date. As a
                    result, and because the application of payment caps may
                    limit the amount by which the Monthly Payments may adjust in
                    respect of certain Mortgage Loans, the amount of a Monthly
                    Payment may be more or less than the amount necessary to
                    amortize the remaining principal balance of the Mortgage
                    Loan over its then remaining amortization schedule and pay
                    interest at the then-applicable Mortgage Rate. Accordingly,
                    Mortgage Loans may be subject to slower amortization (if the
                    Monthly Payment due on a Due Date is sufficient to pay
                    interest accrued to such Due Date at the then-applicable
                    Mortgage Rate but is not sufficient to reduce principal in
                    accordance with the applicable amortization schedule), to
                    negative amortization (if interest accrued to a Due Date at
                    the applicable Mortgage Rate is greater than the
</TABLE>
 
                                      S-5
<PAGE>
 
<TABLE>
<S>                 <C>
                    entire Monthly Payment due on such Due Date) or to
                    accelerated amortization (if the Monthly Payment due on a
                    Due Date is greater than the amount necessary to pay
                    interest accrued to such Due Date at the then-applicable
                    Mortgage Rate and to reduce principal in accordance with the
                    applicable amortization schedule).]
 
                    [     Mortgage Loans, representing    % of the Mortgage
                    Loans by aggregate principal balance as of the Cut-off Date,
                    permit negative amortization. Substantially all of the
                    Mortgage Loans that permit negative amortization contain
                    provisions that limit the extent to which the amount of
                    their respective original principal balances may be exceeded
                    as a result thereof.]
 
                    [All of the Mortgage Loans provide for monthly payments of
                    principal based on amortization schedules significantly
                    longer than the remaining term of such Mortgage Loans,
                    thereby leaving substantial outstanding principal amounts
                    due and payable (each such payment, a 'Balloon Payment') on
                    their respective maturity dates, unless prepaid prior
                    thereto.]
 
                    For a further description of the Mortgage Loans, see
                    'Description of the Mortgage Pool' herein.
 
The Index.......... As of any Interest Rate Adjustment Date, the Index used to
                    determine the Mortgage Rate on each Mortgage Loan will be
                    the                   . See 'Description of the Mortgage
                    Pool--The Index' herein.
 

The Class A
  Certificates..... The Class A Certificates will be issued pursuant to a
                    Pooling and Servicing Agreement, to be dated as of the
                    Cut-off Date, among the Depositor, the Master Servicer and
                    the Trustee (the 'Pooling and Servicing Agreement'). The
                    Class A Certificates have an initial Certificate Balance of
                    $          (the initial 'Class A Balance'), representing an
                    initial interest of approximately      % in a trust fund
                    (the 'Trust Fund'), which will consist primarily of the
                    Mortgage Pool. [The Class A Certificates will consist of
                    [     ] Subclasses designated as the [Class IO Certificates,
                    the Class PO Certificates, the Class Floater Certificates,
                    the Class Inverse Floater Certificates and the Class A-
                    Certificates]. Each Subclass will have the Subclass
                    Certificate Balance set forth on the cover of this
                    Prospectus Supplement.]
 
                    Distributions on the Class A Certificates will be made on
                    the 25th day of each month or, if such day is not a business
                    day, on the succeeding business day, beginning on
                              25, 199 (each, a 'Distribution Date').
                    Distributions on each Distribution Date will be made by
                    check or wire transfer of immediately available funds, as
                    provided in the Pooling and Servicing Agreement, to the
                    Class A Certificateholders of record as of the last business
                    day of the month preceding the month of such Distribution
                    Date (each, a 'Record Date'), except that the final
                    distribution on the Class A Certificates will be made only
                    upon presentation and surrender of the Class A Certificates
                    at the office or agency specified in the Pooling and
                    Servicing Agreement. As more specifically described herein,
                    the Class A Balance will be adjusted from time to time on
                    each Distribution Date to reflect any additions thereto
                    resulting from allocations of Mortgage Loan negative
                    amortization to the Class A Certificates and any reductions
                    thereof resulting from distributions of principal of the
                    Class A Certificates. [Any such adjustments will be
                    allocated among the Subclasses of Class A Certificates pro
                    rata based on the Subclass Certificate Balance of each such
                    Subclass.] As further described herein, interest shall
                    accrue on the Class A Balance at a Pass-Through Rate equal
                    to the weighted average of the Class A Remittance Rates in
                    effect from time to time on the Mortgage Loans.
 
Pass-Through Rate
  on the Class A
  Certificates..... The Class A Remittance Rate in effect for each Mortgage Loan
                    as of any date of determination (i) prior to its first
                    Interest Rate Adjustment Date is equal to its
</TABLE>
 
                                      S-6
<PAGE>
 

<TABLE>
<S>                 <C>
                    Mortgage Rate then in effect minus      basis points (the
                    'Net Mortgage Rate') and (ii) from and after its first
                    Interest Rate Adjustment Date is equal to the Mortgage Rate
                    then in effect on each such Mortgage Loan minus the excess
                    of the related Gross Margin over      basis points. The
                    amount of the adjustment to the Mortgage Rate for each
                    Mortgage Loan will vary depending on the terms of the
                    related Mortgage Note. [The Pass-Through Rates for each
                    Subclass of the Class A Certificates is as set forth on the
                    cover hereof.]
 
Interest
  Distributions on
  the Class A
  Certificates..... Holders of the Class A Certificates will be entitled to
                    receive on each Distribution Date, to the extent of the
                    Available Distribution Amount for such Distribution Date,
                    distributions allocable to interest in an aggregate amount
                    (the 'Class A Interest Distribution Amount') equal to thirty
                    days' interest accrued on the Class A Balance outstanding
                    immediately prior to such Distribution Date at the weighted
                    average of the Class A Remittance Rates in effect for the
                    Mortgage Loans as of the commencement of the related Due
                    Period, less the Class A Certificates' allocable share
                    (calculated as described herein) of (i) the aggregate amount
                    of negative amortization in respect of the Mortgage Loans
                    for their respective Due Dates occurring during the related
                    Due Period and (ii) the aggregate portion of Prepayment
                    Interest Shortfalls incurred during the related Due Period
                    that was not covered by the application of the Master
                    Servicer's servicing compensation for the related Due
                    Period. The amount, if any, by which the Class A Interest
                    Distribution Amount for any Distribution Date is reduced as
                    a result of negative amortization on the Mortgage Loans
                    shall constitute the 'Class Negative Amortization' for such
                    Distribution Date in respect of the Class A Certificates and
                    shall be added to the Class A Balance on such Distribution
                    Date. If the Available Distribution Amount for any
                    Distribution Date is less than the Class A Interest
                    Distribution Amount for such Distribution Date, the
                    shortfall will be [borne pro rata by the Subclasses of Class
                    A Certificates and will be] part of the Class A Interest
                    Distribution Amount distributable to holders of Class A
                    Certificates on subsequent Distribution Dates, to the extent
                    of available funds.
 
                    The Available Distribution Amount for any Distribution Date
                    generally includes: (i) scheduled payments on the Mortgage
                    Loans due during or prior to the related Due Period and
                    collected as of the related Determination Date (to the
                    extent not distributed on previous Distribution Dates) and
                    certain unscheduled payments and other collections on the

                    Mortgage Loans collected during the related Due Period, net
                    of amounts payable or reimbursable to the Master Servicer
                    therefrom; (ii) any Advances made by the Master Servicer for
                    the related Distribution Date; and (iii) that portion of the
                    Master Servicer's servicing compensation for the related Due
                    Period applied to cover Prepayment Interest Shortfalls
                    incurred during the related Due Period. See 'Description of
                    the Certificates--Distributions--Calculations of Interest'
                    herein.
 
                    [The amount of interest to which holders of each Subclass
                    Class A Certificates[, other than the Class IO and Class PO
                    Certificates,] will be entitled each month is calculated
                    based on the outstanding principal balance of that Subclass,
                    as of the related Distribution Date. Interest will accrue
                    each month on each such Subclass according to the following
                    formula: 1/12th of the pass-through rate for such subclass
                    multiplied by the outstanding principal balance of such
                    subclass as of the related Distribution Date. The
                    pass-through rate for each such subclass or class is the
                    percentage set forth on the cover of this Prospectus
                    Supplement. Interest on the Class A Certificates will be
                    calculated on the basis of a 360-day year consisting of
                    twelve 30-day months.
 
                    [The amount of interest to which holders of the Class IO
                    Certificates are entitled each month is calculated based on
                    a 'notional amount.' A notional amount does not entitle
                    holders to receive distributions of principal on the basis
                    of such notional amount, but is used for the purpose of
                    computing the amount of interest accrued on each such
</TABLE>
 
                                      S-7
<PAGE>
 
<TABLE>
<S>                 <C>
                    subclass. The notional amount for the Class IO Certificates
                    is calculated based on the sum of the indicated percentages
                    of the respective outstanding principal balances of certain
                    other subclasses as described herein. The method of
                    determining the notional amount of the Class IO Certificates
                    is described under 'Description of the
                    Certificates--Interest' herein. Interest will accrue on the
                    Class IO Certificates each month in an amount equal to the
                    product of (i) 1/12th of      % and (ii) the notional amount
                    of the Class IO Certificates.]
 
                    [The yield on the Class [PO] Certificates, which are
                    expected to be offered at a substantial discount and which
                    are not entitled to distributions in respect of interest,
                    will be extremely sensitive to both the timing of receipt of
                    prepayments and the overall rate of prepayment on the

                    Mortgage Loans. This particular sensitivity is separately
                    displayed in a table appearing under the heading        ,
                    which shows, among other things, the differences in the
                    amount of principal distributions on, and yield to investors
                    in, the Class PO Certificates at various rates of
                    prepayment.]
 
Principal
  Distributions on
  the Class A
  Certificates..... Holders of the Class A Certificates will be entitled to
                    receive on each Distribution Date, to the extent of the
                    balance of the Available Distribution Amount remaining after
                    the payment of the Class A Interest Distribution Amount for
                    such Distribution Date, distributions in respect of
                    principal in an amount (the 'Class A Principal Distribution
                    Amount') generally equal to the aggregate of (i) the then
                    Class A Scheduled Principal Distribution Percentage
                    (calculated as described herein) of all scheduled payments
                    of principal (including the principal portion of any Balloon
                    Payments) due on the Mortgage Loans during or, if and to the
                    extent not previously received or advanced and distributed
                    on prior Distribution Dates, prior to the related Due Period
                    that were paid by the mortgagors as of the related
                    Determination Date or advanced by the Master Servicer in
                    respect of such Distribution Date and (ii) all principal
                    prepayments and, to the extent not previously advanced, any
                    other unscheduled principal recoveries received during the
                    related Due Period in respect of the Mortgage Loans, whether
                    in the form of liquidation proceeds, insurance proceeds,
                    condemnation proceeds or amounts received as a result of the
                    purchase of any Mortgage Loan out of the Trust Fund.
                    Distributions in respect of principal of the Class A
                    Certificates on any Distribution Date shall be limited to
                    the sum of (i) the Class A Balance outstanding immediately
                    prior to such Distribution Date and (ii) the Class Negative
                    Amortization, if any, for such Distribution Date in respect
                    of the Class A Certificates. [The Class A Principal
                    Distribution Amount will be allocated among the Subclasses
                    of Class A Certificates as described herein.] See
                    'Description of the Certificates--Distributions--
                    Calculations of Principal' herein.
 
Advances........... The Master Servicer is required to make advances
                    ('Advances') in respect of delinquent Monthly Payments on
                    the Mortgage Loans, subject to the limitations described
                    herein. The Trustee will be obligated to make any such
                    Advance if the Master Servicer fails in its obligation to do
                    so, to the extend provided in the Pooling and Servicing
                    Agreement. See 'Description of the Certificates--Advances'
                    herein and 'Description of the Certificates--Advances in
                    Respect of Delinquencies' in the Prospectus.
 

Subordination...... The rights of holders of the Subordinate Certificates to
                    receive distributions of amounts collected on the Mortgage
                    Loans will be subordinated, to the extent described herein,
                    to the rights of holders of the Class A Certificates. This
                    subordination is intended to enhance the likelihood of
                    receipt by the holders of the Class A Certificates of the
                    full amount of the Class A Interest Distribution Amount and
                    the [ultimate receipt of principal equal to the initial
                    Class A Balance]. The protection afforded to the holders of
                    the Class A Certificates by means of the subordination, to
                    the extent provided herein, will be accomplished by the
                    application of the Available Distribution
</TABLE>
 
                                      S-8
<PAGE>
 
<TABLE>
<S>                 <C>
                    Amount to the Class A Certificates prior to the application
                    thereof to the Subordinate Certificates. See 'Description of
                    the Certificates--Subordination' herein.
 
The Subordinate
  Certificates..... The Class B Certificates have an initial Certificate Balance
                    of $          (the initial 'Class B Balance') and the Class
                    C Certificates have an initial Certificate Balance of
                    $          (the initial 'Class C Balance'), representing
                         % and      %, respectively, of the Mortgage Loans by
                    aggregate principal balance as of the Cut-off Date. Interest
                    shall accrue on the Class B Balance and Class C Balance at a
                    Pass-Through Rate equal to the weighted average of the Net
                    Mortgage Rates in effect from time to time on the Mortgage
                    Loans.
 
                    The Class R Certificates, which have no Pass-Through Rate
                    and initially have a Certificate Balance of $          (the
                    initial 'Class R Balance'), represent the right to receive
                    on any Distribution Date the balance, if any, of the
                    Available Distribution Amount remaining after the payment of
                    all interest and principal due on the other Classes of
                    Certificates. Subsequent to the first Distribution Date, the
                    Class R Balance will equal the excess, if any, of the
                    aggregate Stated Principal Balance of the Mortgage Loans
                    over the sum of the Class A Balance, Class B Balance and
                    Class C Balance.
 
                    The Subordinate Certificates are not offered hereby.
 
Optional
  Termination...... At its option, the Master Servicer may purchase all of the
                    Mortgage Loans, and thereby effect termination of the Trust
                    Fund and early retirement of the then outstanding
                    Certificates, on any Distribution Date on which the

                    aggregate Stated Principal Balance of the Mortgage Loans
                    remaining in the Trust Fund is less than       % of the
                    aggregate principal balance of such Mortgage Loans as of the
                    Cut-off Date. See 'Pooling and Servicing
                    Agreement--Termination' herein and 'Description of the
                    Certificates--Termination' in the Prospectus.
 
Certain Federal
  Income Tax
  Consequences..... Beneficial owners of the Regular Certificates will be
                    required to report income thereon in accordance with the
                    accrual method of accounting. [It is anticipated that the
                    Class Certificates will be issued with original issue
                    discount in an amount equal to the excess of the initial
                    Class      Certificate Principal Balances thereof (plus
                    days of interest at the pass-through rates thereon) over
                    their issue prices (including accrued interest). It is
                    further anticipated that the Class      Certificates will be
                    issued at a premium and that the Class      Certificates
                    will be issued with de minimis original issue discount for
                    federal income tax purposes. Although not free from doubt,
                    it is anticipated that the Class      Certificates will be
                    treated as issued with original issue discount in an amount
                    equal to the excess of all distributions of principal and
                    interest thereon over their issue price (including accrued
                    interest), and the Company intends to report income in
                    respect of such Class of Certificates in this manner.] See
                    'Certain Federal Income Tax Consequences' in the Prospectus.
 
ERISA
  Considerations... [A fiduciary of any employee benefit plan or other
                    retirement arrangement subject to the Employee Retirement
                    Income Security Act of 1974, as amended ('ERISA'), or
                    Section 4975 of the Code should review carefully with its
                    legal advisors whether the purchase or holding of Class A
                    Certificates could give rise to a transaction that is
                    prohibited or is not otherwise permitted either under ERISA
                    or Section 4975 of the Code.] [The U.S. Department of Labor
                    has issued an individual exemption, Prohibited Transaction
                    Exemption 93-32, to the Underwriter that generally exempts
                    from the application of certain of the prohibited
                    transaction provisions of Section 406 of the Employee
                    Retirement Income Security Act of 1974, as amended
                    ('ERISA'), and the excise taxes imposed on such prohibited
                    transactions by Section 4975(a) and (b) of the Code,
                    transactions relating to the purchase, sale and holding of
                    pass-through certificates underwritten by the Underwriter
                    such as the Class A Certificates and the
</TABLE>
 
                                      S-9
<PAGE>
 
<TABLE>

<S>                 <C>
                    servicing and operation of asset pools such as the Mortgage
                    Pool, provided that certain conditions are satisfied. A
                    fiduciary of any employee benefit plan subject to
                    ERISA or the Code should consult with its legal advisors
                    regarding the requirements of ERISA and the Code.] See
                    'ERISA Considerations' herein and in the Prospectus.
 
Rating............. It is a condition to the issuance of the Class A
                    Certificates that they be rated [not lower than] '     ' by
                          (the 'Rating Agency'). 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
                    address the frequency of prepayments of Mortgage Loans, or
                    the corresponding effect on yield to investors. See 'Risk
                    Factors' and 'Rating' herein and 'Yield Considerations' in
                    the Prospectus.
 
Legal Investment... The appropriate characterization of the Class A Certificates
                    under various legal investment restrictions, and thus the
                    ability of investors subject to these restrictions to
                    purchase the Class A Certificates, may be subject to
                    significant interpretative uncertainties. The Class A
                    Certificates will [not] be 'mortgage related securities'
                    within the meaning of the Secondary Mortgage Market
                    Enhancement Act of 1984 [so long as they are rated in at
                    least the second highest rating category by the Rating
                    Agency, and, as such, are legal investments for certain
                    entities to the extent provided in SMMEA]. Accordingly,
                    investors should consult their own legal advisors to
                    determine whether and to what extent the Class A
                    Certificates constitute legal investments for them. See
                    'Legal Investment' herein and in the Prospectus.
</TABLE>
 
                                      S-10
<PAGE>
                                  RISK FACTORS
       [DESCRIPTION WILL DEPEND ON THE PARTICULARS OF THE MORTGAGE POOL]
 
     Special Prepayment Considerations.  The rate and timing of principal
payments on the Class A Certificates will depend, among other things, on the
rate and timing of principal payments (including prepayments, defaults,
liquidations and purchases of Mortgage Loans due to a breach of representation
and warranty) on the Mortgage Loans. As is the case with mortgage-backed
securities generally, the Class A Certificates are subject to substantial
inherent cash-flow uncertainties because the Mortgage Loans may be prepaid at
any time.
 
     As described herein, prior to reduction of the Class A Balance to zero, all
principal prepayments on and other unscheduled recoveries of principal of the
Mortgage Loans will be allocated to the Class A Certificates. To the extent that
no prepayments or other unscheduled recoveries of principal are distributed on

the Subordinate Certificates, the subordination afforded the Class A
Certificates by the Subordinate Certificates, in the absence of offsetting
losses on the Mortgage Loans allocated thereto, will be increased.
 
     See [Prepayment and Yield Considerations' herein and] 'Description of the
Certificates--Distributions--Priority' herein and 'Yield Considerations' in the
Prospectus.
 
     Special Yield Considerations.  The yield to maturity on the Class A
Certificates will depend, among other things, on the rate and timing of
principal payments (including prepayments, defaults, liquidations and purchases
of Mortgage Loans due to a breach of representation and warranty) on the
Mortgage Loans and the allocation thereof to reduce the Certificate Balance of
such class. The yield to maturity on the Class A Certificates will also depend
on changes in the Index and the effect of any maximum lifetime Mortgage Rate,
minimum lifetime Mortgage Rate, Payment Cap and Periodic Rate Cap applicable to
each Mortgage Loan. The yield to investors on the Class A Certificates will be
adversely affected by any allocation thereto of Prepayment Interest Shortfalls
on the Mortgage Loans, which are expected to result from the distribution of
interest only to the date of prepayment (rather than a full month's interest) in
connection with prepayments in full, and the lack of any distribution of
interest on the amount of any partial prepayments. Neither the Certificates nor
the Mortgage Loans are guaranteed by any governmental entity or private insurer.
 
     In general, if a Certificate is purchased at a premium and principal
distributions thereon occur at a rate faster than anticipated at the time of
purchase, the investor's actual yield to maturity will be lower than that
assumed at the time of purchase. Conversely, if a Certificate is purchased at a
discount and principal distributions thereon occur at a rate slower than that
assumed at the time of purchase, the investor's actual yield to maturity will be
lower than assumed at the time of purchase.
 
     See ['Prepayment and Yield Considerations' and] 'Certain Federal Income Tax
Consequences' herein and in the Prospectus and 'Yield Considerations' in the
Prospectus.
 
     Risks Associated with Certain of the Mortgage Loans and Mortgaged
Properties.  [Description of type of property, lease provisions, nature of
tenants and operating income.]
 
     Effect of Mortgagor Defaults.  The aggregate amount of distributions on the
Class A Certificates, the yield to maturity of the Class A Certificates, the
rate of principal payments on the Class A Certificates and the weighted average
life of the Class A Certificates will be affected by the rate and the timing of
delinquencies and defaults on the Mortgage Loans. If a purchaser of a Class A
Certificate calculates its anticipated yield based on an assumed rate of default
and amount of losses on the Mortgage Loans that is lower than the default rate
and amount of losses actually experienced and such additional losses are
allocable to such class of Certificates, such purchaser's actual yield to
maturity will be lower than that so calculated and could, under certain extreme
scenarios, be negative. The timing of any loss on a liquidated Mortgage Loan
will also affect the actual yield to maturity of the Class A Certificates to
which a portion of such loss is allocable, even if the rate of defaults and
severity of losses are consistent with an investor's expectations. In general,

the earlier a loss borne by an investor occurs, the greater is the effect on
such investor's yield to maturity.
 
     As and to the extent described herein, the Master Servicer will be entitled
to receive interest on unreimbursed Advances and unreimbursed servicing expenses
that (i) are recovered out of amounts received on the Mortgaged Loan as to which
such Advances were made or such servicing expenses were incurred, which amounts
are in the form of liquidation proceeds, insurance proceeds, condemnation
proceeds or amounts paid in connection with the purchase of such Mortgage Loan
out of the Trust Fund or (ii) are determined to be nonrecoverable Advances. The
Master Servicer's right to receive such payments of interest are prior to the
rights of Certificateholders to receive distributions on the Certificates and,
consequently, may result in losses being allocated to the Class A Certificates
that would not otherwise have resulted absent the accrual of such interest.
 
     Even if losses on the Mortgage Loans are not borne by an investor in the
Class A Certificates, such losses may affect the weighted average life and yield
to maturity of such Investor's Certificates. Losses on the Mortgage Loans, to
the extent not allocated to the Class A Certificates, may result in a higher
percentage ownership interest evidenced by such Certificates than
 
                                      S-11
<PAGE>
would otherwise have resulted absent such loss. The consequent effect on the
weighted average life and yield to maturity of the Class A Certificates will
depend upon the characteristics of the remaining Mortgage Loans.
 
     Regardless of whether losses ultimately result, delinquencies and defaults
on the Mortgage Loans may significantly delay the receipt of payments by the
holder of a Class A Certificate, to the extent that Advances or the
subordination of another class of Certificates does not fully offset the effects
of any such delinquency or default. The Scheduled Principal Distribution Amount
and the Unscheduled Principal Distribution Amount generally consist of, as more
fully described herein, principal of the Mortgage Loans actually collected or
advanced. The Master Servicer has the ability to extend and modify Mortgage
Loans that are in default or as to which a payment default is imminent,
including the ability to extend the date on which a Balloon Payment is due by up
to 36 months, subject to certain conditions described in the Pooling and
Servicing Agreement. The Master Servicer's obligation to make Advances in
respect of a Mortgage Loan that is delinquent as to its Balloon Payment is
limited, however, to the extent described under 'Description of the
Certificates--Advances'. Until such time as any Mortgage Loan delinquent in
respect of its Balloon Payment is liquidated, the entitlement of the holders of
Class A Certificates on each Distribution Date in respect of principal of such
Mortgage Loan will be limited to the Class A Scheduled Principal Distribution
Percentage of that portion of the Available Distribution Amount that represents
the principal portion of (i) any payment made by the related mortgagor under a
forbearance arrangement or (ii) any related Advance made by the Master Servicer.
Consequently, any delay in the receipt of a Balloon Payment that is payable, in
whole or in part, to the Class A Certificate will extend the weighted average
life of the Class A Certificates.
 
     As described under 'Description of the Certificates--Distributions' herein,
if the portion of Available Distribution Amount distributable in respect of

interest on the Class A Certificates on any Distribution Date is less than the
Distributable Certificate Interest then payable for such class, the shortfall
will be distributable to holders of such Class of Certificates on subsequent
Distribution Dates, to the extent of available funds. Any such shortfall will
not bear interest and will therefore negatively affect the yield to maturity of
such class of Certificates for so long as it is outstanding.
 
     [The following paragraphs will be included in the event any of the Mortgage
Loans are acquired from the Resolution Trust Corporation:
 
          Troubled Originators.  The Mortgage Loans were originated or purchased
     by the [Originating Institutions], each of which is subject to an RTC
     receivership. It is possible that the financial difficulties experienced by
     the [Originating Institutions] may have adversely affected either or both
     of (i) the standards and procedures pursuant to which the Mortgage Loans
     were originated or purchased by such [Originating Institutions] and (ii)
     that manner in which such Mortgage Loans have been serviced prior to
     assumption of servicing responsibilities by the Master Servicer. The
     Mortgage Loans will be acquired by the Depositor on or before the Delivery
     Date from the Mortgage Asset Seller, which acquired the Mortgage Loans from
     the RTC in its capacity as receiver of each of the Associations pursuant to
     a certain commercial mortgage loan sale agreement, dated , 199 (as amended,
     the 'Loan Sale Agreement'). Pursuant to the Loan Sale Agreement, the RTC,
     as receiver of the [Originating Institutions], has made certain
     representations and warranties regarding the Mortgage Loans and is
     obligated to cure such breaches or repurchase those Mortgage Loans as to
     which there is a breach of such representations and warranties. The RTC
     repurchase price for the Mortgage Loans is par plus accrued interest at the
     related Mortgage Rate [, except in the case of Mortgage Loans as to which a
     repurchase for a breach of the representation and warranty relating to
     certain environmental matters would be accomplished at a price that
     initially is discounted but increases to par over approximately   years].
     See 'Description of the Mortgage Pool--Representations and Warranties of
     the Originating Institutions' herein. The RTC, acting in its corporate
     capacity, has guaranteed such obligations of the RTC, acting in its
     capacity as receiver. The agreement pursuant to which such guarantee was
     made by the RTC is hereinafter referred to as the 'Guarantee Agreement'.
 
          Limited Information.  The information set forth in this Prospectus
     Supplement with respect to the Mortgage Loans is derived from books and
     records of the [Originating Institutions], as well as a limited review of
     the credit and legal files relating to the Mortgage Loans. Accordingly,
     available information does not permit the Depositor to determine fully the
     origination, credit appraisal and underwriting practices of the originators
     of the Mortgage Loans. Furthermore, it is possible that this Prospectus
     Supplement does not contain material information regarding the Mortgage
     Loans that would have been disclosed if the structure and personnel of the
     [Originating Institutions] had not been affected by such institutions
     having been placed in receivership. While the Depositor has undertaken a
     limited review of the records and files related to the Mortgage Loans in
     connection with the issuance of the Class A Certificates, the Mortgage
     Loans have not been 're-underwritten' or subjected to the type of review
     that would typically be made in respect of a newly originated mortgage
     loan.]

 
                                      S-12
<PAGE>
                        DESCRIPTION OF THE MORTGAGE POOL
 
GENERAL
 
     The Trust Fund will consist primarily of conventional, [adjustable
interest] [fixed] rate Mortgage Loans with an aggregate principal balance as of
the Cut-off Date, after deducting payments of principal due on such date, of
$               . Each Mortgage Loan is evidenced by a promissory note (a
'Mortgage Note') and secured by a mortgage, deed of trust or other similar
security instrument (a 'Mortgage') creating a first fee lien on a [multifamily]
[commercial] property (a 'Mortgaged Property'). The Mortgaged Properties consist
of [description commercial or multifamily properties]. Because no evaluation of
any mortgagor's financial condition has been conducted, investors should
consider all of the Mortgage Loans to be non-recourse loans so that, in the
event of mortgagor default, recourse may be had only against the specific
property and such limited other assets as have been pledged to secure a Mortgage
Loan, and not against the mortgagor's other assets. All percentages of the
Mortgage Loans described herein are approximate percentages (except as otherwise
indicated) by aggregate principal balance as of the Cut-off Date.
 
     The Mortgage Loans to be included in the Trust Fund will have been
originated or acquired by                               (the 'Mortgage Asset
Seller') and will comply with the underwriting criteria described herein. The
Depositor will purchase the Mortgage Loans to be included in the Mortgage Pool
on or before the Delivery Date from the Mortgage Asset Seller pursuant to a
seller's agreement (the 'Seller's Agreement'), to be dated as of             ,
199 between the Mortgage Asset Seller and the Depositor. The Depositor will
cause the Mortgage Loans in the Mortgage Pool to be assigned to
                        , as Trustee, pursuant to the Pooling and Servicing
Agreement.                         , in its capacity as Master Servicer, will
service the Mortgage Loans pursuant to the Pooling and Servicing Agreement.
 
     Under the Seller's Agreement,                               , as seller of
the Mortgage Loans to the Depositor, will make certain representations,
warranties and covenants to the Depositor relating to, among other things, the
due execution and enforceability of the Seller's Agreement and certain
characteristics of the Mortgage Loans, and will be obligated to repurchase or
substitute for any Mortgage Loans as to which there exists deficient
documentation or an uncured material breach of any such representation, warranty
or covenant. Under the Pooling and Servicing Agreement the Depositor will assign
all its right, title and interest in such representations, warranties and
covenants (including                               's repurchase or substitution
obligation, to the Trustee for the Trust Fund. The Depositor will make no
representations or warranties with respect to the Mortgage Loans and will have
no obligation to repurchase or substitute for Mortgage Loans with deficient
documentation or which are otherwise defective.                               ,
as seller of the Mortgage Loans to the Depositor, is selling such Mortgage Loans
without recourse and, accordingly, in such capacity, will have no obligations
with respect to the Certificates other than pursuant to such representations,
warranties, covenants and repurchase obligations. See 'Description of the
Agreements--Representations and Warranties; Repurchases' in the Prospectus.

 
     The Mortgage Rate on each Mortgage Loan is subject to adjustment on each
Interest Rate Adjustment Date by adding the related Gross Margin to the value of
the Index (described below) as most recently announced a specified number of
days prior to such Interest Rate Adjustment Date, subject, in the case of
substantially all of the Mortgage Loans, to minimum and maximum lifetime
Mortgage Rates, with ranges specified below. The Mortgage Rates on the Mortgage
Loans generally are adjusted monthly; however, certain of the Mortgage Loans
provide for Interest Rate Adjustment Dates to occur quarterly (   % of the
Mortgage Loans), semi-annually (   % of the Mortgage Loans) or annually (   % of
the Mortgage Loans). Each of the Mortgage Loans provided for an initial fixed
interest rate period;    Mortgage Loans, representing    % of the Mortgage
Loans, have not experienced their first Interest Rate Adjustment Dates. The
latest initial Interest Rate Adjustment Date for any Mortgage Loan is to occur
in                               .
 
     Subject to the Payment Caps described below, the amount of the Monthly
Payment on each Mortgage Loan adjusts periodically on each Payment Adjustment
Date to an amount that would fully amortize the principal balance of the
Mortgage Loan over its then remaining amortization schedule and pay interest at
the Mortgage Rate in effect during the one month period preceding such Payment
Adjustment Date. Approximately    % of the Mortgage Loans provide that an
adjustment of the amount of the Monthly Payment on a Payment Adjustment Date may
not result in a Monthly Payment that increases by more than    % (nor, in some
cases, decreases by more than    %) of the amount of the Monthly Payment in
effect immediately prior to such Payment Adjustment Date (each such provision, a
'Payment Cap'); however, certain of those Mortgage Loans also provide that the
Payment Cap will not apply on certain Payment Adjustment Dates or if the
application thereof would result in the principal balance of the Mortgage Loan
exceeding (through negative amortization) by a specified percentage the original
principal balance thereof. Generally, the related Mortgage Note provides that
if, as a result of negative amortization, the respective principal balance of
the Mortgage Loan reaches an amount specified therein (which as to most Mortgage
Loans is not greater than    % of the
 
                                      S-13
<PAGE>
Mortgage Loan principal balance as of the origination date thereof), the amount
of the Monthly Payments due thereunder will be increased as necessary to prevent
further negative amortization.
 
     Only in the case of    % of the Mortgage Loans does a Payment Adjustment
Date immediately follow each Interest Rate Adjustment Date. As a result, and
because application of Payment Caps may limit the amount by which the Monthly
Payments due on certain of the Mortgage Loans may adjust, the amount of a
Monthly Payment may be more or less than the amount necessary to amortize the
Mortgage Loan principal balance over the then remaining amortization schedule at
the applicable Mortgage Rate. Accordingly, Mortgage Loans may be subject to
slower Amortization (if the Monthly Payment due on a Due Date is sufficient to
pay interest accrued to such Due Date at the applicable Mortgage Rate but is not
sufficient to reduce principal in accordance with the applicable amortization
schedule), to negative amortization (if interest accrued to a Due Date at the
applicable Mortgage Rate is greater than the entire Monthly Payment due on such
Due Date) or to accelerated amortization (if the Monthly Payment due on a Due

Date is greater than the amount necessary to pay interest accrued to such Due
Date at the applicable Mortgage Rate and to reduce principal in accordance with
the applicable amortization schedule).
 
THE INDEX
 
     As of any Payment Adjustment Date, the Index applicable to the
determination of the related Mortgage Rate will be a per annum rate equal to
                              , as most recently available as of the date days
prior to the Payment Adjustment Date (the 'Index'). Such average yields reflect
the yields for the week prior to that week in which the information is reported.
In the event that the Index is no longer available, an index reasonably
acceptable to the Trustee that is based on comparable information will be
selected by the Master Servicer.
 
     The Index is currently calculated based on information reported in
                              . Listed below are the weekly average yields on
actively traded                               as reported in
                              on the date that would have been applicable to
mortgage loans having the following adjustment dates for the indicated years.
Such average yields may fluctuate significantly from week to week as well as
over longer periods and may not increase or decrease in a constant pattern from
period to period. The following does not purport to be representative of future
average yields. No assurance can be given as to the average yields on such
                              on any Payment Adjustment Date or during the life
of any Mortgage Loan.
 
                                [NAME OF INDEX]
 
<TABLE>
<CAPTION>
ADJUSTMENT DATE    1992       1993       1994       1995       1996
- ---------------   -------    -------    -------    -------    -------
<S>               <C>        <C>        <C>        <C>        <C>
January 1......
February 1.....
March 1........
April 1........
May 1..........
June 1.........
July 1.........
August 1.......
September 1....
October 1......
November 1.....
December 1.....
</TABLE>
 
                                      S-14
<PAGE>
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
 
     Approximately    % of the Mortgage Loans have Due Dates that occur on the
first day of each month; approximately    % of the Mortgage Loans have Due Dates

that occur on the fifth day of each month; approximately    % of the Mortgage
Loans have Due Dates that occur on the tenth day of each month; and the
remainder of the Mortgage Loans have Due Dates that occur on the fifteenth day
of each month.
 
     As of the Cut-off Date, the Mortgage Loans had the following
characteristics; (i) Mortgage Rates ranging from    % per annum to    % per
annum; (ii) a weighted average Mortgage Rate of    % per annum; (iii) Gross
Margins ranging from basis points to basis points; (iv) a weighted average Gross
Margin of basis points; (v) principal balances ranging from $         to
$         ; (vi) an average principal balance of $         ; (vii) original
terms to scheduled maturity ranging from months to months; (viii) a weighted
average original term to scheduled maturity of months; (ix) remaining terms to
scheduled maturity ranging from months to months; (x) a weighted average
remaining term to scheduled maturity of months; (xi) Cut-off Date Loan-to-Value
('LTV') Ratios ranging from    % to    %; (xii) a weighted average Cut-off Date
LTV Ratio of    %; (xiii) as to the    % of the Mortgage Loans to which such
characteristic applies, (A) minimum lifetime Mortgage Rates ranging from    %
per annum to    % per annum and (B) a weighted average minimum lifetime Mortgage
Rate of    % per annum; (xiv) as to the    % of Mortgage Loans to which such
characteristic applies and for which it may be currently calculated, (A) maximum
lifetime Mortgage Rates ranging from    % per annum to    % per annum and (B) a
weighted average maximum lifetime Mortgage Rate of    % per annum; (xv) Cut-off
Date Debt Service Coverage Ratios ranging from    % to    % and (xvi) a weighted
average Cut-off Date Debt Service Coverag Ratio of    %.
 
        % of the Mortgage Loans provide for Balloon Payments on their respective
maturity dates. Loans providing the Balloon Payments involve a greater degree of
risk than self-amortizing loans. See 'Risk Factors--Balloon Payments' in the
Prospectus.
 
     No Mortgage Loan currently prohibits principal prepayments; however,
certain of the Mortgage Loans impose fees or penalties ('Prepayment Premiums')
in connection with full or partial prepayments. Although Prepayment Premiums are
payable to the Master Servicer as additional servicing compensation, the Master
Servicer may waive the payment of any Prepayment Premium only in connection with
a principal prepayment that is proposed to be made during the three month period
prior to the scheduled maturity of the related Mortgage Loan, or under certain
other limited circumstances.
 
     The following table sets forth the range of Mortgage Rates on the Mortgage
Loans as of the Cut-off Date:
 
                     MORTGAGE RATES AS OF THE CUT-OFF DATE
 
<TABLE>
<CAPTION>
                                                                              PERCENT BY
                                                          AGGREGATE           AGGREGATE
                             NUMBER OF     PERCENT        PRINCIPAL           PRINCIPAL
                             MORTGAGE        BY         BALANCE AS OF       BALANCE AS OF
MORTGAGE RATE                  LOANS       NUMBER      THE CUT-OFF DATE    THE CUT-OFF DATE
- --------------------------   ---------    ---------    ----------------    ----------------
 

<S>                          <C>          <C>          <C>                 <C>
                                ---       ---------        -------             -------
     Total................                  100.00%         $                   100.00%
                                ---       ---------        -------             -------
                                ---       ---------        -------             -------
Weighted Average Mortgage
  Rate:
</TABLE>
 
- ------------------
Note: Percentage totals may not add due to rounding.
 
                                      S-15
<PAGE>
     The following table sets forth the types of Mortgaged Properties securing
the Mortgage Loans:
 
                                 PROPERTY TYPE
 
<TABLE>
<CAPTION>
                                                                              PERCENT BY
                                                          AGGREGATE           AGGREGATE
                             NUMBER OF     PERCENT        PRINCIPAL           PRINCIPAL
                             MORTGAGE        BY         BALANCE AS OF       BALANCE AS OF
TYPE                           LOANS       NUMBER      THE CUT-OFF DATE    THE CUT-OFF DATE
- --------------------------   ---------    ---------    ----------------    ----------------
 
<S>                          <C>          <C>          <C>                 <C>
                                ---       ---------        -------             -------
     Total................                  100.00%         $                   100.00%
                                ---       ---------        -------             -------
                                ---       ---------        -------             -------
</TABLE>
 
- ------------------
Note: Percentage totals may not add due to rounding.
 
     The following table sets forth the range of Gross Margins for the Mortgage
Loans:
 
                                 GROSS MARGINS
 
<TABLE>
<CAPTION>
                                                                              PERCENT BY
                                                          AGGREGATE           AGGREGATE
                             NUMBER OF     PERCENT        PRINCIPAL           PRINCIPAL
                             MORTGAGE        BY         BALANCE AS OF       BALANCE AS OF
GROSS MARGIN                   LOANS       NUMBER      THE CUT-OFF DATE    THE CUT-OFF DATE
- --------------------------   ---------    ---------    ----------------    ----------------
 
<S>                          <C>          <C>          <C>                 <C>
                                ---       ---------        -------             -------

     Total................                  100.00%         $                   100.00%
                                ---       ---------        -------             -------
                                ---       ---------        -------             -------
Weighted Average Gross
  Margin:
</TABLE>
 
- ------------------
Note: Percentage totals may not add due to rounding.
 
     The following table sets forth the frequency of adjustments to the Mortgage
Rates on the Mortgage Loans as of the Cut-off Date:
 
                   FREQUENCY OF ADJUSTMENTS TO MORTGAGE RATES
 
<TABLE>
<CAPTION>
                                                                              PERCENT BY
                                                          AGGREGATE           AGGREGATE
                             NUMBER OF     PERCENT        PRINCIPAL           PRINCIPAL
                             MORTGAGE        BY         BALANCE AS OF       BALANCE AS OF
FREQUENCY(A)                   LOANS       NUMBER      THE CUT-OFF DATE    THE CUT-OFF DATE
- --------------------------   ---------    ---------    ----------------    ----------------
 
<S>                          <C>          <C>          <C>                 <C>
                                ---       ---------        -------             -------
     Total................                  100.00%         $                   100.00%
                                ---       ---------        -------             -------
                                ---       ---------        -------             -------
Weighted Average Frequency
  of Adjustments to
  Mortgage Rate:
</TABLE>
 
- ------------------
Note: Percentage totals may not add due to rounding.
(A)                  or      % of Mortgage Loans have not experienced their
    first Interest Rate Adjustment Date.
 
                                      S-16
<PAGE>
     The following table sets forth the frequency of adjustments to the Monthly
Payments on the Mortgage Loans as of the Cut-off Date.
 
                  FREQUENCY OF ADJUSTMENTS TO MONTHLY PAYMENTS
 
<TABLE>
<CAPTION>
                                                                              PERCENT BY
                                                          AGGREGATE           AGGREGATE
                             NUMBER OF     PERCENT        PRINCIPAL           PRINCIPAL
                             MORTGAGE        BY         BALANCE AS OF       BALANCE AS OF
FREQUENCY(A)                   LOANS       NUMBER      THE CUT-OFF DATE    THE CUT-OFF DATE
- --------------------------   ---------    ---------    ----------------    ----------------

 
<S>                          <C>          <C>          <C>                 <C>
                                ---       ---------        -------             -------
     Total................                  100.00%         $                   100.00%
                                ---       ---------        -------             -------
                                ---       ---------        -------             -------
Weighted Average Frequency
  of Adjustments to
  Monthly Payments:
</TABLE>
 
- ------------------
Note: Percentage totals may not add due to rounding.
 
     The following table sets forth the range of maximum lifetime Mortgage Rates
for the Mortgage Loans:
 
                        MAXIMUM LIFETIME MORTGAGE RATES
 
<TABLE>
<CAPTION>
                                                                              PERCENT BY
                                                          AGGREGATE           AGGREGATE
                             NUMBER OF     PERCENT        PRINCIPAL           PRINCIPAL        REMAINING
MAXIMUM LIFETIME MORTGAGE    MORTGAGE        BY         BALANCE AS OF       BALANCE AS OF       TERM TO
RATE                           LOANS       NUMBER      THE CUT-OFF DATE    THE CUT-OFF DATE    MATURITY
- --------------------------   ---------    ---------    ----------------    ----------------    ---------
 
<S>                          <C>          <C>          <C>                 <C>                 <C>
                                ---       ---------        -------             -------
     Total................                  100.00%         $                   100.00%
                                ---       ---------        -------             -------
                                ---       ---------        -------             -------
Weighted Average Maximum Lifetime Mortgage Rate:
</TABLE>
 
- ------------------
Note: Percentage totals may not add due to rounding.
(A) Represents Mortgage Loans without a lifetime rate cap.
(B) The lifetime rate caps for these Mortgage Loans are based upon the Index as
    determined at a future point in time plus a fixed percentage. Therefore, the
    rate is not determinable as of the Cut-off Date.
(C) This calculation does not include the      Mortgage Loans without a lifetime
    rate cap or the      Mortgage Loans with lifetime rate caps which are
    currently not determinable.
 
                                      S-17
<PAGE>
     The following table sets forth the range of minimum lifetime Mortgage Rates
on the Mortgage Loans:
 
                        MINIMUM LIFETIME MORTGAGE RATES
 
<TABLE>

<CAPTION>
                                                                           PERCENT BY
                                                       AGGREGATE           AGGREGATE
                             NUMBER OF    PERCENT      PRINCIPAL           PRINCIPAL        REMAINING
MAXIMUM LIFETIME MORTGAGE    MORTGAGE       BY       BALANCE AS OF       BALANCE AS OF       TERM TO
RATE                           LOANS      NUMBER    THE CUT-OFF DATE    THE CUT-OFF DATE    MATURITY
- --------------------------   ---------    ------    ----------------    ----------------    ---------
<S>                          <C>          <C>       <C>                 <C>                 <C>
                             ---------    ------    ----------------        -------
     Total................                100.00%       $                    100.00%
                             ---------    ------    ----------------        -------
                             ---------    ------    ----------------        -------
Weighted Average Minimum
  Lifetime
  Mortgage Rate:
</TABLE>
 
- ------------------
Note: Percentage totals may not add due to rounding.
(A) Represents Mortgage Loans without interest rate floors.
(B) This calculation does not include the           Mortgage Loans without
interest rate floors.
 
     The following table sets forth the range of principal balances of the
Mortgage Loans as of the Cut-off Date:
 
                   PRINCIPAL BALANCES AS OF THE CUT-OFF DATE
 
<TABLE>
<CAPTION>
                                                                           PERCENT BY
                                                       AGGREGATE           AGGREGATE
                             NUMBER OF    PERCENT      PRINCIPAL           PRINCIPAL
PRINCIPAL BALANCE AS OF      MORTGAGE       BY       BALANCE AS OF       BALANCE AS OF
THE CUT-OFF DATE               LOANS      NUMBER    THE CUT-OFF DATE    THE CUT-OFF DATE
- --------------------------   ---------    ------    ----------------    ----------------
<S>                          <C>          <C>       <C>                 <C>
                             ---------    ------    ----------------        -------
     Total................                100.00%       $                    100.00%
                             ---------    ------    ----------------        -------
                             ---------    ------    ----------------        -------
Average Principal Balance
  as of the
  Cut-off Date:
</TABLE>
 
- ------------------
Note: Percentage totals may not add due to rounding.
 
                                      S-18
<PAGE>
     The following tables set forth the original and remaining terms to maturity
(in months) of the Mortgage Loans:
 

                      ORIGINAL TERM TO MATURITY IN MONTHS
 
<TABLE>
<CAPTION>
                                                                           PERCENT BY
                                                       AGGREGATE           AGGREGATE
                             NUMBER OF    PERCENT      PRINCIPAL           PRINCIPAL
                             MORTGAGE       BY       BALANCE AS OF       BALANCE AS OF
ORIGINAL TERMS IN MONTHS       LOANS      NUMBER    THE CUT-OFF DATE    THE CUT-OFF DATE
- --------------------------   ---------    ------    ----------------    ----------------
<S>                          <C>          <C>       <C>                 <C>
                             ---------    ------    ----------------        -------
     Total................                100.00%       $                    100.00%
                             ---------    ------    ----------------        -------
                             ---------    ------    ----------------        -------
Weighted Average Original
  Term to
  Maturity:
</TABLE>
 
- ------------------
Note: Percentage totals may not add due to rounding.
 
                      REMAINING TERM TO MATURITY IN MONTHS
 
<TABLE>
<CAPTION>
                                                                           PERCENT BY
                                                       AGGREGATE           AGGREGATE
                             NUMBER OF    PERCENT      PRINCIPAL           PRINCIPAL
                             MORTGAGE       BY       BALANCE AS OF       BALANCE AS OF
REMAINING TERM IN MONTHS       LOANS      NUMBER    THE CUT-OFF DATE    THE CUT-OFF DATE
- --------------------------   ---------    ------    ----------------    ----------------
<S>                          <C>          <C>       <C>                 <C>
                             ---------    ------    ----------------        -------
     Total................                100.00%       $                    100.00%
                             ---------    ------    ----------------        -------
                             ---------    ------    ----------------        -------
Weighted Average Remaining
  Term to
  Maturity:
</TABLE>
 
- ------------------
Note: Percentage totals may not add due to rounding.
 
     The following tables set forth the respective years in which the Mortgage
Loans were originated and are scheduled to mature:
 
                       MORTGAGE LOAN YEAR OF ORIGINATION
 
<TABLE>
<CAPTION>
                                                                           PERCENT BY

                                                       AGGREGATE           AGGREGATE
                             NUMBER OF    PERCENT      PRINCIPAL           PRINCIPAL
                             MORTGAGE       BY       BALANCE AS OF       BALANCE AS OF
YEAR                           LOANS      NUMBER    THE CUT-OFF DATE    THE CUT-OFF DATE
- --------------------------   ---------    ------    ----------------    ----------------
<S>                          <C>          <C>       <C>                 <C>
                             ---------    ------    ----------------        -------
     Total................                100.00%       $                    100.00%
                             ---------    ------    ----------------        -------
                             ---------    ------    ----------------        -------
</TABLE>
 
- ------------------
Note: Percentage totals may not add due to rounding.
 
                                      S-19
<PAGE>
                              [PRINCIPAL TENANT[S]
 
                 ('Tenant') is the Borrower's largest tenant, with leases on
properties accounting for      % of the aggregate gross leasable area and   % of
the aggregate base rental revenues on the Mortgaged Properties. Tenant's
principal business is                         , and it is one of the world's
largest                   based on sales volume. Tenant operates over
stores in 48 states, Canada and Puerto Rico.       , had credit ratings of
and    from Moody's Investors Service, Inc. and Standard & Poor's Rating Group,
respectively.]
 
                       [SIGNIFICANT MORTGAGED PROPERTIES
 
     As of             , the largest Mortgaged Property was       , located in
      . None of the other Mortgaged Properties represented percent or more of
the aggregate [Value] of the Mortgaged Properties or of the aggregate annualized
based rental revenues of the Mortgaged Properties.
 
     The                   ('Significant Property') was acquired by the borrower
in       , and consists of    square feet       of space located adjacent to
                  . The majority of leases at Significant Property
                        . The current occupancy rate is   %. Significant
Property's current tenants include three primary tenants,       , a nationally
recognized             which occupies   % of the gross leasable area ('GLA') of
that Mortgaged Property, and             , a large regional
                        which occupies   % of the GLA of that Mortgaged
Property. Significant Property also leases space to       other tenants
occupying between                         and       square feet each. None of
the primary tenant leases expire before             , and each includes renewal
options which could extend the terms of those leases for a minimum of five
additional years. The annualized based rental rate per square foot is $      .
Real property taxes on Significant Property for the latest fiscal year were
$      . The following table shows lease expirations, not including renewal
options, for the next ten years for Significant Property:
 
<TABLE>
<CAPTION>

                                                    PERCENT OF
YEAR       NUMBER     GLA (SQ. FT.)    BASE RENT    GROSS RENT
- --------   -------    -------------    ---------    ----------
<S>        <C>        <C>              <C>          <C>
1995....
1996....
1997....
1998....
1999....
2000....
2001....
2002....
2003....
2004]...
</TABLE>
 
                    MORTGAGE LOAN YEAR OF SCHEDULED MATURITY
 
<TABLE>
<CAPTION>
                                                             AGGREGATE            PERCENT BY
                             NUMBER OF                   PRINCIPAL BALANCE    AGGREGATE PRINCIPAL
                             MORTGAGE      PERCENT BY        AS OF THE         BALANCE AS OF THE
YEAR                           LOANS         NUMBER        CUT-OFF DATE          CUT-OFF DATE
- --------------------------   ---------     ----------    -----------------    -------------------
<S>                          <C>           <C>           <C>                  <C>
                             ---------     ----------         -------               -------
  Total...................                   100.00%          $                      100.00%
                             ---------     ----------         -------               -------
                             ---------     ----------         -------               -------
</TABLE>
 
- ------------------
Note: Percentage totals may not add due to rounding.
 
     The following table sets forth the range of Cut-off Date LTV Ratios of the
Mortgage Loans. A 'Cut-off Date LTV Ratio' is a fraction, expressed as a
percentage, the numerator of which is the Cut-off Date Balance of a Mortgage
Loan, and the denominator of which is the appraised value of the related
Mortgaged Property as determined by an appraisal thereof obtained in connection
with the origination of such Mortgage Loan.
 
                                      S-20
<PAGE>
                            CUT-OFF DATE LTV RATIOS
 
<TABLE>
<CAPTION>
                                                             AGGREGATE            PERCENT BY
                             NUMBER OF                   PRINCIPAL BALANCE    AGGREGATE PRINCIPAL
                             MORTGAGE      PERCENT BY        AS OF THE         BALANCE AS OF THE
LTV RATIO                      LOANS         NUMBER        CUT-OFF DATE          CUT-OFF DATE
- --------------------------   ---------     ----------    -----------------    -------------------
<S>                          <C>           <C>           <C>                  <C>

                             ---------     ----------         -------               -------
  Total...................                   100.00%          $                      100.00%
                             ---------     ----------         -------               -------
                             ---------     ----------         -------               -------
Weighted Average Cut-off
  Date LTV
  Ratio:
</TABLE>
 
- ------------------
 
Note: Percentage totals may not add due to rounding.
 
     The following table sets forth the range of Debt Service Coverage Ratios
for the Mortgage Loans. The 'Debt Service Coverage Ratio' for any Mortgage Loan
is the ratio of Net Operating Income produced by the related Mortgaged Property
for the period covered by the annual operating statement of the amounts of
principal, interest and other sums due under such Mortgage Loan for the same
period. 'Net Operating Income' is the rent from all leases under which the
tenants have taken occupancy at the time of calculation (including only rents
prior to expiration for those leases whose terms expire within one year of the
calculation and pass-throughs for utilities and excluding all free rent) less
operating expenses (such as utilities, administrative expenses, repairs and
maintenance) and less fixed expenses (such as insurance, real estate and other
taxes to be paid by mortgagor). The annual operating statements for the
Mortgaged Properties used in deriving the following table were obtained from the
respective mortgagors. The information contained therein was unaudited, and the
Depositor has made no attempt to verify its accuracy. The last day of the
twelve-month period covered by each such operating statement is set forth in
Annex A with respect to the related Mortgage Loan. [Annual operating statements
for any year following 198 could not be obtained with respect to       of the
Mortgaged Properties and, consequently, the Debt Service Coverage Ratios for the
ralted Mortgage Loans were not calculated. No conclusions should be drawn as to
those       Mortgage Loans on the basis of the information set forth below.]
 
              DEBT SERVICE COVERAGE RATIOS AS OF THE CUT-OFF DATE
 
<TABLE>
<CAPTION>
                                                             AGGREGATE            PERCENT BY
                             NUMBER OF                   PRINCIPAL BALANCE    AGGREGATE PRINCIPAL
       DEBT SERVICE          MORTGAGE      PERCENT BY        AS OF THE         BALANCE AS OF THE
      COVERAGE RATIO           LOANS         NUMBER        CUT-OFF DATE          CUT-OFF DATE
- --------------------------   ---------     ----------    -----------------    -------------------
<S>                          <C>           <C>           <C>                  <C>
                             ---------     ----------         -------               -------
  Total...................                   100.00%          $                      100.00%
                             ---------     ----------         -------               -------
                             ---------     ----------         -------               -------
Weighted Average Debt
  Service
  Coverage Ratio
</TABLE>
 

- ------------------
 
Note: Percentage totals may not add due to rounding.
 
(A) The debt service coverage ratios for these loans were not calculated due to
    a lack of operating statements with respect to years after 198 .
 
(B) This calculation does not include the       Mortgage Loans where debt
    service coverage ratios were not calculated.
 
                                      S-21
<PAGE>
     The Mortgage Loans are secured by Mortgaged Properties in
         different states. The table below sets forth the states in which the
Mortgaged Properties are located:
 
                            GEOGRAPHIC DISTRIBUTION
 
<TABLE>
<CAPTION>
                                                             AGGREGATE            PERCENT BY
                             NUMBER OF                   PRINCIPAL BALANCE    AGGREGATE PRINCIPAL
                             MORTGAGE      PERCENT BY        AS OF THE         BALANCE AS OF THE
STATE                          LOANS         NUMBER        CUT-OFF DATE          CUT-OFF DATE
- --------------------------   ---------     ----------    -----------------    -------------------
<S>                          <C>           <C>           <C>                  <C>
                             ---------     ----------         -------               -------
  Total...................                   100.00%          $                      100.00%
                             ---------     ----------         -------               -------
                             ---------     ----------         -------               -------
</TABLE>
 
- ------------------
Note: Percentage totals may not add due to rounding.
 
     Set forth in Annex A to this Prospectus Supplement are certain individual
characteristics of the respective Mortgage Loans.
 
UNDERWRITING STANDARDS
 
     All of the Mortgage Loans were originated or acquired by          ,
generally in accordance with the underwriting criteria described herein.
 
     [Description of underwriting standards.]
 
ADDITIONAL INFORMATION
 
     The description in this Prospectus Supplement of the Mortgage Pool and the
Mortgaged Properties is based upon the Mortgage Pool as expected to be
constituted at the close of business on the Cut-off Date, as adjusted for the
scheduled principal payments due on or before such date. Prior to the issuance
of the Class A Certificates, a Mortgage Loan may be removed from the Mortgage
Pool as a result of incomplete documentation or otherwise, if the Depositor
deems such removal necessary or appropriate and may be prepaid at any time. A

limited number of other mortgage loans may be included in the Mortgage Pool
prior to the issuance of the Class A Certificates unless including such mortgage
loans would materially alter the characteristics of the Mortgage Pool as
described herein. The Depositor believes that the information set forth herein
will be representative of the characteristics of the Mortgage Pool as it will be
constituted at the time the Class A Certificates are issued, although the range
of Mortgage Rates and maturities and certain other characteristics of the
Mortgage Loans in the Mortgage Pool may vary.
 
     A Current Report on Form 8-K (the 'Form 8-K') will be available to
purchasers of the Class A Certificates and will be filed, together with the
Pooling and Servicing Agreement, with the Securities and Exchange Commission
within fifteen days after the initial issuance of the Class A Certificates. In
the event Mortgage Loans are removed from or added to the Mortgage Pool as set
forth in the preceding paragraph, such removal or addition will be noted in the
Form 8-K.
 
                                      S-22
<PAGE>
                        DESCRIPTION OF THE CERTIFICATES
 
GENERAL
 
     The Certificates will be issued pursuant to the Pooling and Servicing
Agreement and will consist of four classes to be designated as the Class A
Certificates, the Class B Certificates, the Class C Certificates and the Class R
Certificates. The Class B, Class C and Class R Certificates (the 'Subordinate
Certificates') will be subordinate to the Class A Certificates, as described
herein. The Certificates represent in the aggregate the entire beneficial
ownership interest in a Trust Fund consisting of: (i) the Mortgage Loans and all
payments under and proceeds of the Mortgage Loans received after the Cut-off
Date (exclusive of payments of principal and interest due on or before the
Cut-off Date); (ii) any Mortgaged Property acquired on behalf of the Trust Fund
through foreclosure or deed in lieu of foreclosure (upon acquisition, an 'REO
Property'); (iii) such funds or assets as from time to time are deposited in the
Certificate Account and any account established in connection with REO
Properties (the 'REO Account'); and (iv) the rights of the mortgagee under all
insurance policies with respect to the Mortgage Loans. Only the Class A
Certificates are offered hereby. [The Class A Certificates will consist of
[      ] Subclasses designated as the [Class IO Certificates, the Class PO
Certificates, the Class Floater Certificates and the Class Inverse Floater
Certificates]].
 
     The Class A Certificates will have an initial Certificate Balance of
$       , representing    % of the aggregate principal balance of the Mortgage
Loans as of the Cut-off Date. [Each Subclass of Class A Certificates will have
the initial Subclass Certificate Balance set forth on the cover page hereof. The
Subclass Certificate Balance of any Subclass outstanding at any time represents
the maximum amount which the holders thereof are entitled to receive as
distributions allocable to principal on the Class A Certificates from the cash
flow on the Mortgage Loans and the other assets of the Trust Fund]. The Class B
Certificates will have an initial Certificate Balance of $       , representing
   % of the aggregate principal balance of the Mortgage Loans as of the Cut-off
Date. The Class C Certificates will have an initial Certificate Balance of

$       , representing    % of the aggregate principal balance of the Mortgage
Loans as of the Cut-off Date. The initial Certificate Balance of the Class R
Certificates will be [zero]. The Certificate Balance of any class of
Certificates outstanding at any time represents the maximum amount which the
holders thereof are entitled to receive as distributions allocable to principal
from the cash flow on the Mortgage Loans and the other assets in the Trust Fund.
The respective Certificate Balances of the Class A, Class B and Class C
Certificates (respectively, the 'Class A Balance', 'Class B Balance' and 'Class
C Balance') will in each case be (i) reduced by amounts actually distributed on
such class of Certificates that are allocable to principal and (ii) increased by
amounts allocated to such class of Certificates in respect of negative
amortization on the Mortgage Loans. [Any increase or decrease in the Class A
Balance will be allocated among the Subclasses of Class A Certificates pro rata
based on the then current Subclass Certificate Balances of each Subclass]. The
Certificate Balance of the Class R Certificates (the 'Class R Balance') will at
any time equal the aggregate Stated Principal Balance of the Mortgage Loans
minus the sum of the Class A Balance, Class B Balance and Class C Balance. The
Stated Principal Balance of any Mortgage Loan at any date of determination will
equal (a) the Cut-off Date Balance of such Mortgage Loan, plus (b) any negative
amortization added to the principal balance of such Mortgage Loan on any Due
Date after the Cut-off Date to and including the Due Date in the Due Period for
the most recently preceding Distribution Date, minus (c) the sum of (i) the
principal portion of each Monthly Payment due on such Mortgage Loan after the
Cut-off Date, to the extent received from the mortgagor or advanced by the
Master Servicer and distributed to holders of the Certificates before such date
of determination, (ii) all principal prepayments and other unscheduled
collections of principal received with respect to such Mortgage Loan, to the
extent distributed to holders of the Certificates before such date of
determination, and (iii) any reduction in the outstanding principal balance of
such Mortgage Loan resulting out of a bankruptcy proceeding for the related
mortgagor.
 
     None of the Subordinate Certificates are offered hereby.
 
DISTRIBUTIONS
 
     Method, Timing and Amount.  Distributions on the Certificates will be made
on the 25th day of each month or, if such 25th day is not a business day, then
on the next succeeding business day, commencing in                   199 (each,
a 'Distribution Date'). All distributions (other than the final distribution on
any Certificate) will be made by the Master Servicer to the persons in whose
names the 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 by
wire transfer in immediately available funds to the account specified by the
Certificateholder at a bank or other entity having appropriate facilities
therefor, if such Certificateholder will have provided the Master Servicer with
wiring instructions no less than five business days prior to the related Record
Date and is the registered owner of Certificates the aggregate initial principal
amount of which is at least $       , or otherwise by check mailed to such
Certificateholder. The final distribution on any Certificate will be made in
like manner, but only upon presentment or surrender of such Certificate at the
location specified in the notice to the holder thereof of
 

                                      S-23
<PAGE>
such final distribution. All distributions made with respect to a class of
Certificates on each Distribution Date will be allocated pro rata among the
outstanding Certificates of such class based on their respective Percentage
Interests. The Percentage Interest evidenced by any Class A Certificate is equal
to the initial denomination thereof as of the Delivery Date, divided by the
initial Certificate Balance for such class. The aggregate distribution to be
made on the Certificates on any Distribution Date shall equal the Available
Distribution Amount.
 
     The 'Available Distribution Amount' for any Distribution Date is an amount
equal to (a) the sum of (i) the amount on deposit in the Certificate Account as
of the close of business on the related Determination Date, (ii) the aggregate
amount of any Advances made by the Master Servicer in respect of such
Distribution Date and (iii) the aggregate amount deposited by the Master
Servicer in the Certificate Account in respect of such Distribution Date in
connection with Prepayment Interest Shortfalls incurred during the related Due
Period, net of (b) the portion of the amount described in clause (a)(i) hereof
that represents (i) Monthly Payments due on a Due Date subsequent to the end of
the related Due Period, (ii) any voluntary principal prepayments and other
unscheduled recoveries on the Mortgage Loans received after the end of the
related Due Period or (iii) any amounts payable or reimbursable therefrom to any
person.
 
     Priority.  On each Distribution Date, the Master Servicer shall apply
amounts on deposit in the Certificate Account, to the extent of the Available
Distribution Amount, first, to distributions of interest to holders of the Class
A Certificates, in the amount equal to all Distributable Certificate Interest in
respect of the Class A Certificates for such Distribution Date and, to the
extent not previously distributed, for all preceding Distribution Dates and
second, to distributions of principal to holders of the Class A Certificates, in
an amount, not to exceed the sum of the Class A Balance outstanding immediately
prior to such Distribution Date and any Class Negative Amortization in respect
of the Class A Certificates for such Distribution Date, equal to the sum of (A)
the then Class A Scheduled Principal Distribution Percentage of the Scheduled
Principal Distribution Amount for such Distribution Date and (B) the Unscheduled
Principal Distribution Amount for such Distribution Date.
 
     On or after the reduction of the Class A Balance to zero, the Available
Distribution Amount will be paid solely to the holders of the Subordinate
Certificates.
 
     Calculations of Interest.  The 'Distributable Certificate Interest' in
respect of the Class A Certificates for any Distribution Date represents that
portion of the Accrued Certificate Interest in respect of such class of
Certificates for such Distribution Date that is net of such class's allocable
share of (i) the aggregate portion of any Prepayment Interest Shortfalls
resulting from voluntary principal prepayments on the Mortgage Loans during the
related Due Period that are not covered by the application of servicing
compensation of the Master Servicer for the related Due Period (such uncovered
aggregate portion, as to such Distribution Date, the 'Net Aggregate Prepayment
Interest Shortfall'); and (ii) the aggregate of any negative amortization in
respect of the Mortgage Loans for their respective Due Dates during the related

Due Period (the aggregate of such negative amortization, as to such Distribution
Date, the 'Aggregate Mortgage Loan Negative Amortization').
 
     The 'Accrued Certificate Interest' in respect of the Class A Certificates
for any Distribution Date is equal to thirty days' interest accrued during the
related Interest Accrual Period at the Pass-Through Rate applicable to such
class of Certificates for such Distribution Date accrued on the related
Certificate Balance outstanding immediately prior to such Distribution Date. The
Pass-Through Rate applicable to the Class A Certificates for any Distribution
Date is equal to the weighted average of the Class A Remittance Rates in effect
for the Mortgage Loans as of the commencement of the related Due Period (as to
such Distribution Date, the 'Weighted Average Class A Remittance Rate'). The
'Class A Remittance Rate' in effect for any Mortgage Loan as of any date of
determination (a) prior to its first Interest Rate Adjustment Date, is equal to
the related Mortgage Rate then in effect minus basis points and (b) from and
after its first Interest Rate Adjustment Date, is equal to the related Mortgage
Rate then in effect minus the excess of the related Gross Margin over basis
points. The 'Interest Accrual Period' for the Certificates is the calendar month
preceding the month in which the Distribution Date occurs.
 
     The portion of Net Aggregate Prepayment Interest Shortfalls and the
Aggregate Mortgage Loan Negative Amortization for any Distribution Date that
will be allocated to the Class A Certificates on such Distribution Date will be
equal to the then applicable Class A Interest Allocation Percentage. The 'Class
A Interest Allocation Percentage' for any Distribution Date will equal a
fraction, expressed as a percentage, then numerator of which is equal to the
product of (a) the Class A Balance (net of any Uncovered Portion thereof)
outstanding immediately prior to such Distribution Date, multiplied by (b) the
Weighted Average Class A Remittance Rate for such Distribution Date, and the
denominator of which is the product of (x) the aggregate Stated Principal
Balance of the Mortgage Loans outstanding immediately prior to such Distribution
Date, multiplied by (y) the Weighted Average Net Mortgage Rate for such
Distribution Date. The 'Net Mortgage Rate' in effect for any Mortgage Loan as of
any date of determination is equal to the related Mortgage Rate then in effect
minus basis points. The 'Uncovered Portion' of the Class A
 
                                      S-24
<PAGE>
Balance, as of any date of determination, is the portion thereof representing
the excess, if any, of (a) the Class A Balance then outstanding, over (b) the
aggregate Stated Principal Balance of the Mortgage Loans then outstanding.
 
     [Any distributions in respect of principal made to, or losses in respect of
principal allocated in reduction of the Subclass Certificate Balance of the
Class  Certificates will result in a corresponding reduction in the Class IO
Notional Amount].
 
     [Each Subclass of the Class A Certificates will bear interest at the
Pass-Through Rate described on the cover hereof].
 
     [Interest Rates will fluctuate on Class (Floater, Inverse) Certificates
pursuant to the formula set forth, immediately below:
 
          As a result of these calculations, increasing levels of (Index) will

     produce reduced pass-through rates for the Class Inverse Floater
     Certificates (subject to the applicable minimum rates, while decreasing
     levels of (Index) will produce increased pass-through rates (subject to the
     applicable maximum rates).]
 
     Calculations of Principal.  The 'Scheduled Principal Distribution Amount'
for any Distribution Date is equal to the aggregate of the principal portions of
all Monthly Payments, including Balloon Payments, due during or, if and to the
extent not previously received or advanced and distributed to Certificateholders
on a preceding Distribution Date, prior to the related Due Period, in each case
to the extent paid by the related mortgagor or advanced by the Master Servicer
and included in the Available Distribution Amount for such Distribution Date.
The principal portion of any Advances in respect of a Mortgage Loan delinquent
as to its Balloon Payment will constitute advances in respect of the principal
portion of such Balloon Payment.
 
     The Class A Scheduled Principal Distribution Percentage for any
Distribution Date represents the portion of the Scheduled Principal Distribution
Amount for such Distribution Date payable (subject to the payment priorities
described herein) on the Class A Certificates. The 'Class A Scheduled Principal
Distribution Percentage' for any Distribution Date will equal the lesser of (a)
100% and (b) a fraction, expressed as a percentage, the numerator of which is
the Class A Balance outstanding immediately prior to such Distribution Date, and
the denominator of which is the lesser of (i) the sum of the Class A Balance,
the Class B Balance and the Class C Balance and (ii) the aggregate Stated
Principal Balance of the Mortgage Loans, in either case outstanding immediately
prior to such Distribution Date.
 
     The 'Unscheduled Principal Distribution Amount' for any Distribution Date
is equal to the sum of: (a) all voluntary principal prepayments received on the
Mortgage Loans during the related Due Period; and (b) the excess, if any, of (i)
all unscheduled recoveries received on the Mortgage Loans during the related Due
Period, whether in the form of liquidation proceeds, condemnation proceeds,
insurance proceeds or amounts paid in connection with the purchase of a Mortgage
Loan out of the Trust Fund, exclusive in each case of any portion thereof
payable or reimbursable to the Master Servicer in connection with the related
Mortgage Loan, over (ii) the respective portions of the net amounts described in
the immediately preceding clause (i) needed to cover interest (at the applicable
Net Mortgage Rate in effect from time to time) on the related Mortgage Loan from
the date to which interest was previously paid or advanced through the Due Date
for such Mortgage Loan in the related Due Period (exclusive of any portion of
such interest added to the principal balance of such Mortgage Loan as negative
amortization).
 
     The 'Class Negative Amortization' in respect of any class of Certificates
for any Distribution Date is equal to such class' allocable share of the
Aggregate Mortgage Loan Negative Amortization for such Distribution Date.
 
     [The Certificate Principal Distribution Amount on each Distribution Date
will be allocated among and distributed in reduction of the principal balances
of the Subclasses of Class A Certificates as follows:
 
          [first, to the Class  Certificates, up to their PAC Principal Amount
     with respect to such Distribution Date;

 
          second, to the Class  Certificates, up to their PAC Principal Amount
     with respect to such Distribution Date;
 
          third, sequentially, to the Class  and Class  Certificates, up to
     their respective TAC Principal Amounts with respect to such Distribution
     Date;
 
          fourth, to the Class  Certificates, until the Subclass Certificate
     Balance thereof has been reduced to zero;
 
          fifth, to the Class  Certificates, sequentially in that order, without
     regard to their respective TAC Principal Amounts and until the Subclass
     Balance of each such Subclass has been reduced to zero;
 
     sixth, to the Class  Certificates, without regard to their PAC Principal
Amount, until the Subclass Certificate Balance thereof has been reduced to
zero.]
 
     [As used above, the 'PAC Principal Amount' for any Distribution Date and
for any Subclass of PAC Certificates means the amount, if any, that would reduce
the Subclass Certificate Balance of such Subclass to the percentage of its
initial Subclass Certificate Balance shown in the tables set forth below with
respect to such Distribution Date. A 'PAC Certificate' is a Certificate
 
                                      S-25
<PAGE>
representing an ownership interest in Class or Subclass that is designed to
receive principal distributions using a predetermined schedule derived by
assuming two constant prepayment rates for the Mortgage Loans.]
 
     [As used above, the 'TAC Principal Amount' for any Distribution Date and
for any Subclass of TAC Certificates means the amount, if any, that would reduce
the Subclass Certificate Balance of such Subclass to the percentage of its
initial Subclass Certificate Balance shown in the tables set forth below with
respect to such Distribution Date. A 'TAC Certificate' is a Certificate
representing an ownership interest in a Class or Subclass that is designed to
receive principal distributions using a predetermined schedule derived by
assuming a single constant prepayment rate for the Mortgage Loans.]
 
                          [INSERT PAC AND TAC TABLES]
 
[Principal Payment Characteristics of the PAC Certificates and the TAC
Certificates and the Companion Certificates
 
     The percentages of the initial Subclass Certificate Balances of the PAC
Certificates and the TAC Certificates set forth in the tables above were
calculated using the assumptions described in the full paragraph on page S-
herein. Based on such assumptions, the Subclass Certificate Balance of each
Subclass of PAC Certificates would be reduced to the percentage of its initial
Subclass Certificate Balance indicated in the tables above for each Distribution
Date if prepayments on the Mortgage Loans occur at any constant rate between
approximately    % SPA (as defined herein under 'Prepayment and Yield
Considerations') and approximately    % of SPA. Based on such assumptions, the

Subclass Certificate Balance of the TAC Certificates would be reduced to the
percentage of their initial Subclass Certificate Balance indicated in the tables
above for each Distribution Date if prepayments on the Mortgage Loans occur at a
constant rate of    % SPA. However, it is highly unlikely that principal
prepayments on the Mortgage Loans will occur at any constant rate or that the
Mortgage Loans will prepay at the same rate. In addition, even if principal
prepayments were to occur at a constant rate, there may be differences between
the characteristics of the mortgage loans ultimately included in the Trust Fund
and the Mortgage Loans which are expected to be included, as described herein.
Therefore, there can be no assurance that the Subclass Certificate Balance of
any Subclass of PAC Certificates or the TAC Certificates, after the application
of the distributions to be made on any Distribution Date, will be equal to the
applicable percentage of the initial Subclass Certificate Balance for such
Distribution Date specified in the tables above.
 
     As discussed under 'Prepayment and Yield Considerations' herein, the
weighted average life of a Subclass of Class A Certificates refers to the
average amount of time that will elapse from the date of issuance of such
Subclass until each dollar in reduction of the principal balance of such
Subclass is distributed to investors. The aggregate amount distributed in
reduction of the principal balance, and accordingly, the weighted average life
of each Subclass of Class A Certificates will be affected, to varying degrees,
by the rate of principal payments (including prepayments) of the Mortgage Loans,
the timing of changes in such rate of payment and the priority sequence of
distributions in reduction of principal of the Class A Certificates. The
interaction of these factors may have different effects on the Subclasses of
Class A Certificates, including the PAC Certificates, the TAC Certificates and
the Class A- Certificates, and the effects on any Subclass may vary at different
times during the life of such Subclass. Further, to the extent that the purchase
prices paid by investors for the Class A Certificates, including the PAC
Certificates, the TAC Certificates and the Class A- Certificates, represent
discounts or premiums to their respective initial principal balances,
variability in the weighted average lives of such Certificates could result in
variability in the related yields to maturity. See 'Prepayment and Yield
Considerations' herein.
 
     The weighted average lives of the Subclasses of PAC Certificates and the
Class A- Certificates will vary under different prepayment scenarios. To the
extent that principal prepayments are made at a constant rate that is slower
than approximately    % SPA, the Class A Principal Distribution Amount on each
Distribution Date may be insufficient to make distributions in reduction of the
principal balances of some or all of the PAC Certificates in amounts that would
reduce their principal balances to their respective planned principal balances
for such Distribution Date. The weighted average lives of the Subclasses of the
PAC Certificates may therefore be extended, as illustrated by the tables
beginning on page S-  . To the extent that such principal prepayments are made
at a constant rate that is higher than    % SPA, the weighted average lives of
the Subclasses of PAC Certificates may be reduced, as illustrated by the tables
beginning on page S-  .
 
     The extent to which the planned principal balances will be achieved and the
sensitivity of the PAC Certificates to principal prepayments on the Mortgage
Loans will depend, in part, upon the period of time during which the TAC
Certificates and the Class A- Certificates remain outstanding. On each

Distribution Date, the excess of the Class A Principal Distribution Amount
 
                                      S-26
<PAGE>
over the PAC Principal Amounts ('Excess Principal Payments') for such
Distribution Date will be distributed first to the TAC Certificates and the
Class A- Certificates before being distributed to the PAC Certificates in
accordance with the priorities set forth above under '--Distributions'. This is
intended to decrease the likelihood that the PAC Certificates will be reduced
below their planned principal balances on a given Distribution Date. As such,
and in accordance with the priorities described above, the TAC Certificates and
the Class A- Certificates support the PAC Certificates. However, under certain
relatively fast prepayment scenarios, one or more Subclasses of PAC Certificates
may continue to be outstanding when the Class A- Certificates and the TAC
Certificates are no longer outstanding. Under such circumstances, the entire
Class A Principal Distribution Amount will be applied to the remaining PAC
Certificates in accordance with the priorities described herein. Thus, when the
principal balances of the TAC Certificates and the Class A- Certificates have
been reduced to zero, any Subclasses of PAC Certificates then outstanding will,
in accordance with the priorities set forth above, become more sensitive to the
rate of prepayment on the Mortgage Loans as such Subclasses will receive all
Excess Principal Payments until the principal balances of the PAC Certificates
have been reduced to zero. Conversely, under certain relatively slow prepayment
scenarios, the Class A Principal Distribution Amount may not be sufficient to
pay the PAC Principal Amounts for all Subclasses of PAC Certificates on a given
Distribution Date. In such cases, the Class A Principal Distribution Amount for
each subsequent Distribution Date will be applied in accordance with the
priorities described herein such that the TAC Certificates and the Class A-
Certificates will not receive any distributions in reduction of their principal
balances until the outstanding principal balance of each such Subclass of PAC
Certificates has reached its planned principal balance for such Distribution
Date. As a result, the weighted average life of any Subclass of PAC Certificates
(or of the Class A- Certificates) that did not receive its PAC Principal Amount
on a Distribution Date may be extended.
 
     The weighted average life of the TAC Certificates will also vary under
different prepayment scenarios. To the extent that principal prepayments are
made at a constant rate that is slower than approximately    % SPA, the Class A
Principal Distribution Amount on each Distribution Date may be insufficient to
make distributions in reduction of the principal balance of the TAC Certificates
in amounts that would reduce their principal balance to their targeted principal
balance for such Distribution Date. The weighted average life of the TAC
Certificates may therefore be extended, as illustrated by the table on page
S-  . To the extent that such principal prepayments are made at a constant rate
that is higher than    % SPA, the weighted average life of the TAC Certificates
may be reduced as illustrated by the table on page S-  .
 
     The extent to which the targeted principal balance will be achieved and the
sensitivity of the TAC Certificates to principal prepayments on the Mortgage
Loans will depend, in part, upon the period of time during which the Class A
Certificates remain outstanding. On each Distribution Date, the excess of the
Class A Principal Distribution Amount over the PAC Principal Amounts and the TAC
Principal Amounts for such Distribution Date will be distributed first to the
Class A Certificates before being distributed to the TAC Certificates in

accordance with the priorities set forth above under '--Distributions.' As such,
and in accordance with such priorities described above, the Class A Certificates
support the TAC Certificates. This is intended to decrease the likelihood that
the principal balance of the TAC Certificates will be reduced below their
targeted principal balance on a given Distribution Date. However, under certain
relatively fast prepayment scenarios, the TAC Certificates may continue to be
outstanding when the Class A- Certificates are no longer outstanding. Under such
circumstances, all Excess Principal Payments will be applied first to the TAC
Certificates and the Class A-7 TAC Component. Thus, when the principal balances
of the Class A- Certificates have been reduced to zero, the TAC Certificates and
the Class A-7 TAC Component, if outstanding, will become more sensitive to the
rate of prepayment on the Mortgage Loans as the TAC Certificates and the Class
A-7 TAC Component will receive all Excess Principal Payments until the principal
balances of such TAC Certificates have been reduced to zero. Conversely, under
certain relatively slow prepayment scenarios, the Excess Principal Payments, if
any, may not be sufficient to pay the TAC Principal Amounts of the TAC
Certificates on a given Distribution Date. In such cases, the Excess Principal
Payments for each subsequent Distribution Date will be applied in accordance
with the priorities described herein such that the Class A Certificates will not
receive any distributions in reduction of their principal balances until the
outstanding principal balances of the TAC Certificates have reached their
targeted principal balance for such Distribution Date. As a result, the weighted
average lives of the TAC Certificates and the Class A- Certificates may be
extended.
 
     Because any Excess Principal Payments for any Distribution Date will be
distributed to Certificateholders on such Distribution Date, the ability to
distribute the PAC Principal Amounts and the TAC Principal Amounts on any
Distribution Date will not be enhanced by the averaging of high and low
principal prepayment rates on the Mortgage Loans over several Distribution
Dates, as might be the case if any such Excess Principal Payments were held for
future applications and not distributed monthly. There is no assurance that (i)
distributions in reduction of the Subclass Certificate Balance of any Subclass
of PAC Certificates will not commence significantly earlier than the first
Distribution Date shown in the above tables relating to such Subclass, (ii) the
Subclass Certificate Balance of any Subclass of PAC Certificates or the TAC
Certificates will not commence significantly later than the first
 
                                      S-27
<PAGE>
Distribution Date shown in the above tables relating to such Subclass or (iii)
the Subclass Certificate Balance of any Subclass of PAC Certificates or the TAC
Certificates will not be reduced to zero significantly earlier or significantly
later than the last Distribution Date shown in the above tables.]
 
SUBORDINATION
 
     In order to maximize the likelihood of distribution in full of the Class A
Interest Distribution Amount and the Class A Scheduled Principal Distribution
Amount, on each Distribution Date, holders of the Class A Certificates have a
right to distributions of the Available Distribution Amount that is prior to the
rights of the holders of the Subordinate Certificates, to the extent necessary
to satisfy the Class Interest Distribution Amount and the Class A Scheduled
Principal Distribution Amount.

 
     The entitlement to the Class A Certificates of the entire Unscheduled
Principal Distribution Amount will accelerate the amortization of the Class A
Certificates relative to the actual amortization of the Mortgage Loans.
 
     To the extent that the Class A Certificates are amortized faster than the
Mortgage Loans, without taking into account losses on the Mortgage Loans, the
percentage interest evidenced by the Class A Certificates in the Trust Fund will
be decreased (with a corresponding increase in the interest in the Trust Fund
evidenced by the Subordinate Certificates), thereby increasing, relative to
their respective Certificate Balances, the subordination afforded the Class A
Certificates by the Subordinate Certificates.
 
ADVANCES
 
     On the business day immediately preceding each Distribution Date, the
Master Servicer will be obligated to make advances (each, an 'Advance') out of
its own funds, or funds held in the Certificate Account that are not required to
be part of the Available Distribution Amount for such Distribution Date, in an
amount equal to the aggregate of (i) all Monthly Payments (net of the Servicing
Fee), other than Balloon Payments, which were due on the Mortgage Loans during
the related Due Period and delinquent as of the related Determination Date and
(ii) in the case of each Mortgage Loan delinquent in respect of its Balloon
Payment as of the related Determination Date, an amount sufficient to amortize
fully the principal portion of such Balloon Payment over the remaining
amortization term of such Mortgage Loan and to pay interest at the Net Mortgage
Rate in effect for such Mortgage Loan for the one month period preceding its Due
Date in the related Due Period (but only to the extent that the related
mortgagor has not made a payment sufficient to cover such amount under any
forbearance arrangement that has been included in the Available Distribution
Amount for such Distribution Date). The Master Servicer's obligations to make
Advances in respect of any Mortgage Loan will continue through liquidation of
such Mortgage Loan and out of its own funds from any amounts collected in
respect of the Mortgage Loan as to which such Advance was made, whether in the
form of late payments, insurance proceeds, liquidation proceeds, condemnation
proceeds or amounts paid in connection with the purchase of such Mortgage Loan.
Notwithstanding the foregoing, the Master Servicer will be obligated to make any
Advance only to the extent that it determines in its reasonable good faith
judgment that, if made, would be recoverable out of general funds on deposit in
the Certificate Account. Any failure by the Master Servicer to make an Advance
as required under the Pooling and Servicing Agreement will constitute an event
of default thereunder, in which case the trustee will be obligated to make any
such Advance, in accordance with the terms of the Pooling and Servicing
Agreement.
 
[REGISTRATION AT THE DEPOSITORY TRUST COMPANY
 
     The Class A Book-Entry Certificates will be issued in minimum denominations
of $       and integral multiples thereof. The Class A Book-Entry Certificates
(other than the Class IO Certificates) (the 'Book-Entry Certificates') will be
issued in book-entry form and represented by certificates registered in the name
of Cede & Co. ('Cede'), as nominee of DTC. Accordingly, Cede is expected to be
the holder of record of the Class A Book-Entry Certificates. A Class A
Book-Entry Certificateholder will not be entitled to receive a Certificate

representing such Certificateowner's interest therein except in the event that
Definitive Class A Certificates are issued for all Certificates under the
limited circumstances described herein. See 'Definitive Class A Certificates'
below.
 
     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, 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 ('DTC Participants') and facilitate the
clearance and settlement of securities transactions through electronic
book-entry changes in accounts of DTC Participants, thereby eliminating the need
for physical movement of certificates. DTC Participants include securities
brokers and dealers (including the Underwriter), banks, trust companies and
clearing corporations and may include certain other organizations. Indirect
access to the DTC system also is
 
                                      S-28
<PAGE>
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a DTC Participant,
either directly or indirectly ('Indirect DTC Participants').
 
     Certificateowners that are not DTC Participants or Indirect DTC
Participants but desire to purchase, sell or otherwise transfer ownership of, or
other interests in, Book-Entry Certificates may do so only through DTC
Participants and Indirect DTC Participants. In addition, Certificateowners will
receive all distributions of principal of and interest on such Certificates from
the Trustee through DTC and DTC Participants. Under a book-entry format,
Certificateowners may experience some delay in their receipt of distributions
since such distributions will be forwarded by the Trustee to DTC, DTC will
forward such distributions to DTC Participants, and each DTC Participant will be
responsible for disbursing such distributions to Indirect DTC Participants or to
Certificateowners.
 
     Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among DTC
Participants on whose behalf it acts with respect to the Book-Entry Certificates
and is required to receive and transmit distributions of principal of an
interest on such Certificates. DTC Participants and Indirect DTC Participants
with which Certificateowners have accounts with respect to such Certificates
similarly are required to make book-entry transfers and receive and transmit
such distributions on behalf of their respective Certificateowners. Accordingly,
although Certificateowners will not possess certificates, the Rules provide a
mechanism by which Certificateowners will receive distributions and will be able
to transfer their interests.
 
     Because DTC can only act on behalf of DTC Participants, Indirect DTC
Participants and certain banks, the ability of a Book-Entry Certificateowner to
pledge Book-Entry 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 certificate for such Certificates.
 

     DTC has advised the Depositor that it will take any action permitted to be
taken by a Book-Entry Certificateholder under the Agreement only at the
direction of one or more DTC Participants to whose account with DTC the
Book-Entry Certificates are credited. Additionally, DTC has advised the
Depositor that it will take such actions with respect to a principal amount of
Book-Entry Certificates only at the direction of and on behalf of DTC
Participants whose holdings include that principal amount of Book-Entry
Certificates. DTC may take conflicting actions with respect to other principal
amounts of Book-Entry Certificates to the extent that such actions are taken on
behalf of DTC Participants whose holdings include those principal amounts of
such Certificates.
 
     The information herein concerning the Depository and its book-entry system
has been obtained from sources believed to be reliable, but the Seller takes no
responsibility for the accuracy or completeness thereof.
 
DEFINITIVE CERTIFICATES
 
     Book-Entry Certificates issued in fully registered, certificated form
('Definitive Class A Certificates') will be delivered to Certificateowners (or
their nominees) only if (i) the Master Servicer advises the Trustee in writing
that DTC is no longer willing or able to properly discharge its responsibilities
as depositary with respect to the Book-Entry Certificates, and the Trustee or
the Master Servicer is unable to locate a qualified successor, (ii) the Master
Servicer, at its sole option, elects to terminate the book-entry system through
DTC, or (iii) after the occurrence of an Event of Default under the Pooling and
Servicing Agreement, Certificateowners representing a majority in principal
amount of the Book-Entry Certificates then outstanding advise DTC through DTC
Participants in writing that the continuation of a book-entry system through DTC
(or a successor thereto) is no longer in the best interest of Certificateowners.
 
     Upon the occurrence of any of the events described in clauses (i) through
(iii) in the immediately preceding paragraph, DTC is required to notify all DTC
Participants of the availability through DTC of Definitive Certificates. Upon
delivery of Definitive Certificates, the Trustee will recognize the holders of
such Definitive Certificates as holders under the Pooling and Servicing
Agreement ('Holders'). Distributions of principal of and interest on the
Definitive Certificates will be made by the Trustee directly to Holders of
Definitive Certificates in accordance with the procedures set forth in the
Prospectus and the Pooling and Servicing Agreement.
 
     Requests for transfer of Definitive Certificates will be required to be
submitted directly to the Trustee in a form acceptable to the Trustee (such as
the forms which will appear on the back of the certificate representing a
Definitive Certificate), signed by the Holder or such Holder's legal
representative and accompanied by the Definitive Certificate or Certificates for
which transfer is being requested.]
 
                                      S-29
<PAGE>
                     [PREPAYMENT AND YIELD CONSIDERATIONS]
 
     The rate of distributions in reduction of the principal balance of [any
Subclass of] the Class A Certificates, the aggregate amount of distributions [on

any Subclass of] the Class A Certificates and the yield to maturity of [any
Subclass of] the Class A Certificates purchased at a discount or premium will be
directly related to the rate of payments of principal (both scheduled and
unscheduled payments thereof) on the Mortgage Loans in the Trust Fund and the
amount and timing of borrower defaults.
 
     The rate of payments (including prepayments) on pools of Mortgage Loans is
influenced by a variety of economic, geographic, social and other factors beyond
the Depositor's control. If prevailing rates for similar mortgage loans fall
significantly below the market rates on the Mortgage Loans, the rate of
prepayment would generally be expected to increase. Conversely, if interest
rates on similar mortgage loans rise significantly above the Mortgage Rates on
the Mortgage Loans, the rate of prepayment would generally be expected to
decrease.
 
     The timing of changes in the rate of prepayment on the Mortgage Loans may
significantly affect the actual yield to maturity experienced by an investor who
purchases a Class A Certificate at a price other than par, even if the average
rate of principal payments experienced over time is consistent with such
investor's expectation. In general, the earlier a prepayment of principal on the
Mortgage Loans, the greater the effect on such investor's yield to maturity. As
a result, the effect on such investor's yield of principal payments occurring at
a rate higher (or lower) than the rate anticipated by the investor during the
period immediately following the issuance of the Class A Certificates would not
be fully offset by a subsequent like reduction (or increase) in the rate of
principal payments. Furthermore, the effective yield to holders of Class A
Certificates will be lower than the yield otherwise produced by the applicable
Pass-Through Rates and purchase prices because while interest will accrue from
the first day of each month, the distribution of such interest will not be made
until the    th day (or if such day is not a business day, the immediately
following business day) of the month following the month of accrual. In
addition, the effective yield on the Class A Certificates will be affected by
any Prepayment Interest Shortfalls.
 
     No representation is made as to the rate of principal payments on the
Mortgage Loan or as to the yield to maturity of any Subclass of Class A
Certificates. An investor is urged to make an investment decision with respect
to any Subclass of Class A Certificates based on the anticipated yield to
maturity of such Subclass of Class A Certificates resulting from its purchase
price and such investor's own determination as to anticipated Mortgage Loan
prepayment rates under a variety of scenarios. The extent to which [any Subclass
of] Class A Certificates are purchased at a discount or a premium, the degree to
which the timing of payments [on such Subclass of] Certificates is sensitive to
prepayments will determine the extent to which the yield to maturity of such
[Subclass of] Certificates may vary from the anticipated yield. An investor
should carefully consider the associated risks, including, in the case of any
Class A Certificates purchased at a discount [(particularly the Class PO
Certificates)] the risk that a slower than anticipated rate of principal
payments on the Mortgage Loans could result in an actual yield to such investor
that is lower than the anticipated yield and, in the case of any Class A
Certificates purchased at a premium [(particularly the Class IO Certificates)]
the risk that a faster than anticipated rate of principal payments could result
in an actual yield to such investor that is lower than the anticipated yield.
 

     An investor should consider the risk that rapid rates of prepayments on the
Mortgage Loans, and therefore of amounts distributable in reduction of principal
balance of the Class A Certificates, may coincide with periods of low prevailing
interest rates. During such periods, the effective interest rates on securities
in which an investor may choose to reinvest amounts distributed in reduction of
the principal balance of such investor's Class A Certificate may be lower than
the applicable Pass-Through Rate. Conversely, slower rates of prepayments on the
Mortgage Loans, and therefore of amounts distributable in reduction of principal
balance of the Class A Certificates, may coincide with periods of high
prevailing interest rates. During such periods, the amount of principal
distributions available to an investor for reinvestment at such high prevailing
interest rates may be relatively small.
 
     As referred to herein, the weighted average life of [a Subclass of] Class A
Certificates [(other than the Class IO Certificates)] refers to the average
amount of time that will elapse from the date of issuance of [such Subclass or]
Class until each dollar in reduction of the principal balance of such [Subclass
or] Class is distributed to the investor. [The weighted average life of the
Class IO Certificates is the average amount of time that will elapse between the
date of issuance of the Class IO Certificates and the date on which each dollar
in reduction of the principal balances of the Class-        Certificates
(indicated percentages of which balances comprise the Class IO Notional Amount)
is distributed to the investors in the Class-        Certificates]. The weighted
average life of [each Subclass of] the Class A Certificates will be influenced
by, among other things, the rate and timing of principal payments on the
Mortgage Loans, which may be in the form of scheduled amortization or
prepayments.
 
     [Investors in the Class Floater Certificates should understand that at
levels of (Floating Index) greater than approximately      %, the Pass-Through
Rate of such Subclass will remain at its maximum rate of approximately      %
per annum. Investors in
 
                                      S-30
<PAGE>
the Class Floater Certificates should also consider the risk that lower than
anticipated levels of (Floating Index) could result in actual yields to such
investors that are lower than the anticipated yields. Conversely, investors in
the Class Inverse Floater Certificates should consider the risk that higher than
anticipated levels of (Floating Index) could result in actual yields to such
investors that are significantly lower than anticipated yields. Investors in the
Class Inverse Floater Certificates should also understand that at levels of
(Floating Index) in excess of approximately      %, the Pass-Through Rate of the
Class Inverse Floater Certificates will be 0% per annum.]
 
     [Investors in the Class Floater and/or Inverse Floater Certificates should
understand that the timing of changes in the level of (Floating Index) may
affect the actual yields to such investors even if the average level is
consistent with such investor's expectations. Each investor must make an
independent decision as to the appropriate (Floating Index) assumptions to be
used in deciding whether to purchase a Class Floater and/or Inverse Floater
Certificate.]
 
     [Additionally, levels of (Floating Index) may have little or no correlation

to levels of prevailing (mortgage) loan interest rates. It is possible that
lower prevailing (mortgage) loan interest rates (which might be expected to
result in faster prepayments) could occur concurrently with an increased level
of (Floating Index). Conversely, it is possible that higher prevailing
(mortgage) loan interest rates (which might be expected to result in slower
prepayments) could occur concurrently with a decreased level of index.]
 
[SENSITIVITY OF THE CLASS IO/PO CERTIFICATES
 
     THE YIELD TO AN INVESTOR ON THE CLASS IO/PO CERTIFICATES WILL BE HIGHLY
SENSITIVE TO BOTH THE TIMING OF RECEIPT OF PREPAYMENTS AND THE OVERALL RATE OF
PRINCIPAL PREPAYMENT ON THE MORTGAGE LOANS, WHICH RATE MAY FLUCTUATE
SIGNIFICANTLY FROM TIME TO TIME. AN INVESTOR SHOULD FULLY CONSIDER THE
ASSOCIATED RISKS, INCLUDING THE RISK THAT A [RAPID][RELATIVELY LOW] RATE OF
PRINCIPAL PAYMENTS (INCLUDING PREPAYMENTS [COULD RESULT IN THE FAILURE OF AN
INVESTOR IN THE CLASS IO/PO CERTIFICATES TO FULLY RECOVER ITS INITIAL
INVESTMENT] [WILL HAVE A NEGATIVE EFFECT ON THE YIELD TO INVESTORS OF THE CLASS
PO CERTIFICATES].
 
     The following table indicates the sensitivity to various rates of
prepayment on the Mortgage Loans of the pre-tax yields to maturity on a
corporate bond equivalent ('CBE') basis of the Class IO/PO Certificates.
 
           SENSITIVITY OF THE CLASS IO/PO CERTIFICATES TO PREPAYMENTS
 
<TABLE>
<CAPTION>
                                              PERCENTAGES OF SPA
                          -----------------------------------------------------------
                           50%      75%     100%     275%     350%     430%     491%
                          -----    -----    -----    -----    -----    -----    -----
<S>                       <C>      <C>      <C>      <C>      <C>      <C>      <C>
Pre-Tax Yields (CBE)...
</TABLE>
 
     The pre-tax yields set forth in the preceding table were calculated by (i)
determining the monthly discount rates which, when applied to the assumed stream
of cash flows to be paid on the Class IO/PO Certificates, would cause the
discounted present value of such assumed stream of cash flows to equal an
assumed aggregate purchase price of such Class IO/PO Certificates of
approximately      % of the aggregate initial principal balance thereof plus
accrued interest and (ii) converting such monthly rates to corporate bond
equivalent rates. Such calculation does not take into account the interest rates
at which investors may be able to reinvest funds received by them as
distributions on the Class IO/PO Certificates and consequently does not purport
to reflect the return on any investment in Class IO/PO Certificates when such
reinvestment rates are considered.
 
     Notwithstanding the assumed prepayment rates reflected in the preceding
table, it is highly unlikely that the Mortgage Loans will prepay at a constant
rate until maturity or that all of the Mortgage Loans will prepay at the same
time. The Mortgage Loans initially included in the Trust Fund may differ from
those currently expected to be included in the Trust Fund, and thereafter may be
changed as a result of permitted substitutions. As a result of these factors,

the pre-tax yields on the Class IO/PO Certificates are likely to differ from
those shown in such table, even if all of the Mortgage Loans prepay at the
indicated percentages of SPA.
 
WEIGHTED AVERAGE LIFE OF THE CERTIFICATES
 
     Weighted average life refers to the average amount of time from the date of
issuance of a security until each dollar of principal of such security will be
repaid to the investor. The weighted average lives of the Certificates will be
influenced by the rate at which principal payments (including scheduled
payments, principal prepayments and payments made pursuant to any applicable
policies of insurance) on the Mortgages are made. The tables of Percentages of
Initial Certificate Balance Outstanding for the Certificates at the respective
percentage of CPR set forth on pages [  ] through [  ] indicate the weighted
average life of each Class of Certificates and set forth the percentage of the
initial principal amount of such Certificates that would be outstanding after
each of the dates shown at the indicated percentages of CPR. The tables have
been prepared on the basis of certain Mortgage Loan
 
                                      S-31
<PAGE>
assumptions. The simplifying assumptions made in prepaying the following tables
are expected to vary from the actual performance of the Mortgage Loans.
 
     Based on the foregoing assumptions, the tables indicate the weighted
average life of the Certificates and set forth the percentages of the initial
Certificate Balance of the Certificates that would be outstanding after the
Distribution Date in [            ] of each of the years indicated, at various
percentages of the CPR. None of the indicated percentages of CPR purports to be
an historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of the Mortgage Loans included in the Trust Fund.
Variations in the actual prepayment experience and extension experience and the
balance of the Mortgage Loans that prepay or are extended may increase or
decrease the percentage of initial Certificate Balance (and weighted average
life) shown in the following tables. Such variations may occur even if the
average prepayment experience of all such Mortgage Loans equals any of the
specified percentages of the CPR. In addition, as described above under
'Description of the Mortgage Loans,' the Mortgage Loans may be subject to
periods of slower amortization or to negative amortization, in which case the
weighted average lives of the Certificates will be increased, and to periods of
accelerated amortization, in which case the weighted average lives of the
Certificates will be decreased.
 
    PERCENTAGE OF INITIAL CERTIFICATE BALANCE OUTSTANDING AT THE RESPECTIVE
                               PERCENTAGES OF CPR
 
<TABLE>
<CAPTION>
                                                        CLASS
 DATE                                  1%       3%       4%       5%       7%
- -----------------------------------   -----    -----    -----    -----    -----
<S>                                   <C>      <C>      <C>      <C>      <C>
1995...............................
1996...............................

1997...............................
1998...............................
1999...............................
2000...............................
2001...............................
2002...............................
2003...............................
2004...............................
2005...............................
2006...............................
2007...............................
2008...............................
2009...............................
2010...............................
Weighted average life (years)(1)...
</TABLE>
 
                                      S-32
<PAGE>
                        POOLING AND SERVICING AGREEMENT
 
GENERAL
 
     The Certificates will be issued pursuant to a Pooling and Servicing
Agreement to be dated as of       1, 199 (the 'Pooling and Servicing
Agreement'), by and among the Depositor, the Master Servicer and the Trustee.
 
     Reference is made to the Prospectus for important information in addition
to that set forth herein regarding the terms and conditions of the Pooling and
Servicing Agreement and the Class A Certificates. The Depositor will provide to
a prospective or actual Class A Certificateholder without charge, upon written
request, a copy (without exhibits) of the Pooling and Servicing Agreement.
Requests should be addressed to Nomura Asset Securities Corporation, 2 World
Financial Center--Building B, New York, New York 10281-1198.
 
ASSIGNMENT OF THE MORTGAGE LOANS
 
     On or prior to the Delivery Date, the Depositor will assign or cause to be
assigned the Mortgage Loans, without recourse, to the Trustee for the benefit of
the Certificateholders. Prior to the Delivery Date, the Depositor will, as to
each Mortgage Loan, deliver to the Trustee (or the custodian hereinafter
referred to), among other things, the following documents (collectively, as to
such Mortgage Loan, the 'Mortgage File'): (i) the original or, if accompanied by
a 'lost note' affidavit, a copy of the Mortgage Note, endorsed by
                 which transferred such Mortgage Loan, without recourse, in
blank or to the order of Trustee; (ii) the original Mortgage or a certified copy
thereof, and any intervening assignments thereof, or certified copies of such
intervening assignments, in each case with evidence of recording thereon; (iii)
originals or certified copies of any related assignment of leases, rents and
profits and any related security agreement (if, in either case, such item is a
document separate from the Mortgage) and any intervening assignments of each
such document or instrument; (iv) an assignment of the Mortgage, executed by the
             which transferred such Mortgage Loan, in blank or to the order of
the Trustee, in recordable form; (v) assignments of any related assignment of

leases, rents and profits and any related security agreement (if, in either
case, such item is a document separate from the Mortgage), executed by
                   which transferred such Mortgage Loan, in blank or to the
order of the Trustee; (vi) originals or certified copies of all assumption,
modification and substitution agreements in those instances where the terms or
provisions of the Mortgage or Mortgage Note have been modified or the Mortgage
or Mortgage Note has been assumed; and (vii) the originals or certificates of a
lender's title insurance policy issued on the date of the origination of such
Mortgage Loan or, with respect to each Mortgage Loan not covered by a lender's
title insurance policy, an attorney's opinion of title given by an attorney
licensed to practice law in the jurisdiction where the Mortgaged Property is
located. The Pooling and Servicing Agreement will require the Depositor promptly
(and in any event within    days of the Delivery Date) to cause each assignment
of the Mortgage described in clause (iv) above to be submitted for recording in
the real property records of the jurisdiction in which the related Mortgaged
Property is located. Any such assignment delivered in blank will be completed to
the order of the Trustee prior to recording. The Pooling and Servicing Agreement
will also require the Depositor to cause the endorsements on the Mortgage Notes
delivered in blank to be completed to the order of the Trustee.
 
THE MASTER SERVICER
 
     General.                       , a                      corporation, will
act as Master Servicer (in such capacity, the 'Master Servicer') for the
Certificates pursuant to the Pooling and Servicing Agreement. The Master
Servicer[, a wholly-owned subsidiary of                      ,] [is engaged in
the mortgage banking business and, as such, originates, purchases, sells and
services mortgage loans.                        primarily originates mortgage
loans through a branch system consisting of   officer in   states, and through
mortgage loan brokers.]
 
     The executive offices of the Master Servicer are located at
                                    , telephone number (   )             .
 
     Delinquency and Foreclosure Experience.  The following tables set forth
certain information concerning the delinquency experience (including pending
foreclosures) on [multifamily] [commercial] mortgage loans included in the
Master Servicer's servicing portfolio (which includes mortgage loans that are
sub-serviced by others). The indicated periods of delinquency are based
 
                                      S-33
<PAGE>
on the number of days past due on a contractual basis. No mortgage loan is
considered delinquent for these purposes until 31 days past due on a contractual
basis.
 
<TABLE>
<CAPTION>
                            AS OF DECEMBER 31,   AS OF DECEMBER 31,   AS OF            ,
                                    19                   19                   19
                            -------------------  -------------------  -------------------
                                      BY DOLLAR            BY DOLLAR            BY DOLLAR
                             BY NO.    AMOUNT     BY NO.    AMOUNT     BY NO.    AMOUNT
                            OF LOANS  OF LOANS   OF LOANS  OF LOANS   OF LOANS  OF LOANS

                            --------  ---------  --------  ---------  --------  ---------
                                            (DOLLAR AMOUNT IN THOUSANDS)
 
<S>                         <C>       <C>        <C>       <C>        <C>       <C>
Total Portfolio...........  $                    $                    $
                            --------  ---------  --------  ---------  --------  ---------
Period of Delinquency
  31 to 59 days...........
  60 to 89 days...........
  90 days or more.........
                            --------  ---------  --------  ---------  --------  ---------
Total Delinquent
  Loans...................  $                    $                    $
                            --------  ---------  --------  ---------  --------  ---------
                            --------  ---------  --------  ---------  --------  ---------
Percent of Portfolio......          %          %         %          %         %          %
Foreclosures pending(1)...          %          %         %          %         %          %
Percent of Portfolio......          %          %         %          %         %          %
Foreclosures..............          %          %         %          %         %          %
Percent of Portfolio......          %          %         %          %         %          %
</TABLE>
 
- ------------------
(1) Includes bankruptcies which preclude foreclosure.
 
     There can be no assurance that the delinquency and foreclosure experience
of the Mortgage Loans comprising the Mortgage Pool will correspond to the
delinquency and foreclosure experience of the Master Servicer's mortgage
portfolio set forth in the foregoing tables. The aggregate delinquency and
foreclosure experience on the Mortgage Loans comprising the Mortgage Pool will
depend on the results obtained over the life of the Mortgage Pool.
 
SPECIAL SERVICERS
 
     The Master Servicer is permitted, at its own expense, to utilize agents or
attorneys in performing any of its obligations under the Pooling and Servicing
Agreement, but will not thereby be relieved of any such obligation, and will be
responsible for the acts and omissions of any such agents or attorneys.
 
     The Master Servicer currently intends to engage [     ]('       '), a
             corporation, as its agent to perform certain servicing functions
primarily related to property inspections, foreclosure and the operation and
sale of REO Property. See 'Description of the Agreements--Realization Upon
Defaulted Whole Loans' in the Prospectus.                        is [describe
organization] of [multifamily] [commercial] properties and has extensive
experience in the [describe relevant experience] of [multifamily][commercial]
properties.
 
CERTIFICATE ACCOUNT
 
     The Master Servicer is required to deposit on a daily basis all amounts
received with respect to the Mortgage Loans of the Mortgage Pool, net of its
servicing compensation, into a separate Certificate Account maintained with
               . Interest or other income earned on funds in the Certificate

Account will be paid to the Master Servicer as additional servicing
compensation. See 'Description of the Trust Funds--Mortgage Assets' and
'--Certificate Accounts' in the Prospectus.
 
                                      S-34
<PAGE>
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
 
     The principal compensation to be paid to the Master Servicer in respect of
its master servicing activities will be the Servicing Fee. The Servicing Fee
will be payable monthly only from amounts received in respect of interest on
each Mortgage Loan, will accrue at the Servicing Fee Rate and will be computed
on the basis of the same principal amount and for the same period respecting
which any related interest payment on such Mortgage Loan is computed. The
Servicing Fee Rate with respect to each Mortgage Loan equals   % per annum. [The
principal compensation to be paid to the Special Servicer in respect of its
special servicing activities will be the Special Servicing Fee. The Special
Servicing Fee will be payable monthly only from amounts received in respect of
interest on each Specially Serviced Mortgage Loan, will accrue at the Special
Servicing Fee Rate and will be computed on the basis of the same principal
amount for the same period respecting which any related interest payment on such
Mortgage Loan is computed. The Special Servicing Fee Rate with respect to each
Specially Serviced Mortgage Loan equals   % per annum.] [As further compensation
for its servicing activities, the Special Servicer shall also be entitled to
receive (i) the Liquidation Fee for the procurement (directly or through an
agent thereof) of a purchaser in connection with the liquidation of a Mortgaged
Property securing any defaulted Mortgage Loan, out of related liquidation
proceeds, provided that the payment of such Liquidation Fee would not be a
violation of, and would not subject the Trustee or the Trust Fund to liability
under, any state or local statute, regulation or other requirement (including
without limitation, those governing the licensing of real estate brokers or
salesmen), and (ii) the Management Fee in connection with the operation and
management of any REO Property out of related revenues. Any 'Liquidation Fee'
payable to the Special Servicer will be equal to   % (if the relevant sale
occurs at a foreclosure sale, trustee's sale or other similar proceeding) or   %
(if the relevant sale also occurs subsequent to such Mortgaged Property's having
become an REO Property), as applicable, of the gross liquidation proceeds. The
'Management Fee' in respect of any REO Property is payable to the Special
Servicer monthly and is equal to   % of the gross revenues derived from such REO
Property.]
 
     As additional servicing compensation, the Master Servicer is entitled to
retain all assumption fees, prepayment penalties and late payment charges, to
the extent collected from mortgagors, together with any interest or other income
earned on funds held in the Certificate Account and any escrow accounts. The
Master Servicer is obligated to pay certain ongoing expenses associated with the
Mortgage Pool and incurred by the Master Servicer in connection with its
responsibilities under the Agreement. See 'Description of the
Agreements--Retained Interest; Servicing Compensation and Payment of Expenses'
in the Prospectus for information regarding other possible compensation payable
to the Master Servicer and for information regarding expenses payable by the
Master Servicer [and 'Certain Federal Income Tax Consequences' herein regarding
certain taxes payable by the Master Servicer.]
 

REPORTS TO CERTIFICATEHOLDERS
 
     On each Distribution Date the Master Servicer shall furnish to each
Certificateholder, to the Depositor, to the Trustee and to the Rating Agency a
statement setting forth certain information with respect to the Mortgage Loans
and the Certificates required pursuant to the Pooling and Servicing Agreement.
In addition, within a reasonable period of time after each calendar year, the
Master Servicer shall furnish to each person who at any time during such
calendar year was the holder of a Certificate a statement containing certain
information with respect to the Certificates required pursuant to the Pooling
and Servicing Agreement, aggregated for such calendar year or portion thereof
during which such person was a Certificateholder. See 'Description of the
Certificates--Reports to Certificateholders' in the Prospectus.
 
VOTING RIGHTS
 
     At all times during the term of this Agreement, the Voting Rights shall be
allocated among the Classes of Certificateholders in proportion to the
respective Certificate Balances of their Certificates (net, in the case of the
Class A, Class B and Class C Certificates, of any Uncovered Portion of the
related Certificate Balance). Voting Rights allocated to a class of
Certificateholders shall be allocated among such Certificateholders in
proportion to the Percentage Interests evidenced by their respective
Certificates.
 
TERMINATION
 
     The obligations created by the Pooling and Servicing Agreement will
terminate following the earliest of (i) the final payment or other liquidation
of the last Mortgage Loan or REO Property subject thereto, and (ii) the purchase
of all of the assets of the Trust Fund by the Master Servicer. Written notice of
termination of the Pooling and Servicing Agreement will be given to each
Certificateholder, and the final distribution will be made only upon surrender
and cancellation of the Certificates at the office of the Certificate Registrar
specified in such notice of termination. In no event, however, will the trust
created by the Pooling and Servicing Agreement continue beyond the expiration of
21 years from the death of the survivor of certain persons named in such Pooling
and Servicing Agreement.
 
                                      S-35
<PAGE>
     Any such purchase by the Master Servicer of all the Mortgage Loans and
other assets in the Trust Fund is required to be made at a price equal to the
greater of (1) the aggregate fair market value of all the Mortgage Loans and REO
Properties then included in the Trust Fund, as mutually determined by the Master
Servicer and the Trustee, and (2) the excess of (a) the sum of (i) the aggregate
Purchase Price of all the Mortgage Loans then included in the Trust Fund and
(ii) the fair market value of all REO Properties then included in the Trust
Fund, as determined by an appraiser mutually agreed upon by the Master Servicer
and the Trustee, over (b) the aggregate of amounts payable or reimbursable to
the Master Servicer under the Pooling and Servicing Agreement. Such purchase
will effect early retirement of the then outstanding Class A Certificates, but
the right of the Master Servicer to effect such termination is subject to the
requirement that the aggregate Stated Principal Balance of the Mortgage Loans

then in the Trust Fund is less than   % of the aggregate principal balance of
the Mortgage Loans as of the Cut-off Date.
 
                                USE OF PROCEEDS
 
     The net proceeds from the sale of Class A Certificates will be used by the
Depositor to pay the purchase price of the Mortgage Loans.
 
                    CERTAIN FEDERAL INCOME TAX CONSEQUENCES
 
     Upon the issuance of the Class A Certificates, Cadwalader, Wickersham &
Taft, counsel to the Depositor, will deliver its opinion generally to the effect
that, assuming compliance with all provisions of the Pooling and Servicing
Agreement, for federal income tax purposes, the Trust Fund will qualify as a
REMIC under the Code.
 
     For federal income tax purposes, the Class R Certificates will be the sole
class of 'residual interests' in the REMIC and the Class A, Class B and Class C
Certificates will be the 'regular interests' in the REMIC and will be treated as
debt instruments of the REMIC.
 
     See 'Certain Federal Income Tax Consequences--Federal Income Tax
Consequences for REMIC Certificates' in the Prospectus.
 
     The Class A Certificates [may] [will not] be treated as having been issued
with original issue discount for federal income tax reporting purposes. The
prepayment assumption that will be used in determining the rate of accrual of
original issue discount, market discount and premium, if any, for federal income
tax purposes will be based on the assumption that subsequent to the date of any
determination the Mortgage Loans will prepay at a rate equal to   % [CPR] [SPA].
No representation is made that the Mortgage Loans will prepay at that rate or at
any other rate. See 'Certain Federal Income Tax Consequences--Federal Income Tax
Consequences for REMIC Certificates--Taxation of Regular Certificates' and
'--Original Issue Discount' in the Prospectus.
 
     The Class A Certificates may be treated for federal income tax purposes as
having been issued at a premium. Whether any holder of such a class of
Certificates will be treated as holding a certificate with amortizable bond
premium will depend on such Certificateholder's purchase price and the
distributions remaining to be made on such Certificate at the time of its
acquisition by such Certificateholder. Holders of such class of Certificates
should consult their own tax advisors regarding the possibility of making an
election to amortize such premium. See 'Certain Federal Income Tax
Consequences--Federal Income Tax Consequences for REMIC Certificates--Taxation
of Regular Certificates' and '--Premium' in the Prospectus.
 
     [Notwithstanding the foregoing treatment of the Class A Certificates for
federal income tax reporting purposes, because the period from the issuance of
the Class A Certificates to the first Distribution Date is longer than the
period between interest payment dates, the Internal Revenue Service may assert
that the Class A Certificates should be treated as having been issued with
original issue discount. Because Class A Certificateholders are required to
account for the income from the Class A Certificates on the accrual method, it
is not anticipated that the income includable in any period in which the Class A

Certificates are treated as having been issued with original issue discount
would differ materially from that includable using the reporting method
discussed above, together with an election to amortize bond premium, if
applicable. See 'Certain Federal Income Tax Consequences--Federal Income Tax
Consequences for REMIC Certificates--Taxation of Regular Certificates',
'--Original Issue Discount' and '--Premium' in the Prospectus.]
 
     The Class A Certificates will be treated as 'qualifying real property
loans' within the meaning of Section 593(d) of the Code[, assets described in
Section 7701(a)(19)(C) of the Code]and 'real estate assets' within the meaning
of Section 856(c)(5)(A) of the Code generally in the same proportion that the
assets of the REMIC underlying such Certificates would be so treated. [In
addition, the Class A Certificates will be 'obligation(s) . . . which . . .
[are] principally secured by an interest in real property' within the meaning of
Section 860G(a)(3)(C) of the Code generally to the extent that such Class A
Certificates are treated as 'real estate assets' under Section 856(c)(5)(A) of
the Code. Moreover, the Class A Certificates will be 'obligation[s] . . . which
 . . . [are] principally secured by an interest in real property' within the
meaning of Section 860G(a)(3)(C) of the Code.] [The Class A
 
                                      S-36
<PAGE>
Certificates will not be considered to represent an interest in 'loans . . .
secured by an interest in real property' within the meaning of Section
7701(a)(19)(C)(v) of the Code.] See 'Certain Federal Income Tax
Consequences--Federal Income Tax Consequences for REMIC Certificates--Status of
REMIC Certificates' in the Prospectus.
 
     For further information regarding the federal income tax consequences of
investing in the Class A Certificates, see 'Certain Federal Income Tax
Consequences--Federal Income Tax Consequences for REMIC Certificates' in the
Prospectus.
 
                              ERISA CONSIDERATIONS
 
     [The Class    Certificates should not be purchased by or transferred to any
person which is an employee benefit plan within the meaning of Section 3(3) of
ERISA or a plan within the meaning of Code Section 4975 (collectively, a
'Plan'), or any person utilizing the assets of such a Plan. Accordingly, the
following discussion does not purport to discuss the considerations under ERISA
or Code Section 4975 with respect to the purchase, holding or disposition of the
Class   Certificates.]
 
     As described in the Prospectus under 'ERISA Considerations', ERISA and the
Code impose certain duties and restrictions on Plans and certain persons who
perform services for Plans. For example, unless exempted, investment by a Plan
in the Certificates may constitute or give rise to a prohibited transaction
under ERISA or the Code. There are certain exemptions issued by the United
States Department of Labor (the 'Department') that may be applicable to an
investment by a Plan in the Certificates, including the individual
administrative exemption described below and Prohibited Transaction Class
Exemption 83-1 ('PTE 83-1'). For a further discussion of PTE 83-1 and other
important factors to be considered by a Plan contemplating investing in the
Certificates, see 'ERISA Considerations' in the Prospectus.

 
     The Department has granted to the Underwriter an individual administrative
exemption (Prohibited Transaction Exemption 93-32, 58 Fed. Reg. 28632 (May 14,
1993)), referred to herein as the 'Exemption,' for certain mortgage-backed and
asset-backed certificates underwritten in whole or in part by the Underwriter.
The Exemption might be applicable to the initial purchase, the holding, and the
subsequent resale by a Plan of certain certificates, such as the Class A
Certificates, underwritten by the Underwriter, representing interests in
pass-through trusts that consist of certain receivables, loans and other
obligations, provided that the conditions and requirements of the Exemption are
satisfied. The loans described in the Exemption include mortgage loans such as
the Mortgage Loans.
 
     Among the conditions that must be satisfied for the Exemption to apply are
the following:
 
          (1) The acquisition of certificates by a Plan is on terms (including
     the price for the certificates) that are at least as favorable to the Plan
     as they would be in an arm's length transaction with an unrelated party;
 
          (2) The rights and interests evidenced by certificates acquired by the
     Plan are not subordinated to the rights and interests evidenced by other
     certificates of the trust fund:
 
          (3) The certificates acquired by the Plan have received a rating at
     the time of such acquisition that is one of the three highest generic
     rating categories from any of Standard & Poor's Corporation ('S&P'),
     Moody's Investors Service, Inc. ('Moody's'), Duff & Phelps Rating Co.
     ('D&P') or Fitch Investors Service, Inc. ('Fitch');
 
          (4) The trustee must not be an affiliate of any other member of the
     Restricted Group (as defined below);
 
          (5) The sum of all payments made to and retained by the Underwriter in
     connection with the distribution of certificates represents not more than
     reasonable compensation for underwriting the certificates. The sum of all
     payments made to and retained by the depositor pursuant to the assignment
     of the mortgage loans to the trust fund represents not more than the fair
     market value of such mortgage loans. The sum of all payments made to and
     retained by the master servicer and any other servicer represents not more
     than reasonable compensation for such person's services under the pooling
     and servicing agreement and reimbursement of such person's reasonable
     expenses in connection therewith; and
 
          (6) The Plan investing in the certificates is an 'accredited investor'
     as defined in Rule 501(a)(1) of Regulation D of the Securities and Exchange
     Commission under the Securities Act of 1933.
 
     The trust fund must also meet the following requirements:
 
          (i) the corpus of the trust fund must consist solely of assets of the
     type that have been included in other investment pools;
 
          (ii) certificates in such other investment pools must have been rated

     in one of the three highest rating categories of S&P, Moody's, Fitch or D&P
     for at least one year prior to the Plan's acquisition of the certificates
     pursuant to the Exemption; and
 
          (iii) certificates evidencing interests in such other investment pools
     must have been purchased by investors other than Plans for at least one
     year prior to any Plan's acquisition of the certificates pursuant to the
     Exemption.
 
                                      S-37
<PAGE>
     If the conditions of the Exemption are met, whether or not a Plan's assets
would be deemed to include an ownership interest in the Mortgage Loans in the
Mortgage Pool, the acquisition, holding and resale of the Class A Certificates
by Plans would be exempt from the prohibited transaction provisions of ERISA and
the Code.
 
     Moreover, the Exemption can provide relief from certain
self-dealing/conflict of interest prohibited transactions that may occur if a
Plan fiduciary causes a Plan to acquire certificates in a trust in which the
fiduciary (or its affiliate) is an obligor on the receivables, loans or
obligations held in the trust provided that, among other requirements, (i) in
the case of an acquisition in connection with the initial issuance of
certificates, at least fifty percent of each class of certificates in which
Plans have invested is acquired by persons independent of the Restricted Group
and at least fifty percent of the aggregate interest in the trust is acquired by
persons independent of the Restricted Group (as defined below); (ii) such
fiduciary (or its affiliate) is an obligor with respect to five percent or less
of the fair market value of the obligations contained in the trust; (iii) the
Plan's investment in certificates of any class does not exceed twenty-five
percent of all of the certificates of that class outstanding at the time of the
acquisitions and (iv) immediately after the acquisition no more than twenty-five
percent of the assets of the Plan with respect to which such person is a
fiduciary are invested in certificates representing an interest in one or more
trusts containing assets sold or served by the same entity.
 
     The Exemption does not apply to the purchasing or holding of Certificates
by Plans sponsored by the Depositor, the Underwriter, the Trustee, the Master
Servicer, any obligor with respect to Mortgage Loans included in the Trust Fund
constituting more than five percent of the aggregate unamortized principal
balance of the assets in the Trust Fund, or any affiliate of such parties (the
'Restricted Group').
 
     Before purchasing a Class A Certificate, a fiduciary of a Plan should make
its own determination as to the availability of the exemptive relief provided by
the Exemption or the availability of any other prohibited transaction exemptions
(including PTE 83-1), and whether the conditions of any such exemption will be
applicable to the Class A Certificates.
 
     Any fiduciary of a Plan considering whether to purchase a Class A
Certificate should also carefully review with its own legal advisors the
applicability of the fiduciary duty and prohibited transaction provisions of
ERISA and the Code to such investment. See 'ERISA Considerations' in the
Prospectus.

 
     A governmental plan as defined in Section 3(32) of ERISA is not subject to
ERISA, or Code Section 4975. However, such a governmental plan may be subject to
a federal, state, or local law, which is, to a material extent, similar to the
provisions of ERISA or Code Section 4975 ('Similar Law'). A fiduciary of a
governmental plan should make its own determination as to the need for an the
availability of any exemptive relief under Similar Law.
 
     [THE CHARACTERISTICS OF THE CLASS [  ] AND CLASS [  ] CERTIFICATES DO NOT
MEET THE REQUIREMENTS OF THE EXEMPTION. ACCORDINGLY, CLASS [  ] AND CLASS [ ]
CERTIFICATES SHOULD NOT BE ACQUIRED BY A PLAN.]
 
     The sale of Certificates to a Plan is in no respect a representation by the
Depositor or the Underwriter that this investment meets all relevant legal
requirements with respect to investments by Plans generally or any particular
Plan, or that this investment is appropriate for Plans generally or any
particular Plan.
 
                                LEGAL INVESTMENT
 
     The Class A Certificates will [not] constitute 'mortgage related
securities' for purposes of the Secondary Mortgage Market Enhancement Act of
1984 ('SMMEA') [so long as they are rated in at least the second highest rating
category by the Rating Agency, and, as such, are legal investments for certain
entities to the extent provided in SMMEA].
 
     The Depositor makes no representations as to the proper characterization of
the Class A Certificates for legal investment or other purposes, or as to the
ability of particular investors to purchase the Class A Certificates under
applicable legal investment restrictions. These uncertainties may adversely
affect the liquidity of the Class A Certificates. Accordingly, all institutions
whose investment activities are subject to legal investment laws and
regulations, regulatory capital requirements or review by regulatory authorities
should consult with their own legal advisors in determining whether and to what
extent the Class A Certificates constitute a legal investment under SMMEA or is
subject to investment, capital or other restrictions.
 
     See 'Legal Investment' in the Prospectus.
 
                                      S-38
<PAGE>
                             METHOD OF DISTRIBUTION
 
     Subject to the terms and conditions set forth in the Underwriting agreement
between the Depositor and the Underwriter, the Class A Certificates will be
purchased from the Depositor by the Underwriter, an affiliate of the Depositor,
upon issuance. Distribution of the Class A Certificates will be made by the
Underwriter from time to time in negotiated transactions or otherwise at varying
prices to be determined at the time of sale. Proceeds to the Depositor from the
sale of the Class A Certificates will be   % of the initial aggregate principal
balance thereof as of the Cut-off Date, plus accrued interest from the Cut-off
Date at a rate of   % per annum, before deducting expenses payable by the
Depositor. In connection with the purchase and sale of the Class A Certificates,
the Underwriter may be deemed to have received compensation from the Depositor

in the form of underwriting discounts.
 
     The Depositor also has been advised by the Underwriter that it, through one
or more of its affiliates currently expects to make a market in the Class A
Certificates offered hereby; however, it has no obligation to do so, any market
making may be discontinued at any time, and there can be no assurance that an
active public market for the Class A Certificates will develop.
 
     The Depositor has agreed to indemnify the Underwriter against, or make
contributions to the Underwriter with respect to, certain liabilities, including
liabilities under the Securities Act of 1933.
 
     [If and to the extent required by applicable law or regulation, this
Prospectus Supplement and the Prospectus will be used by the Underwriter in
connection with offers and sales related to market making transactions in the
Offered Certificates in which the Underwriter acts as principal. The Underwriter
may also act as agent in such transactions. Sales may be made at negotiated
prices determined at the time of sale.]
 
                                 LEGAL MATTERS
 
     Certain legal matters will be passed upon for the Depositor and for the
Underwriter by Cadwalader, Wickersham & Taft, New York, New York. Cadwalader,
Wickersham & Taft will act as tax counsel to the Depositor with respect to
certain tax matters.
 
                                     RATING
 
     It is a condition to issuance that the Class A Certificates be rated [not
lower than] '  ' by the Rating Agency. However, no person is obligated to
maintain the rating on the Class A Certificates, and the Rating Agency is not
obligated to monitor its rating following the Delivery Date.
 
     The Rating Agency's ratings on mortgage pass-through certificates address
the likelihood of the receipt by holders thereof of payments to which they are
entitled. The Rating Agency's ratings take into consideration the credit quality
of the mortgage pool, structural and legal aspects associated with the
certificates, and the extent to which the payment stream in the mortgage pool is
adequate to make payments required under the certificates. The Rating Agency's
rating on the Class A Certificates does not, however, constitute a statement
regarding frequency of prepayments on the Mortgage Loans. See 'Special
Considerations' herein.
 
     There can be no assurance as to whether any rating agency not requested to
rate the Class A Certificates will nonetheless issue a rating and, if so, what
such rating would be. A rating assigned to the Class A Certificates by a rating
agency that has not been requested by the Depositor to do so may be lower than
the rating assigned by the Rating Agency pursuant to the Depositor's request.
 
     The ratings of the        Certificates do not address the possibility that,
as a result of principal prepayments, Certificateholders may receive a lower
than anticipated yield [or that the holders of the Class IO Certificates may
fail to fully recover their initial investments].
 

     The rating of the Class A Certificates should be evaluated independently
from similar ratings on other 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 agency.
 
                                      S-39
<PAGE>
                         INDEX OF PRINCIPAL DEFINITIONS
 
<TABLE>
<CAPTION>
                                                                                                                           PAGE
                                                                                                                      --------------
<S>                                                                                                                   <C>
Accrued Certificate Interest.......................................................................................             S-24
Advance............................................................................................................             S-28
Advances...........................................................................................................              S-8
Aggregate Mortgage Loan Negative Amortization......................................................................             S-24
Available Distribution Amount......................................................................................             S-24
Balloon Payment....................................................................................................              S-6
Book-Entry Certificates............................................................................................             S-28
CBE................................................................................................................             S-31
Cede...............................................................................................................        S-4, S-28
Certificate Balance................................................................................................              S-2
Certificateholder..................................................................................................              S-4
Certificateowner...................................................................................................              S-4
Certificates.......................................................................................................         S-1, S-4
Class A Balance....................................................................................................        S-6, S-23
Class A Interest Allocation Percentage.............................................................................             S-24
Class A Interest Distribution Amount...............................................................................              S-7
Class A Principal Distribution Amount..............................................................................              S-8
Class A Remittance Rate............................................................................................             S-24
Class A Scheduled Principal Distribution Percentage................................................................             S-25
Class B Balance....................................................................................................        S-9, S-23
Class C Balance....................................................................................................        S-9, S-23
Class Negative Amortization........................................................................................        S-7, S-25
Class R Balance....................................................................................................        S-9, S-23
Cut-off Date.......................................................................................................              S-3
Cut-off Date LTV Ratio.............................................................................................             S-20
D&P................................................................................................................             S-37
DTC................................................................................................................              S-4
DTC Participants...................................................................................................             S-28
Debt Service Coverage Ratio........................................................................................             S-21
Definitive Class A Certificates....................................................................................             S-29
Department.........................................................................................................             S-37
Depositor..........................................................................................................              S-1
Depository.........................................................................................................              S-4
Distributable Certificate Interest.................................................................................             S-24
Distribution Date..................................................................................................   S-2, S-6, S-23
Due Date...........................................................................................................              S-5
ERISA..............................................................................................................              S-9
Excess Principal Payments..........................................................................................             S-27
Exemption..........................................................................................................             S-37
Fitch..............................................................................................................             S-37

</TABLE>
 
                                      S-40
<PAGE>
<TABLE>
<CAPTION>
                                                                                                                           PAGE
                                                                                                                      --------------
<S>                                                                                                                   <C>
Form 8-K...........................................................................................................             S-22
GLA................................................................................................................             S-20
Gross Margin.......................................................................................................              S-5
Guarantee Agreement................................................................................................             S-12
Holders............................................................................................................             S-29
Index..............................................................................................................             S-14
Indirect DTC Participants..........................................................................................             S-29
Interest Accrual Period............................................................................................             S-24
Interest Rate Adjustment Date......................................................................................              S-5
LTV................................................................................................................             S-15
Liquidation Fee....................................................................................................             S-35
Loan Sale Agreement................................................................................................             S-12
Management Fee.....................................................................................................             S-35
Master Servicer....................................................................................................        S-2, S-33
Monthly Payments...................................................................................................              S-5
Moody's............................................................................................................             S-37
Mortgage...........................................................................................................             S-13
Mortgage Asset Seller..............................................................................................        S-1, S-13
Mortgage File......................................................................................................             S-33
Mortgage Loans.....................................................................................................              S-1
Mortgage Note......................................................................................................             S-13
Mortgage Pool......................................................................................................              S-1
Mortgage Rate......................................................................................................              S-2
Mortgaged Properties...............................................................................................              S-4
Mortgaged Property.................................................................................................             S-13
Net Aggregate Prepayment Interest Shortfall........................................................................             S-24
Net Mortgage Rate..................................................................................................        S-6, S-24
Net Operating Income...............................................................................................             S-21
PAC Certificate....................................................................................................             S-25
PAC Principal Amount...............................................................................................             S-25
PTE 83-1...........................................................................................................             S-37
Pass-Through Rate..................................................................................................              S-2
Payment Adjustment Date............................................................................................              S-5
Payment Cap........................................................................................................             S-13
Plan...............................................................................................................             S-37
Pooling and Servicing Agreement....................................................................................        S-6, S-33
Prepayment Premiums................................................................................................             S-15
Prepayment and Yield Considerations................................................................................             S-26
Rating Agency......................................................................................................             S-10
Record Date........................................................................................................              S-6
regular interests..................................................................................................        S-2, S-36
REMIC..............................................................................................................              S-2
</TABLE>
 
                                      S-41

<PAGE>
<TABLE>
<CAPTION>
                                                                                                                           PAGE
                                                                                                                      --------------
<S>                                                                                                                   <C>
REO Account........................................................................................................             S-23
REO Property.......................................................................................................             S-23
residual interests.................................................................................................             S-36
Restricted Group...................................................................................................             S-38
S&P................................................................................................................             S-37
SMMEA..............................................................................................................             S-38
Scheduled Principal Distribution Amount............................................................................             S-25
Seller's Agreement.................................................................................................             S-13
Significant Property...............................................................................................             S-20
Similar Law........................................................................................................             S-38
Subclass...........................................................................................................              S-1
Subordinate Certificates...........................................................................................        S-1, S-23
TAC Certificate....................................................................................................             S-26
TAC Principal Amount...............................................................................................             S-26
Tenant.............................................................................................................             S-20
Trust Fund.........................................................................................................         S-1, S-6
Uncovered Portion..................................................................................................             S-24
Underwriter........................................................................................................         S-3, S-4
Unscheduled Principal Distribution Amount..........................................................................             S-25
Weighted Average Class A Remittance Rate...........................................................................             S-24
</TABLE>
 
                                      S-42
<PAGE>

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus supplement and the prospectus to which it relates
shall not constitute an offer to sell or the solicitation of an offer to buy nor
shall there be any sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such State.

PRELIMINARY PROSPECTUS DATED NOVEMBER 12, 1997
(SUBJECT TO COMPLETION)
 
                       MORTGAGE PASS-THROUGH CERTIFICATES
                              (ISSUABLE IN SERIES)
                      NOMURA ASSET SECURITIES CORPORATION
                                   DEPOSITOR
 
    The Certificates offered hereby and by Supplements to this Prospectus (the
'Offered Certificates') will be offered from time to time in series. Each series
of Certificates will represent in the aggregate the entire beneficial ownership
interest in a trust fund (with respect to any series, the 'Trust Fund')
consisting of a segregated pool of various types of multifamily or commercial
mortgage loans and/or installment contracts for the sale of multifamily or
commercial properties (the 'Mortgage Loans'), mortgage-backed securities
evidencing interests therein or secured thereby (the 'MBS'), or a combination of
Mortgage Loans and MBS (with respect to any series, collectively, 'Mortgage
Assets'). The Trust Fund for a series of Certificates may also include letters
of credit, insurance policies, guarantees, reserve funds or other types of
credit support, or any combination thereof (with respect to any series,
collectively, 'Credit Support'), and currency or interest rate exchange
agreements and other financial assets, or any combination thereof (with respect
to any series, collectively, 'Cash Flow Agreements'). See 'Description of the
Trust Funds', 'Description of the Certificates' and 'Description of Credit

Support'.
 
    Each series of Certificates will consist of one or more classes of
Certificates that may (i) provide for the accrual of interest thereon based on
fixed, variable or adjustable rates; (ii) be senior or subordinate to one or
more other classes of Certificates in respect of certain distributions on the
Certificates; (iii) be entitled to principal distributions, with
disproportionately low, nominal or no interest distributions; (iv) be entitled
to interest distributions, with disproportionately low, nominal or no principal
distributions; (v) provide for distributions of accrued interest thereon only
following the occurrence of certain events, such as the retirement of one or
more other classes of Certificates of such series; or (vi) provide for
distributions of principal sequentially, or based on specified payment
schedules, to the extent of available funds, in each case as described in the
related Prospectus Supplement. Any such classes may include classes of Offered
Certificates. See 'Description of the Certificates'.
 
    Principal and interest with respect to Certificates will be distributable
monthly, quarterly, semi-annually or at such other intervals and on the dates
specified in the related Prospectus Supplement. Distributions on the
Certificates of any series will be made only from the assets of the related
Trust Fund.
 
    The Certificates of each series will not represent an obligation of or
interest in the Depositor, any Master Servicer, any Special Servicer or any of
their respective affiliates, except to the limited extent described herein and
in the related Prospectus Supplement. Only those Certificates and assets in the
related Trust Fund as are disclosed in the related Prospectus Supplement will be
guaranteed or insured by any governmental agency or instrumentality or by any
other person. The assets in each Trust Fund will be held in trust for the
benefit of the holders of the related series of Certificates pursuant to a
Pooling and Servicing Agreement or a Trust Agreement, as more fully described
herein.
 
    The yield on each class of Certificates of a series will be affected by,
among other things, the rate of payment of principal (including voluntary and
involuntary prepayments) on the Mortgage Assets in the related Trust Fund and
the timing of receipt of such payments as described under the caption 'Yield
Considerations' 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.
 
    Prospective investors should review the information appearing under the
caption 'Risk Factors' herein and such information as may be set forth under the
caption 'Risk Factors' in the related Prospectus Supplement before purchasing
any Offered Certificate.
 
    If so provided in the related Prospectus Supplement, one or more elections
may be made to treat the related Trust Fund or a designated portion thereof as
one or more 'real estate mortgage investment conduits' for federal income tax
purposes. See also 'Federal Income Tax Consequences' herein.
 
    PROSPECTIVE INVESTORS SHOULD REVIEW THE DISCUSSION OF MATERIAL RISKS
APPEARING UNDER THE CAPTION 'RISK FACTORS' HEREIN COMMENCING ON PAGE 11.

 
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
  AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
    ACCURACY OR ADEQUACY OF THIS 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 Offered
Certificates will develop or that, if it does develop, it will continue. This
Prospectus may not be used to consummate sales of a series of Offered
Certificates unless accompanied by a Prospectus Supplement.
 
    Offers of the Offered 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
Offered Certificates will be distributed by, or sold by underwriters managed by:
 
                     NOMURA SECURITIES INTERNATIONAL, INC.
                THE DATE OF THIS PROSPECTUS IS             , 199
<PAGE>
    Until 90 days after the date of each Prospectus Supplement, all dealers
effecting transactions in the Offered Certificates 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
 
    As more particularly described herein, the Prospectus Supplement relating to
the Offered Certificates of each series will, among other things, set forth with
respect to such Certificates, as appropriate: (i) a description of the class or
classes of Certificates, the payment provisions with respect to each such class
and the Pass-Through Rate or method of determining the Pass-Through Rate with
respect to each such class; (ii) the aggregate principal amount and distribution
dates relating to such series and, if applicable, the initial and final
scheduled distribution dates for each class; (iii) information as to the assets
comprising the Trust Fund, including the general characteristics of the assets
included therein, including the Mortgage Assets and any Credit Support and Cash
Flow Agreements (with respect to the Certificates of any series, the 'Trust
Assets'); (iv) the circumstances, if any, under which the Trust Fund may be
subject to early termination; (v) additional information with respect to the
method of distribution of such Certificates; (vi) whether one or more REMIC
elections will be made and designation of the regular interests and residual
interests; (vii) the aggregate original percentage ownership interest in the
Trust Fund to be evidenced by each class of Certificates; (viii) information as
to any Master Servicer, any Special Servicer (or provision for the appointment
thereof) and the Trustee, as applicable; (ix) information as to the nature and
extent of subordination with respect to any class of Certificates that is
subordinate in right of payment to any other class; and (x) whether such
Certificates will be initially issued in definitive or book-entry form.
 

                             AVAILABLE INFORMATION
 
    The Depositor has filed with the Securities and Exchange Commission (the
'Commission') a Registration Statement (of which this Prospectus forms a part)
under the Securities Act of 1933, as amended, with respect to the Offered
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 pursuant to the rules and regulations of the
Commission. 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, Suite
1400, Chicago, Illinois 60661; and New York Regional Office, 75 Park Place, 14th
Floor, New York, New York 10007. The Commission also maintains a site on the
World Wide Web (the 'Web') at 'http://www.sec.gov' at which users can view and
download copies of reports, proxy and information statements and other
information filed electronically through the Electronic Data Gathering, Analysis
and Retrieval ('EDGAR') system.
 
    No person has been authorized to give any information or to make any
representations 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 Offered
Certificates or an offer of the Offered 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; however, if any material change occurs while
this Prospectus is required by law to be delivered, this Prospectus will be
amended or supplemented accordingly.
 
    A Master Servicer or the Trustee will be required to mail to holders of
Offered Certificates of each series periodic unaudited reports concerning the
related Trust Fund. Unless and until definitive Certificates are issued, such
reports may be sent on behalf of the related Trust Fund to Cede & Co. ('Cede'),
as nominee of The Depository Trust Company ('DTC') and registered holder of the
Offered Certificates, pursuant to the applicable Agreement. If so specified in
the related Prospectus Supplement, such reports may be sent to beneficial owners
identified to the Master Servicer or Trustee. Such reports may also be available
to holders of interests in the Certificates (the 'Certificateholders') upon
request to their respective DTC participants. See 'Description of the
Certificates--Reports to Certificateholders' and 'Description of the
Agreements-- Evidence as to Compliance'. The Depositor will file or cause to be
filed with the Commission such periodic reports with respect to each Trust Fund
as are required under the Securities Exchange Act of 1934, as amended (the
'Exchange Act'), and the rules and regulations of the Commission thereunder.
Reports filed by the Depositor with the Commission pursuant to the Exchange Act
will be filed by means of the EDGAR system and therefore should be available at
the Commission's site on the Web.
 

               INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
 
    There are incorporated herein by reference all documents and reports filed
or caused to be filed by the Depositor with respect to a Trust Fund pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination
of the offering of the Offered Certificates evidencing an interest therein. The
Depositor will provide or cause to be provided without charge to each person to
whom this Prospectus is delivered in connection with the offering of one or more
classes of Offered Certificates, a copy of any or all documents or reports
incorporated herein by reference, in each case to the extent such documents or
reports relate to one or more of such classes of such Offered Certificates,
other than the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Requests to the Depositor should
be directed in writing to its principal executive office at 2 World Financial
Center--Building B, New York, New York 10281-1198, Attention: Secretary, or by
telephone at (212) 667-9300. The Depositor has determined that its financial
statements are not material to the offering of any Offered Certificates. See
'Financial Information' herein.
 
                                       2
<PAGE>
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
Prospectus Supplement.......................................................   2
Available Information.......................................................   2
Incorporation of Certain Information by Reference...........................   2
Summary of Prospectus.......................................................   7
Risk Factors................................................................  11
Limited Liquidity...........................................................  11
Limited Assets..............................................................  11
Average Life of Certificates; Prepayments; Yields...........................  11
Limited Nature of Ratings...................................................  12
Risks Associated with Certain Mortgage Loans and Mortgaged Properties.......  12
Balloon Payments............................................................  14
Obligor Default.............................................................  15
Mortgagor Type..............................................................  15
Credit Support Limitations..................................................  15
Enforceability..............................................................  16
Environmental Risks.........................................................  16
Limited Liquidity and Market Value..........................................  16
ERISA Considerations........................................................  17
Certain Federal Tax Considerations Regarding Residual Certificates..........  17
Certain Federal Tax Considerations Regarding Original Issue Discount........  17
Consent.....................................................................  17
Book-Entry Registration.....................................................  17
Description of the Trust Funds..............................................  18
Mortgage Assets.............................................................  18
Mortgage Loans..............................................................  18
Default and Loss Considerations with Respect to the Mortgage Loans..........  18

Mortgage Loan Information in Prospectus Supplements.........................  19
Mortgage Underwriting Standards and Procedures..............................  20
Payment Provisions of the Mortgage Loans....................................  21
MBS.........................................................................  21
Collection Accounts.........................................................  22
Credit Support..............................................................  22
Cash Flow Agreements........................................................  22
Use of Proceeds.............................................................  22
Yield Considerations........................................................  22
General.....................................................................  22
Pass-Through Rate...........................................................  22
Timing of Payment of Interest and Principal.................................  23
Principal Prepayments.......................................................  23
Prepayments--Maturity and Weighted Average Life.............................  23
Other Factors Affecting Weighted Average Life...............................  24
Type of Mortgage Loan.......................................................  24
Foreclosures and Payment Plans..............................................  25
Due-on-Sale and Due-on-Encumbrance Clauses..................................  25
The Depositor...............................................................  25
Description of the Certificates.............................................  25
General.....................................................................  25
Distributions...............................................................  27
Available Funds.............................................................  27
Distributions of Interest on the Certificates...............................  28
Distributions of Principal of the Certificates..............................  28
</TABLE>
 
                                       3
<PAGE>
<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
Distributions on the Certificates of Prepayment Premiums or in Respect of
  Equity Participations.....................................................  28
Allocation of Losses and Shortfalls.........................................  29
Advances in Respect of Delinquencies........................................  29
Reports to Certificateholders...............................................  29
Termination.................................................................  31
Book-Entry Registration and Definitive Certificates.........................  31
Description of the Agreements...............................................  32
Assignment of Mortgage Assets; Repurchases..................................  32
Representations and Warranties; Repurchases.................................  33
Payments on Mortgage Assets; Deposits to Collection Account.................  34
Collection and Other Servicing Procedures...................................  35
Special Servicers...........................................................  36
Sub-Servicers...............................................................  36
Realization Upon Defaulted Whole Loans......................................  37
Hazard Insurance Policies...................................................  38
Due-on-Sale and Due-on-Encumbrance Provisions...............................  39
Retained Interest; Servicing Compensation and Payment of Expenses...........  39
Evidence as to Compliance...................................................  40
Certain Matters Regarding a Master Servicer, a Special Servicer and the

  Depositor.................................................................  40
Event of Default............................................................  41
Rights Upon Event of Default................................................  41
Amendment...................................................................  41
Duties of the Trustee.......................................................  42
The Trustee.................................................................  42
Description of Credit Support...............................................  42
General.....................................................................  42
Subordinate Certificates....................................................  42
Cross-Support Provisions....................................................  43
Insurance or Guarantees with Respect to the Mortgage Assets.................  43
Letter of Credit............................................................  43
Insurance Policies and Surety Bonds.........................................  43
Certificate Guarantee Insurance.............................................  43
Reserve Funds...............................................................  44
Certain Legal Aspects of Mortgage Loans.....................................  45
General.....................................................................  45
Types of Mortgage Instruments...............................................  45
Leases and Rents............................................................  45
Personalty..................................................................  46
Installment Contracts.......................................................  46
Junior Mortgages; Rights of Senior Mortgages or Beneficiaries...............  46
Subordinate Financing.......................................................  47
Foreclosure.................................................................  48
Judicial Foreclosure........................................................  48
Non-Judicial Foreclosure/Power of Sale......................................  48
Limitations on Lender's Rights..............................................  48
Rights of Redemption........................................................  50
Anti-Deficiency Legislation.................................................  50
Leasehold Risks.............................................................  51
Bankruptcy Laws.............................................................  51
Environmental Legislation...................................................  53
Due-on-Sale and Due-on-Encumbrance..........................................  53
Acceleration on Default.....................................................  54
Default Interest, Prepayment Charges and Prepayments........................  54
</TABLE>
 
                                       4
<PAGE>
<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
Applicability of Usury Laws.................................................  54
Alternative Mortgage Instruments............................................  54
Soldiers' and Sailors' Civil Relief Act of 1940.............................  55
Forfeitures in Drug and RICO Proceedings....................................  55
Certain Laws and Regulations................................................  55
Type of Mortgaged Property..................................................  55
Americans with Disabilities Act.............................................  56
Federal Income Tax Consequences.............................................  56
Federal Income Tax Consequences for REMIC Certificates......................  56
General.....................................................................  56

Status of REMIC Certificates................................................  57
Qualification as a REMIC....................................................  57
Taxation of Regular Certificates............................................  59
General.....................................................................  59
Original Issue Discount.....................................................  59
Acquisition Premium.........................................................  61
Variable Rate Regular Certificates..........................................  61
Deferred Interest...........................................................  62
Market Discount.............................................................  62
Premium.....................................................................  63
Election to Treat All Interest Under the Constant Yield Method..............  63
Sale or Exchange of Regular Certificates....................................  63
Treatment of Losses.........................................................  64
Taxation of Residual Certificates...........................................  64
Taxation of REMIC Income....................................................  64
Basis and Losses............................................................  65
Treatment of Certain Items of REMIC Income and Expense......................  66
Limitations on Offset or Exemption of REMIC Income..........................  66
Tax-Related Restrictions on Transfer of Residual Certificates...............  67
Sale or Exchange of a Residual Certificate..................................  69
Mark to Market Regulations..................................................  69
Taxes That May Be Imposed on the REMIC Pool.................................  70
Prohibited Transactions.....................................................  70
Contributions to the REMIC Pool After the Startup Day.......................  70
Net Income from Foreclosure Property........................................  70
Liquidation of the REMIC Pool...............................................  70
Administrative Matters......................................................  70
Limitations on Deduction of Certain Expenses................................  71
Taxation of Certain Foreign Investors.......................................  71
Regular Certificates........................................................  71
Residual Certificates.......................................................  72
Backup Withholding..........................................................  72
Reporting Requirements......................................................  72
Federal Income Tax Consequences for Certificates as to Which No REMIC
  Election Is Made..........................................................  73
Standard Certificates.......................................................  73
General.....................................................................  73
Tax Status..................................................................  73
Premium and Discount........................................................  74
Recharacterization of Servicing Fees........................................  74
Sale or Exchange of Standard Certificates...................................  75
Stripped Certificates.......................................................  75
General.....................................................................  75
Status of Stripped Certificates.............................................  76
</TABLE>
 
                                       5
<PAGE>
<TABLE>
<CAPTION>
                                                                            PAGE
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<S>                                                                         <C>
Taxation of Stripped Certificates...........................................  76

Reporting Requirements and Backup Withholding...............................  77
Taxation of Certain Foreign Investors.......................................  78
ERISA Considerations........................................................  78
General.....................................................................  78
Certain Requirements Under ERISA............................................  78
General.....................................................................  78
Parties in Interest/Disqualified Persons....................................  78
Delegation of Fiduciary Duty................................................  79
Administrative Exemptions...................................................  79
Governmental Plans..........................................................  79
Unrelated Business Taxable Income; Residual Certificates....................  79
Legal Investment............................................................  80
Method of Distribution......................................................  81
Legal Matters...............................................................  82
Financial Information.......................................................  82
Rating......................................................................  82
Index of Principal Definitions..............................................  83
</TABLE>
 
                                       6
<PAGE>
                             SUMMARY OF PROSPECTUS
 
     The following summary of material information does not contain all the
material information regarding the Certificates and is qualified in its entirety
by reference to the more detailed information appearing elsewhere in this
Prospectus and by reference to the information with respect to each series of
Certificates contained in the Prospectus Supplement to be prepared and delivered
in connection with the offering of such series. An Index of Principal
Definitions is included at the end of this Prospectus.
 
TITLE OF CERTIFICATES
 
     Mortgage Pass-Through Certificates, issuable in series (the
'Certificates').
 
DEPOSITOR
 
     Nomura Asset Securities Corporation, a wholly-owned subsidiary of Nomura
Asset Capital Corporation. See 'The Depositor'.
 
MASTER SERVICER
 
     The master servicer (the 'Master Servicer'), if any, for each series of
Certificates will be named in the related Prospectus Supplement. See
'Description of the Agreements--Collection and Other Servicing Procedures'.
 
SPECIAL SERVICER
 
     The special servicer (the 'Special Servicer'), if any, for each series of
Certificates will be named, or the circumstances in accordance with which a
Special Servicer will be appointed will be described, in the related Prospectus
Supplement. See 'Description of the Agreements--Special Servicer'.
 

TRUSTEE
 
     The trustee (the 'Trustee') for each series of Certificates will be named
in the related Prospectus Supplement. See 'Description of the Agreements--The
Trustee'.
 
ISSUER
 
     The issuer of each series of Certificates will be the related Trust Fund.
 
THE TRUST ASSETS
 
     Each series of Certificates will represent in the aggregate the entire
beneficial ownership interest in a Trust Fund consisting primarily of:
 
          (A) MORTGAGE ASSETS
 
          The Mortgage Assets with respect to each series of Certificates will
     consist of a pool of multifamily and/or commercial mortgage loans and/or
     installment contracts ('Installment Contracts') for the sale of commercial
     or multifamily properties (collectively, the 'Mortgage Loans'), mortgage
     pass-through certificates or other mortgage-backed securities evidencing
     interests in or secured by Mortgage Loans (collectively, the 'MBS') or a
     combination of Mortgage Loans and MBS. Except to the extent described in
     the related Prospectus Supplement, the Mortgage Loans will not be
     guaranteed or insured by the Depositor or any of its affiliates or by any
     governmental agency or instrumentality or other person. As more
     specifically described herein, the Mortgage Loans will be secured by liens
     on, or security interest in, properties consisting of (i) residential
     properties consisting of five or more rental or cooperatively-owned
     dwelling units (the 'Multifamily Properties') or (ii) office buildings,
     shopping centers, hotels, motels, nursing homes, hospitals or other
     health-care related facilities, mobile home parks, warehouse facilities,
     mini-warehouse facilities or self-storage facilities, industrial plants,
     mixed use or other types of commercial properties (the 'Commercial
     Properties' and together with Multifamily Properties, the 'Mortgaged
     Properties'). The Mortgaged Properties may be located in any one of the
     fifty states or the District of Columbia or such other locations as are
     disclosed in the related Prospectus Supplement. All Mortgage Loans will
     have individual principal balances at origination of not less than $25,000
     and original terms to maturity of not more than 40 years. All Mortgage
     Loans will have been originated by persons other than the Depositor, and
     all Mortgage Assets will have been purchased, either directly or
     indirectly, by the Depositor on or before the date of initial issuance of
     the related series of Certificates. As described herein
 
                                       7
<PAGE>
     and in the Prospectus Supplement, each Mortgage Loan may (i) provide for no
     accrual of interest or for accrual of interest thereon at an interest rate
     (a 'Mortgage Rate') that is fixed over its term or that adjusts from time
     to time, or that may be converted from an adjustable to a fixed Mortgage
     Rate, or from a fixed to an adjustable Mortgage Rate, from time to time at
     the mortgagor's election; (ii) provide for scheduled payments to maturity,

     payments that adjust from time to time in accommodate changes in the
     Mortgage Rate or to reflect the occurrence of certain events, and may
     provide negative amortization or accelerated amortization; (iii) be fully
     amortizing or require a balloon payment due on its stated maturity date;
     (iv) contain prohibitions on prepayment or require payment of a premium or
     a yield maintenance penalty in connection with a prepayment; and (v)
     provide for payments of principal, interest or both, on due dates that
     occur monthly, quarterly, semi-annually or other interval. See 'Description
     of the Trust Funds--Mortgage Assets'.
 
          (B) COLLECTION ACCOUNT
 
          Each Trust Fund will include one or more accounts (collectively, the
     'Collection Account') established and maintained on behalf of the
     Certificateholders into which the person or persons designated in the
     related Prospectus Supplement will deposit all payments and collections
     received or advanced with respect to the Mortgage Assets and other assets
     in the Trust Fund other than certain fees and expenses. A Collection
     Account may be maintained as an interest bearing or a non-interest bearing
     account, and funds held therein may be invested in certain short-term,
     investment grade obligations, as described in the related Prospectus
     Supplement. See 'Description of the Agreements--Payments on Mortgage
     Assets; Deposits to Collection Account'.
 
          (C) CREDIT SUPPORT
 
          If so provided in the related Prospectus Supplement, partial or full
     protection against certain defaults and losses on the Mortgage Assets in
     the related Trust Fund may be provided to one or more classes of
     Certificates of the related series in the form of subordination of one or
     more other classes of Certificates of such series or by one or more other
     types of credit support, such as a letter of credit, an insurance policy on
     the Mortgage Loans, guarantee, certificate guarantee insurance policy,
     reserve fund or another type of credit support, or a combination thereof
     (any such coverage with respect to the Certificates of any series, 'Credit
     Support'). The amount and types of coverage, the identification of the
     entity providing the coverage (if applicable) and related information with
     respect to each type of Credit Support, if any, will be described in the
     Prospectus Supplement for a series of Certificates. The Prospectus
     Supplement for any series of Certificates evidencing an interest in a Trust
     Fund that includes MBS will describe any credit support that is included as
     part of the trust fund evidenced or secured by such MBS. See 'Risk
     Factors--Credit Support Limitations' and 'Description of Credit Support'.
 
          (D) CASH FLOW AGREEMENTS
 
          If so provided in the related Prospectus Supplement, the Trust Fund
     may include guaranteed investment contracts pursuant to which moneys held
     in the funds and accounts established for the related series will be
     invested at a specified rate. The Trust Fund may also include certain other
     agreements, such as interest rate exchange agreements, interest rate cap or
     floor agreements, currency exchange agreements or similar agreements
     provided to reduce the effects of interest rate or currency exchange rate
     fluctuations on the Mortgage Assets on one or more classes of Certificates.

     The principal terms of any such guaranteed investment contract or other
     agreement (any such agreement, a 'Cash Flow Agreement'), including
     provisions relating to the timing, manner and amount of payments thereunder
     and provisions relating to the termination thereof, will be described in
     the Prospectus Supplement for the related series. In addition, the related
     Prospectus Supplement will provide certain information with respect to the
     obligor under any such Cash Flow Agreement. The Prospectus Supplement for
     any series of Certificates evidencing an interest in a Trust Fund that
     includes MBS will describe any cash flow agreements that are included as
     part of the trust fund evidenced or secured by such MBS. See 'Description
     of the Trust Funds--Cash Flow Agreements'.
 
DESCRIPTION OF CERTIFICATES
 
     Each series of Certificates evidencing an interest in a Trust Fund
consisting of Mortgage Loans will be issued pursuant to a Pooling and Servicing
Agreement and each series of Certificates evidencing an interest in a Trust Fund
the Mortgage Assets of which consisting of MBS will be issued pursuant to a
Trust Agreement. Pooling and Servicing Agreements and Trust Agreements are
sometimes referred to herein as 'Agreements'. Each series of Certificates
(including any class or classes of Certificates of such series not offered
hereby) will represent in the aggregate the entire beneficial ownership interest
in the Trust Fund. Each class of Certificates (other than certain Stripped
Interest Certificates, as defined below) will have a stated principal amount (a
'Certificate Balance') and (other than certain Stripped Principal Certificates,
as defined below), will accrue interest thereon based
 
                                       8
<PAGE>
on a fixed, variable or adjustable interest rate (a 'Pass-Through Rate'). The
related Prospectus Supplement will specify the Certificate Balance and the
Pass-Through Rate for each class of Certificates, as applicable, or in the case
of a variable or adjustable Pass-Through Rate, the method for determining the
Pass-Through Rate. Each series of Certificates will consist of one or more
classes or subclasses of Certificates that may (i) be senior (collectively,
'Senior Certificates') or subordinate (collectively, 'Subordinate Certificates')
to one or more other classes of Certificates in respect of certain distributions
on the Certificates; (ii) be entitled to principal distributions, with
disproportionately low, nominal or no interest distributions (collectively,
'Stripped Principal Certificates'); (iii) be entitled to interest distributions,
with disproportionately low, nominal or no principal distributions
(collectively, 'Stripped Interest Certificates'); (iv) provide for distributions
of accrued interest thereon only following the occurrence of certain events,
such as the retirement of one or more other classes of Certificates of such
series (collectively, 'Accrual Certificates'); and/or (v) provide for payments
of principal sequentially, based on specified payment schedules or other
methodologies, to the extent of available funds. Any such classes or subclasses
may include classes or subclasses of Offered Certificates. The Certificates will
not be guaranteed or insured by the Depositor or any of its affiliates, by any
governmental agency or instrumentality or by any other person, unless otherwise
provided in the related Prospectus Supplement. See 'Risk Factors-- Limited
Assets' and 'Description of the Certificates'. The Offered Certificates will not
be listed on any securities exchange and will not be quoted in an automated
quotation system of a registered securities association. This fact may limit the

liquidity of the Offered Certificates. See 'Risk Factors--Limited Liquidity and
Market Value.'
 
DISTRIBUTIONS OF INTEREST ON CERTIFICATES
 
     Interest on each class of Offered Certificates (other than certain classes
of Stripped Interest Certificates and Stripped Principal Certificates) of each
series will accrue at the applicable Pass-Through Rate on the outstanding
Certificate Balance thereof and will be distributed to Certificateholders as
provided in the related Prospectus Supplement (each of the specified dates on
which distributions are to be made, a 'Distribution Date'). Distributions with
respect to interest on Stripped Interest Certificates may be made on each
Distribution Date on the basis of a notional amount as described in the related
Prospectus Supplement. Distributions of interest with respect to one or more
classes of Certificates may be reduced to the extent of certain delinquencies
and other contingencies described herein and in the related Prospectus
Supplement. See 'Risk Factors--Average Life of Certificates; Prepayments;
Yields', 'Yield Considerations', and 'Description of the
Certificates--Distributions of Interest on the Certificates'.
 
DISTRIBUTIONS OF PRINCIPAL OF CERTIFICATES
 
     The initial aggregate Certificate Balance of the Certificates of each
series (other than certain classes of Stripped Interest Certificates) will
generally not exceed the outstanding principal balance of the Mortgage Assets as
of the close of business on the day of the month specified in the related Trust
Fund (the 'Cut-off Date'), after application of scheduled payments due on or
before such date, whether or not received. The Certificate Balance of a
Certificate outstanding from time to time represents the maximum amount that the
holder thereof is then entitled to receive in respect of principal from future
cash flow on the assets in the related Trust Fund. Distributions of principal
will be made on each Distribution Date to the class or classes of Certificates
entitled thereto until the Certificate Balance of such Certificates have been
reduced to zero. Distributions of principal of any class of Certificates will be
made on a pro rata basis among all of the Certificates of such class. Stripped
Interest Certificates with no Certificate Balance will not receive distributions
in respect of principal. See 'Description of the Certificates--Distributions of
Principal of the Certificates'.
 
ADVANCES
 
     In connection with a series of Certificates evidencing an interest in a
Trust Fund consisting of Mortgage Assets other than MBS, the Master Servicer may
be obligated as part of its servicing responsibilities to make certain advances
with respect to delinquent scheduled payments on the Mortgage Loans in such
Trust Fund. Advances made by a Master Servicer are reimbursable generally from
subsequent recoveries in respect of such Mortgage Loans, and in certain
circumstances, from other assets available in the Trust Fund. The Master
Servicer will be entitled to receive interest on its outstanding advances,
payable from amounts in the related Trust Fund. The Prospectus Supplement for
any series of Certificates evidencing an interest in a Trust Fund that includes
MBS will describe any corresponding advancing obligation of any person in
connection with such MBS. See 'Description of the Certificates--Advances in
Respect of Delinquencies'. Purchasers of any series of Certificates will be

advised of any advances relating to such Certificates by means of the report to
be delivered to Certificateholders in connection with each distribution. See
'Description of the Certificates--Reports to Certificateholders'.
 
                                       9
<PAGE>
TERMINATION
 
     A series of Certificates may be subject to optional early termination
through the repurchase of the Mortgage Assets in the related Trust Fund. If so
provided in the related Prospectus Supplement, upon the reduction of the
Certificate Balance of a specified class or classes of Certificates by a
specified percentage or amount, the party specified therein will solicit bids
for the purchase of all of the Mortgage Assets of the Trust Fund under the
circumstances and in the manner set forth therein. See 'Description of the
Certificates--Termination'.
 
REGISTRATION OF CERTIFICATES
 
     If so provided in the related Prospectus Supplement, one or more classes of
the Offered Certificates will initially be represented by one or more
Certificates registered in the name of Cede & Co., as the nominee of DTC. No
person acquiring an interest in Offered Certificates so registered will be
entitled to receive a definitive certificate representing such person's interest
except in the event that definitive certificates are issued under the limited
circumstances described herein. See 'Risk Factors-- Book-Entry Registration' and
'Description of the Certificates--Book-Entry Registration and Definitive
Certificates'.
 
RISK FACTORS
 
     An investment in the Offered Certificates may include certain material
risks. See 'Risk Factors' herein and in the related Prospectus Supplement.
 
FEDERAL INCOME TAX CONSEQUENCES
 
     The federal income tax consequences to Certificateholders will vary
depending on whether one or more elections are made to treat the Trust Fund or
specified portions thereof as one or more 'real estate mortgage investment
conduits' (each, a 'REMIC') under the provisions of the Internal Revenue Code of
1986, as amended (the 'Code'). The Prospectus Supplement for each series of
Certificates will specify whether one or more such elections will be made. See
'Federal Income Tax Consequences'.
 
ERISA CONSIDERATIONS
 
     A fiduciary of an employee benefit plan or other retirement arrangement,
including an individual retirement account, or a Keogh plan which is subject to
the Employee Retirement Income Security Act of 1974, as amended ('ERISA'), or
Section 4975 of the Code (each a 'Plan'), or a collective investment fund in
which such Plans are invested, or an insurance company using assets of a
separate account or general account which includes assets of Plans (or which is
deemed pursuant to ERISA to include assets of Plans), or other pensions acting
on behalf of any such Plan or using the assets of any such Plan, which proposes

to cause a Plan to acquire any of the Offered Certificates should carefully
review with its legal advisors whether the purchase or holding of Offered
Certificates could give rise to a transaction that is prohibited or is not
otherwise permissible either under ERISA or Section 4975 of the Code. See 'ERISA
Considerations' herein and in the related Prospectus Supplement.
 
LEGAL INVESTMENT
 
     The related Prospectus Supplement will specify whether the Offered
Certificates will constitute 'mortgage related securities' for purposes of the
Secondary Mortgage Market Enhancement Act of 1984. Investors whose investment
authority is subject to legal restrictions should consult their own legal
advisors to determine whether and to what extent the Offered Certificates
constitute legal investments for them. See 'Legal Investment' herein and in the
related Prospectus Supplement.
 
RATING
 
     At the date of issuance, as to each series, each class of Offered
Certificates will be rated not lower than investment grade by one or more
nationally recognized statistical rating agencies (each, a 'Rating Agency'). See
'Rating' herein and in the related Prospectus Supplement.
 
                                       10
<PAGE>
                                  RISK FACTORS
 
     Investors should consider, in connection with the purchase of Offered
Certificates, among other things, the following factors and certain other
factors as may be set forth in 'Risk Factors' in the related Prospectus
Supplement.
 
LIMITED LIQUIDITY
 
     There can be no assurance that a secondary market for the Certificates of
any series will develop or, if it does develop, that it will provide holders
with liquidity of investment or will continue while Certificates of such series
remain outstanding. Any such secondary market may provide less liquidity to
investors than any comparable market for securities evidencing interests in
single-family mortgage loans. The market value of Certificates will fluctuate
with changes in prevailing rates of interest. Consequently, sale of Certificates
by a holder in any secondary market that may develop may be at a discount from
100% of their original principal balance or from their purchase price.
Furthermore, secondary market purchasers may look only hereto, to the related
Prospectus Supplement and to the reports to Certificateholders delivered
pursuant to the Agreement as described herein under the heading 'Description of
the Certificates--Reports to Certificateholders,' '--Book-Entry Registration and
Definitive Certificates' and 'Description of the Agreements--Evidence as to
Compliance' for information concerning the Certificates. Certificateholders will
have no redemption rights. Each class of Offered Certificates of a series will
be issued in minimum denominations corresponding to Certificate Balances or, in
the case of Stripped Interest Certificates, notional amounts specified in the
related Prospectus Supplement. Nomura Securities International, Inc., through
one or more of its affiliates, currently expects to make a secondary market in

the Offered Certificates, but has no obligation to do so.
 
LIMITED ASSETS
 
     A series of Certificates will not have any claim against or security
interest in the Trust Funds for any other series. If the related Trust Fund is
insufficient to make payments on such Certificates, no other assets will be
available for payment of the deficiency. Additionally, certain amounts remaining
in certain funds or accounts, including the Certificate Account and any accounts
maintained as Credit Support, may be withdrawn under certain conditions, as
described in the related Prospectus Supplement. In the event of such withdrawal,
such amounts will not be available for future payment of principal of or
interest on the Certificates. With respect to a series of Certificates
consisting of one or more classes of Subordinate Certificates, on any
Distribution Date in respect of which losses or shortfalls in collections on the
Mortgage Assets have been incurred, the amount of such losses or shortfalls will
be borne first by one or more classes of the Subordinate Certificates, and,
thereafter, by the remaining classes of Certificates in the priority and manner
and subject to the limitations specified in the related Prospectus Supplement.
 
AVERAGE LIFE OF CERTIFICATES; PREPAYMENTS; YIELDS
 
     Prepayments on the Mortgage Assets in any Trust Fund (including principal
prepayments on the Mortgage Loans resulting from both voluntary and involuntary
liquidations) generally will result in a faster rate of principal payments on
one or more classes of the related Certificates than if payments on such
Mortgage Assets were made as scheduled. Thus, the prepayment experience on the
Mortgage Assets may affect the average life of each class of related
Certificates. The rate of principal payments on pools of mortgage loans varies
between pools and from time to time is influenced by a variety of economic,
demographic, geographic, social, tax, legal and other factors. There can be no
assurance as to the rate of prepayment on the Mortgage Assets in any Trust Fund
or that the rate of payments will conform to any model described herein or in
any Prospectus Supplement. If prevailing interest rates fall significantly below
the applicable mortgage rates, principal prepayments are likely to be higher
than if prevailing rates remain at or above the rates borne by the Mortgage
Loans underlying or comprising the Mortgage Assets in any Trust Fund. As a
result, the actual maturity of any class of Certificates could occur
significantly earlier than expected. A series of Certificates may include one or
more classes of Certificates with priorities of payment and, as a result, yields
on other classes of Certificates, including classes of Offered Certificates, of
such series may be more sensitive to prepayments on Mortgage Assets. A series of
Certificates may include one or more classes offered at a significant premium or
discount. Yields on such classes of Certificates will be sensitive, and in some
cases extremely sensitive, to voluntary and involuntary prepayments on Mortgage
Assets and, where the amount of interest payable with respect to a class is
disproportionately high, as compared to the amount of principal, as with certain
classes of Stripped Interest Certificates, a holder might, in some prepayment
scenarios, fail to recoup its original investment. A series of Certificates may
include one or more classes of Certificates, including classes of Offered
Certificates, that provide for distribution of principal thereof from amounts
attributable to interest accrued but not currently distributable on one or more
classes of Accrual Certificates and, as a result, yields on such Certificates
will be sensitive to (a) the provisions of such Accrual Certificates relating to

the timing of distributions of interest thereon and (b) if such Accrual
Certificates accrue interest at a variable
 
                                       11
<PAGE>
or adjustable Pass-Through Rate, changes in such rate. See 'Yield
Considerations' herein and, if applicable, in the related Prospectus Supplement.
 
LIMITED NATURE OF RATINGS
 
     Any rating assigned by a Rating Agency to a class of Certificates will
reflect such Rating Agency's assessment solely of the likelihood that holders of
Certificates of such class will receive payments to which such
Certificateholders are entitled under the related Agreement. Such rating will
not constitute an assessment of the likelihood that principal prepayments on the
related Mortgage Assets will be made, the degree to which the rate of such
prepayments might differ from that originally anticipated or the likelihood of
early optional termination of the series of Certificates. Such rating will not
address the possibility that prepayment at higher or lower rates than
anticipated by an investor may cause such investor to experience a lower than
anticipated yield or that an investor purchasing a Certificate at a significant
premium might fail to recoup its initial investment under certain prepayment
scenarios. Each Prospectus Supplement will identify any payment to which holders
of Offered Certificates of the related series are entitled that is not covered
by the applicable rating.
 
     The amount, type and nature of credit support, if any, established with
respect to a series of Certificates will be determined on the basis of criteria
established by each Rating Agency rating classes of such series. Such criteria
are sometimes based upon an actuarial analysis of the behavior of mortgage loans
in a larger group. Such analysis is often the basis upon which each Rating
Agency determines the amount of credit support required with respect to each
such class. There can be no assurance that the historical data supporting any
such actuarial analysis will accurately reflect future experience nor any
assurance that the data derived from a large pool of mortgage loans accurately
predicts the delinquency, foreclosure or loss experience of any particular pool
of Mortgage Assets. No assurance can be given that values of any Mortgaged
Properties have remained or will remain at their levels on the respective dates
of origination of the related Mortgage Loans. Moreover, there is no assurance
that appreciation of real estate values generally will limit loss experiences on
the Mortgaged Properties. If the commercial or multifamily residential real
estate markets should experience an overall decline in property values such that
the outstanding principal balances of the Mortgage Loans underlying or
comprising the Mortgage Assets in a particular Trust Fund and any secondary
financing on the related Mortgaged Properties become equal to or greater than
the value of the Mortgaged Properties, the rates of delinquencies, foreclosures
and losses could be higher than those now generally experienced by institutional
lenders. In addition, adverse economic conditions (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
rates of delinquencies, foreclosures and losses with respect to any Trust Fund.
To the extent that such losses are not covered by Credit Support, such losses
will be borne, at least in part, by the holders of one or more classes of the
Certificates of the related series. See 'Description of Credit Support' and

'Rating'.
 
RISKS ASSOCIATED WITH CERTAIN MORTGAGE LOANS AND MORTGAGED PROPERTIES
 
     Mortgage loans made with respect to multifamily or commercial property may
entail risks of delinquency and foreclosure, and risks of loss in the event
thereof, that are greater than similar risks associated with single-family
property. See 'Description of the Trust Funds--Mortgage Assets'. The ability of
a mortgagor to repay a loan secured by an income-producing property typically is
dependent primarily upon the successful operation of such property rather than
any independent income or assets of the mortgagor; thus, the value of an
income-producing property is directly related to the net operating income
derived from such property. In contrast, the ability of a mortgagor to repay a
single-family loan typically is dependent primarily upon the mortgagor's
household income, rather than the capacity of the property to produce income;
thus, other than in geographical areas where employment is dependent upon a
particular employer or an industry, the mortgagor's income tends not to reflect
directly the value of such property. A decline in the net operating income of an
income-producing property will likely affect both the performance of the related
loan as well as the liquidation value of such property, whereas a decline in the
income of a mortgagor on a single-family property will likely affect the
performance of the related loan but may not affect the liquidation value of such
property.
 
     The performance of a mortgage loan secured by an income-producing property
leased by the mortgagor to tenants as well as the liquidation value of such
property may be dependent upon the business operated by such tenants in
connection with such property, the creditworthiness of such tenants or both; the
risks associated with such loans may be offset by the number of tenants or, of
applicable, a diversity of types of business operated by such tenants.
 
     It is anticipated that all or a substantial portion of the Mortgage Loans
included in any Trust Fund will be nonrecourse loans or loans for which recourse
may be restricted or unenforceable, as to which, in the event of mortgagor
default, recourse may be had only against the specific multifamily or commercial
property and such other assets, if any, as have been pledged to secure the
 
                                       12
<PAGE>
Mortgage Loan. With respect to those Mortgage Loans that provide for recourse
against the mortgagor and its assets generally, there can be no assurance that
such recourse will ensure a recovery in respect of a defaulted Mortgage Loan
greater than the liquidation value of the related Mortgaged Property.
 
     Further, the concentration of default, foreclosure and loss risks in
individual mortgagors or Mortgage Loans in a particular Trust Fund or the
related Mortgaged Properties will generally be greater than for pools of
single-family loans both because the Mortgage Assets in a Trust Fund will
generally consist of a smaller number of loans than would a single-family pool
of comparable aggregate unpaid principal balance and because of the higher
principal balance of individual Mortgage Loans.
 
RETAIL PROPERTIES
 

     Significant factors determining the value of retail properties are the
quality of the tenants as well as fundamental aspects of real estate such as
location and market demographics. The correlation between the success of tenant
businesses and property value is more direct with respect to retail properties
than other types of commercial property because a significant component of the
total rent paid by retail tenants is often tied to a percentage of gross sales.
Whether a retail property is 'anchored' or 'unanchored' is also an important
distinction. Retail properties that are anchored have traditionally been
percived to be less risky. While there is no strict definition of an anchor, it
is generally understood that a retail anchor tenant is proportionately large in
size and is vital in attracting customers to the property. Furthermore, the
correlation between the success of tenant businesses and property value is
increased when the property is a single tenant property.
 
     Unlike office or hotel properties, retail properties also face competition
from sources outside a given real estate market. Catalogue retailers, home
shopping networks, telemarketing and outlet centers all compete with more
traditional retail properties for consumer dollars. Continued growth of these
alternative retail outlets (which are often characterized by lower operating
costs) could adversely affect the rent collectible at the retail properties
included in the Mortgaged Properties.
 
OFFICE PROPERTIES
 
     Significant factors determining the value of office properties are the
quality of the tenants in the building, the physical attributes of the building
in relation to competing buildings and the strength and stability of the market
area as a desirable business location. Office properties may be adversely
affected if there is an economic decline in the business operated by the
tenants. The risk of such an adverse effect is increased if revenue is dependent
on a single tenant or if there is a significant concentration of tenants in a
particular business or industry.
 
     Office properties are also subject to competition with other office
properties in the same market. Competition is affected by a property's age,
condition, design (e.g. floor sizes and layout), access to transportation and
ability or inability to offer certain amenities to its tenants, including
sophisticated building systems (such as fiberoptic cables, satellite
communications or other base building technological features).
 
     The success of an office property also depends on the local economy. A
company's decision to locate office headquarters in a given area, for example,
may be affected by such factors as labor cost and quality, tax environment and
quality of life issues such as schools and cultural amenities. A central
business district may have an economy which is markedly different from that of a
suburb. The local economy will impact on an office property's ability to attract
stable tenants on a consistent basis. In addition, the cost of refitting office
space of a new tenant is often more costly than for other property types.
 
HOTEL PROPERTIES
 
     Various factors, including location, quality and franchise affiliation
affect the economic performance of a hotel. Adverse economic conditions, either
local, regional or national, may limit the amount that can be charged for a room

and may result in a reduction in occupancy levels. The construction of competing
hotels can have similar effects. To meet competition in the industry and to
maintain economic values, continuing expenditures must be made for modernizing,
refurbishing, and maintaining existing facilities prior to the expiration of
their anticipated useful lives. Because hotel rooms are generally rented for
short periods of time, hotels tend to respond more quickly to adverse economic
conditions and competition than do other commercial properties. Furthermore, the
financial strength and capabilities of the owner and operator of a hotel may
have a substantial impact on such hotel's quality of service and economic
performance. Additionally, the hotel and lodging industry is generally seasonal
in nature and this seasonality can be expected to cause periodic fluctuations in
room and other revenues, occupancy levels, room rates and operating expenses.
The demand for particular accommodations may also be affected by changes in
travel patterns caused by changes in energy prices, strikes, relocation of
highways, the construction of additional highways and other factors.
 
                                       13
<PAGE>
     Hotel properties may be franchises of national or regional hotel chains.
The viability of any such hotel property depends in part on the continued
existence and financial strength of the franchisor, the public perception of the
franchise service mark and the duration of the franchise licensing agreements.
The transferability of franchise license agreements may be restricted and, in
the event of a foreclosure on any such hotel property, the mortgage may not have
the right to use the franchise license without the franchisor's consent.
Conversely, a lender may be unable to remove a franchisor that it desires to
replace following a foreclosure. Further, in the event of a foreclosure on a
hotel property, it is unlikely that the Trustee (or Master Servicer or Special
Servicer) or purchaser of such hotel property would be entitled to the rights
under any liquor license for such hotel property and such party would be
required to apply in its own right for such license or licenses. There can be no
assurance that a new license could be obtained or that it could be obtained
promptly.
 
SENIOR HOUSING/HEALTHCARE PROPERTIES
 
     Significant factors determining the value of senior housing and healthcare
properties include federal and state laws, competition with similar properties
on a local and regional basis and the continued availability of revenue from
government reimbursement programs, primarily Medicaid and Medicare. Providers of
long-term nursing care and other medical services are subject to federal and
state laws that relate to the adequacy of medical care, distribution of
pharmaceuticals, rate setting, equipment, personnel, operating policies and
additions to facilities and services and, to the extent dependent on patients
whose fees are reimbursed by private insurers, to the reimbursement policies of
such insurers. In addition, facilities where such care or other medical services
are provided are subject to periodic inspection by governmental authorities to
determine compliance with various standards necessary for continued licensing
under state law and continued participation in the Medicaid and Medicare
reimbursement programs. The failure of any such borrowers to maintain or renew
any required license or regulatory approval could prevent it from continuing
operations at a Mortgaged Property (in which case no revenues would be received
from such property or portion thereof requiring licensing) or, if applicable,
bar it from participation in government reimbursement programs. Furthermore, in

the event of foreclosure, there can be no assurance that the Trustee (or Master
Servicer or Special Servicer) or purchaser in a foreclosure sale would be
entitled to the rights under such licenses and such party may have to apply in
its own right for such a license. There can be no assurance that a new license
could be obtained.
 
     Under applicable federal and state laws and regulations, Medicare and
Medicaid, only the provider who actually furnished the related medical goods and
services generally may sue for or enforce its rights to reimbursement.
Accordingly, in the event of foreclosure, none of the Trustee, the Master
Servicer, the Special Servicer or a subsequent lessee or operator of the
property would generally be entitled to obtain from federal or state governments
any outstanding reimbursement payments relating to services furnished at the
respective properties prior to such foreclosure.
 
     The operators of such nursing homes are likely to compete on a local and
regional basis with others that operate similar facilities, some of which
competitors may be better capitalized, may offer services not offered by such
operators or may be owned by non-profit organizations or government agencies
supported by endowments, charitable contributions, tax revenues and other
sources not available to such operators. The successful operation of a Mortgaged
Property that is a nursing home will generally depend upon the number of
competing facilities in the local market, as well as upon other factors such as
its age, appearance, reputation and management, the types of services it
provides and the quality of care and the cost of that care.
 
     Nursing home facilities may receive a substantial portion of their revenues
from government reimbursement programs, primarily Medicaid and Medicare.
Medicaid and Medicare are subject to statutory and regulatory changes,
retroactive rate adjustments, administrative rulings, policy interpretations,
delays by fiscal intermediaries and government funding restrictions. Moreover,
government payors have employed cost-containment measures that limit payments to
health care providers, and there are currently under construction various
proposals for national health care reform that could further limit those
payments. Accordingly, there can be no assurance that payments under government
reimbursement programs will, in the future, be sufficient to fully reimburse the
cost of caring for program beneficiaries. If not, net operating income of the
Mortgaged Properties that receive revenues from those sources, and consequently
the ability of the related borrowers to meet their Mortgage Loan obligations,
could be adversely affected.
 
BALLOON PAYMENTS
 
     Certain of the Mortgage Loans as of the Cut-off Date may not be fully
amortizing over their terms to maturity and, thus, will require substantial
principal payments (i.e., balloon payments) at their stated maturity. Mortgage
Loans with balloon payments involve a greater degree of risk because the ability
of a mortgagor to make a balloon payment typically will depend upon its ability
either to timely refinance the loan or to timely sell the related Mortgaged
Property. The ability of a mortgagor to accomplish either
 
                                       14
<PAGE>
of these goals will be affected by a number of factors, including the level of

available mortgage rates at the time of sale or refinancing, the mortgagor's
equity in the related Mortgaged Property, the financial condition and operating
history of the mortgagor and the related Mortgaged Property, tax laws, rent
control laws (with respect to certain Multifamily Properties and mobile home
parks), reimbursement rates (with respect to certain hospitals, nursing homes
and convalescent homes), renewability of operating licenses, prevailing general
economic conditions and the availability of credit for commercial or
multifamily, as the case may be, real properties generally.
 
OBLIGOR DEFAULT
 
     In order to maximize recoveries on defaulted Mortgage Loans, a Master
Servicer typically will have considerable flexibility to extend and modify
Mortgage Loans that are in default or as to which a payment default is
reasonably foreseeable, including in particular with respect to balloon
payments. In addition, a Master Servicer or a Special Servicer may receive a
workout fee based on receipts from or proceeds of such Mortgage Loans. While a
Master Servicer generally will be required to determine that any such extension
or modification is likely to produce a greater recovery on a present value basis
than liquidation, there can be no assurance that such flexibility with respect
to extensions or modifications or payment of a workout fee will increase the
present value of receipts from or proceeds of Mortgage Loans that are in default
or as to which a default is reasonably foreseeable. The recent foreclosure and
delinquency experience with respect to loans serviced by a Master Servicer or,
if applicable, any Special Servicer or significant Sub-Servicer will be provided
in the related Prospectus Supplement.
 
MORTGAGOR TYPE
 
     Mortgage Loans made to partnerships, corporations or other entities may
entail risks of loss from delinquency and foreclosure that are greater than
those of Mortgage Loans made to individuals. Partnerships, corporations and
certain other types of organizations generally limit the liability of the
beneficial owners of such organizations for the obligations of such
organizations, and therefore limit the recourse of a lender to the assets of
such beneficial owners. The mortgagor's sophistication and form of organization
may increase the likelihood of protracted litigation or bankruptcy in default
situations.
 
JUNIOR MORTGAGE LOANS
 
     Certain of the Mortgage Loans may be secured by junior Mortgages which are
subordinate to senior mortgages or deeds of trust held by other lenders or
institutional investors. The rights of any Trust Fund (and therefore the
Certificateholders), as beneficiary under a junior Mortgage, are subordinate to
those of the mortgagee or beneficiary under the senior mortgage or deed of
trust, including the prior rights of the senior mortgage or beneficiary to
receive rents, hazard insurance and condemnation proceeds and to cause the
Mortgaged Property securing the Mortgage Loan to be sold upon default of the
mortgagor or trustor, thereby extinguishing the Trust Fund's junior Mortgage
unless the Servicer or the Special Servicer asserts the Trust Fund's subordinate
interest in the Mortgaged Property in foreclosure litigation or satisfies the
defaulted senior loan. See 'Certain Legal Aspects of Mortgage Loans--Junior
Mortgages; Rights of Senior Mortgages or Beneficiaries' herein.

 
CREDIT SUPPORT LIMITATIONS
 
     The Prospectus Supplement for a series of Certificates will describe any
Credit Support in the related Trust Fund, which may include letters of credit,
insurance policies, guarantees, reserve funds or other types of credit support,
or combinations thereof. Use of Credit Support will be subject to the conditions
and limitations described herein and in the related Prospectus Supplement.
Moreover, such Credit Support may not cover all potential losses or risks; for
example, Credit Support may or may not cover fraud or negligence by a mortgage
loan originator or other parties.
 
     A series of Certificates may include one or more classes of Subordinate
Certificates (which may include Offered Certificates). Although subordination is
intended to reduce the risk to holders of Senior Certificates of delinquent
distributions or ultimate losses, the amount of subordination will be limited
and may decline under certain circumstances. Any limits with respect to the
aggregate amount of claims under any related Credit Support may be exhausted
before the principal of the lower priority classes of Certificates of a series
has been repaid. As a result, the impact of significant losses and shortfalls on
the Mortgage Assets may fall primarily upon those classes of Certificates having
a lower priority of payment. Moreover, if a form of Credit Support covers more
than one series of Certificates (each, a 'Covered Trust'), holders of
Certificates evidencing an interest in a Covered Trust will be subject to the
risk that such Credit Support will be exhausted by the claims of other Covered
Trusts.
 
     The amount of any applicable Credit Support supporting one or more classes
of Offered Certificates, including the subordination of one or more classes of
Certificates, will be determined on the basis of criteria established by each
Rating Agency
 
                                       15
<PAGE>
rating such classes of Certificates based on an assumed level of defaults,
delinquencies, other losses or other factors. There can, however, be no
assurance that the loss experience on the related Mortgage Assets will not
exceed such assumed levels. See '--Limited Nature of Ratings', 'Description of
the Certificates' and 'Description of Credit Support'.
 
ENFORCEABILITY
 
     Mortgages may contain a due-on-sale clause, which permits the lender to
accelerate the maturity of the Mortgage Loan if the mortgagor sells, transfers
or conveys the related Mortgaged Property or its interest in the Mortgaged
Property. Mortgages may also include a debt-acceleration clause, which permits
the lender to accelerate the debt upon a monetary or non-monetary default of the
mortgagor. The courts of all states will enforce clauses providing for
acceleration in the event of a material payment default. The equity courts of
any state, however, may refuse the foreclosure of a mortgage or deed of trust
when an acceleration of the indebtedness would be inequitable or unjust or the
circumstances would render the acceleration unconscionable.
 
     If so specified in the related Prospectus Supplement, the Mortgage Loans

will be secured by an assignment of leases and rents pursuant to which the
mortgagor typically assigns its right, title and interest as landlord under the
leases on the related Mortgaged Property and the income derived therefrom to the
lender as further security for the related Mortgage Loan, while retaining a
license to collect rents for so long as there is no default. In the event the
mortgagor defaults, the license terminates and the lender is entitled to collect
rents. Such assignments may not be perfected as security interests prior to
actual possession of the cash flows. Some state laws may require that the lender
take possession of the Mortgaged Property and obtain a judicial appointment of a
receiver before becoming entitled to collect the rents. In addition, if
bankruptcy or similar proceedings are commenced by or in respect of the
mortgagor, the lender's ability to collect the rents may be adversely affected.
See 'Certain Legal Aspects of Mortgage Loans-- Leases and Rents'.
 
ENVIRONMENTAL RISKS
 
     Real property pledged as security for a mortgage loan may be subject to
certain environmental risks. Under the laws of certain states, contamination of
a property may give rise to a lien on the property to assure the costs of
cleanup. In several states, such a lien has priority over the lien of an
existing mortgage against such property. In addition, under the laws of some
states and under the federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980 ('CERCLA'), a lender may be liable, as an 'owner' or
'operator,' for the costs of addressing releases or threatened releases of
hazardous substances that require remedial action at a property, if agents or
employees of the lender have become sufficiently involved in the operations of
the mortgagor, regardless of whether the environmental damage or threat was
caused by a prior owner. A lender also risks such liability on foreclosure of
the mortgage. Each Pooling and Servicing Agreement will provide that the Master
Servicer, acting on behalf of the Trust Fund, may not acquire title to a
Mortgaged Property securing a Mortgage Loan or take over its operation unless
the Master Servicer has previously determined, based upon a report prepared by a
person who regularly conducts environmental audits, that (i) the Mortgaged
Property is in compliance with applicable environmental laws and regulations or,
if not, that taking such actions as are necessary to bring the Mortgaged
Property in compliance therewith is reasonably likely to produce a greater
recovery on a present value basis than not taking such actions and (ii) there
are no circumstances or conditions that have resulted in any contamination or,
if circumstances or conditions have resulted in any contamination or if such
circumstances or conditions require remedial action, taking such actions with
respect to the affected Mortgaged Property is reasonably likely to produce a
greater recovery on a present value basis that not taking such actions. See
'Certain Legal Aspects of Mortgage Loans-- Environmental Legislation'.
 
LIMITED LIQUIDITY AND MARKET VALUE
 
     There is currently no secondary market for the Offered Certificates. In
addition, the Offered Certificates will not be listed on any securities exchange
and will not be quoted in an automated quotation system of a registered
securities association. While the underwriter with respect to a series of
Certificates may intend to make a secondary market in the related Offered
Certificates, underwriters are under no obligation to do so. Accordingly, there
can be no assurance that a secondary market for any series of Offered
Certificates will develop. Moreover, if a secondary market does develop, there

can be no assurance that it will provide holders of Offered Certificates with
liquidity of investment or that it will continue for the life of the Offered
Certificates. Lack of liquidity could result in a substantial decrease in the
market value of the Offered Certificates. In addition, the market value of the
Offered Certificates at any time may be affected by many factors, including then
prevailing interest rates, and no representation is made by any person or entity
as to the market value of any Offered Certificates at any time.
 
                                       16
<PAGE>
ERISA CONSIDERATIONS
 
     Generally, ERISA applies to investments made by employee benefit plans and
transactions involving the assets of such plans. Due to the complexity of
regulations which govern such plans, prospective investors that are subject to
ERISA are urged to consult their own counsel regarding consequences under ERISA
of acquisition, ownership and disposition of the Offered Certificates of any
series. See 'ERISA Considerations'.
 
CERTAIN FEDERAL TAX CONSIDERATIONS REGARDING RESIDUAL CERTIFICATES
 
     Holders of Residual Certificates will be required to report on their
federal income tax returns as ordinary income their pro rata share of the
taxable income of the REMIC, regardless of the amount or timing of their receipt
of cash payments, as described in 'Federal Income Tax Consequences--Federal
Income Tax Consequences for REMIC Certificates'. Accordingly, under certain
circumstances, holders of Offered Certificates that constitute Residual
Certificates may have taxable income and tax liabilities arising from such
investment during a taxable year in excess of the cash received during such
period. The requirement that holders of Residual Certificates report their pro
rata share of the taxable income and net loss of the REMIC will continue until
the Certificate Balances of all classes of Certificates of the related series
have been reduced to zero, even though holders of Residual Certificates have
received full payment of their stated interest and principal. A portion (or, in
certain circumstances, all) of such Certificateholder's share of the REMIC
taxable income may be treated as 'excess inclusion' income to such holder which
(i) generally, will not be subject to offset by losses from other activities,
(ii) for a tax-exempt holder, will be treated as unrelated business taxable
income and (iii) for a foreign holder, will not qualify for exemption from
withholding tax. Individual holders of Residual Certificates may be limited in
their ability to deduct servicing fees and other expenses of the REMIC. In
addition, Residual Certificates are subject to certain restrictions on transfer.
Because of the special tax treatment of Residual Certificates, the taxable
income arising in a given year on a Residual Certificate will not be equal to
the taxable income associated with investment in a corporate bond or stripped
instrument having similar cash flow characteristics and pre-tax yield.
Therefore, the after-tax yield on the Residual Certificate may be significantly
less than that of a corporate bond or stripped instrument having similar cash
flow characteristics.
 
CERTAIN FEDERAL TAX CONSIDERATIONS REGARDING ORIGINAL ISSUE DISCOUNT
 
     Accrual Certificates will be, and certain of the other Classes of
Certificates of a series may be, issued with 'original issue discount' for

federal income tax purposes, which generally will result in recognition of some
taxable income in advance of the receipt of cash attributable to such income.
See 'Federal Income Tax Consequences--Federal Income Tax Consequences for REMIC
Certificates--Taxation of Regular Certificates'.
 
CONSENT
 
     Under certain circumstances, the consent or approval of the holders of a
specified percentage of the aggregate Certificate Balance of all outstanding
Certificates of all series or a similar means of allocating decision-making
under the Agreement ('Voting Rights') will be required to direct, and will be
sufficient to bind all Certificateholders to, certain actions, including
amending the related Agreement in certain circumstances. See 'Description of the
Agreements--Events of Default', '--Rights Upon Event of Default' and
'--Amendment'.
 
BOOK-ENTRY REGISTRATION
 
     If so provided in the Prospectus Supplement, one or more classes of the
Certificates will be initially represented by one or more certificates
registered in the name of Cede, the nominee for DTC, and will not be registered
in the names of the Certificateholders or their nominees. Because of this,
unless and until Definitive Certificates are issued, Certificateholders will not
be recognized by the Trustee as 'Certificateholders' (as that term is to be used
in the related Agreement). Hence, until such time, Certificateholders will be
able to exercise the rights of Certificateholders only indirectly through DTC
and its participating organizations. See 'Description of the
Certificates--Book-Entry Registration and Definitive Certificates'.
 
                                       17
<PAGE>
                         DESCRIPTION OF THE TRUST FUNDS
 
MORTGAGE ASSETS
 
     The primary assets of each Trust Fund (the 'Mortgage Assets') will include
(i) Multifamily and/or Commercial Loans and/or Installment Contracts
(collectively, the 'Mortgage Loans') or (ii) pass-through certificates or other
mortgage-backed securities evidencing interests in or secured by one or more
Mortgage Loans ('MBS'). Any MBS that are included in the assets of a Trust Fund
(i) will have been either (a) previously registered under the Securities Act of
1933, as amended (the 'Securities Act'), or (b) eligible for sale under Rule
144(k) of the Securities Act and (ii) will have been acquired in bona fide
secondary market transactions from third parties not including the issuer of
such MBS or any affiliate of such issuer. As used herein, 'Mortgage Loans'
refers to both whole Mortgage Loans and Mortgage Loans underlying MBS. Mortgage
Loans that secure, or interests in which are evidenced by, MBS are herein
sometimes referred to as Underlying Mortgage Loans. Mortgage Loans that are not
Underlying Mortgage Loans are sometimes referred to as 'Whole Loans'. The
Mortgage Assets will not be guaranteed or insured by the Depositor or any of its
affiliates. The Prospectus Supplement will describe any guarantee or insurance
relating to the Mortgage Assets by any governmental agency or instrumentality or
by any other person. Each Mortgage Asset will be selected by the Depositor for
inclusion in a Trust Fund from among those purchased, either directly or

indirectly, from a prior holder thereof (a 'Mortgage Asset Seller'), which prior
holder may or may not be the originator of such Mortgage Loan or the issuer of
such MBS and may be an affiliate of the Depositor.
 
MORTGAGE LOANS
 
     The Mortgage Loans will be secured by liens on, or security interests in,
Mortgaged Properties consisting of (i) residential properties consisting of five
or more rental or cooperatively-owned dwelling units in high-rise, mid-rise or
garden apartment buildings ('Multifamily Properties' and the related loans,
'Multifamily Loans') or (ii) office buildings, retail stores, hotels or motels,
nursing homes, hospitals or other health care-related facilities, mobile home
parks, warehouse facilities, mini-warehouse facilities or self-storage
facilities, industrial plants, mixed use or other types of commercial properties
('Commercial Properties' and the related loans, 'Commercial Loans') located in
any one of the fifty states or the District of Columbia or such other locations
as are disclosed in the related Prospectus Supplement. The Mortgage Loans will
be secured by mortgages or deeds of trust or other similar security instruments
creating a first or more junior lien on Mortgaged Properties. Multifamily
Property may include mixed commercial and residential structures and may include
apartment buildings owned by private cooperative housing corporations
('Cooperatives'). The Mortgaged Properties may include leasehold interest in
properties, the title to which is held by third party lessors. The term of any
such leasehold will exceed the term of the mortgage note by at least ten years.
Each Mortgage Loan will have been originated by a person (the 'Originator')
other than the Depositor. The Mortgage Loans will be evidenced by promissory
notes (the 'Mortgage Notes') secured by mortgages or deeds of trust (the
'Mortgages') creating a lien on the Mortgaged Properties. Mortgage Loans will
generally also be secured by an assignment of leases and rents and/or operating
or other cash flow guarantees relating to the Mortgage Loan.
 
DEFAULT AND LOSS CONSIDERATIONS WITH RESPECT TO THE MORTGAGE LOANS
 
     Mortgage Loans secured by commercial and multifamily properties are
markedly different from owner-occupied single-family home mortgage loans. The
repayment of loans secured by commercial or multifamily properties is typically
dependent upon the successful operation of such property rather than upon the
liquidation value of the real estate. The Mortgage Loans will be non-recourse
loans, which means that, absent special facts, the mortgagee may look only to
the Net Operating Income from the property for repayment of the mortgage debt,
and not to any other of the mortgagor's assets, in the event of the mortgagor's
default. Lenders typically look to the Debt Service Coverage Ratio of a loan
secured by income-producing property as an important measure of the risk of
default on such a loan. The 'Debt Service Coverage Ratio' of a Mortgage Loan at
any given time is the ratio of the Net Operating Income for a twelve-month
period to the annualized scheduled payments on the Mortgage Loan. 'Net Operating
Income' is typically defined as total operating revenues (including primarily
rental income and any expense reimbursement, ancillary income, late charges and
deposit forfeitures) minus total operating expenses (including primarily
expenses for advertising, general administration, management fees and
disbursements, utilities, repairs and maintenance, insurance, real estate taxes
and replacement reserves based solely on the mortgagor's estimates of the useful
lives of various assets). Net Operating Income does not reflect capital
expenditures or partnership expenses. The Net Operating Income of a Mortgaged

Property will fluctuate over time and may be sufficient or insufficient to cover
debt service on the related Mortgage Loan at any given time.
 
     As the primary component of Net Operating Income, rental income (and
maintenance payments from tenant-stockholders of a Cooperative) is subject to
the vagaries of the applicable real estate market and/or business climate.
Properties typically leased, occupied or used on a short-term basis, such as
health care-related facilities, hotels and motels, and mini-warehouse and self-
 
                                       18
<PAGE>
storage facilities, tend to be affected more rapidly by changes in market or
business conditions than do properties leased, occupied or used for longer
periods, such as (typically) warehouses, retail stores, office buildings and
industrial plants. Commercial Loans may be secured by owner-occupied Mortgaged
Properties or Mortgaged Properties leased to a single tenant. Accordingly, a
decline in the financial condition of the mortgagor or single tenant, as
applicable, may have a disproportionately greater effect on the Net Operating
Income from such Mortgaged Properties than would be the case with respect to
Mortgaged Properties with multiple tenants.
 
     Changes in the expense components of Net Operating Income due to the
general economic climate or economic conditions in a locality or industry
segment, such as increases in interest rates, real estate and personal property
tax rates and other operating expenses including energy costs; changes in
governmental rules, regulations and fiscal policies, including environmental
legislation; and acts of God may also affect the risk of default on the related
Mortgage Loan. As may be further described in the related Prospectus Supplement,
in some cases leases of Mortgaged Properties may provide that the lessee, rather
than the mortgagor, is responsible for payment of certain of these expenses
('Net Leases'); however, because leases are subject to default risks as well
when a tenant's income is insufficient to cover its rent and operating expenses,
the existence of such 'net of expense' provisions will only temper, not
eliminate, the impact of expense increases on the performance of the related
Mortgage Loan.
 
     While the duration of leases and the existence of any 'net of expense'
provisions are often viewed as the primary considerations in evaluating the
credit risk of mortgage loans secured by certain income-producing properties,
such risk may be affected equally or to a greater extent by changes in
government regulation of the operator of the property. Examples of the latter
include mortgage loans secured by health care-related facilities and hospitals,
the income from which and the operating expenses of which are subject to state
and/or federal regulations, such as Medicare and Medicaid, and multifamily
properties and mobile home parks, which may be subject to state or local rent
control regulation and, in certain cases, restrictions on changes in use of the
property. Low-and moderate-income housing may be particularly subject to legal
limitations and regulations but, because of such regulations, may also be less
sensitive to fluctuations in market rents generally.
 
     The liquidation value of any Mortgaged Property may be adversely affected
by risks generally incident to interests in real property, including declines in
rental or occupancy rates. Lenders generally use the Loan-to-Value Ratio of a
mortgage loan as a measure of risk of loss if a property must be liquidated upon

a default by the mortgagor. 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 Value of the related Mortgaged
Property. The 'Value' of a Mortgaged Property, other than with respect to
Refinance Loans, is generally the lesser of (a) the appraised value determined
in an appraisal obtained by the originator at origination of such loan and (b)
the sales price for such property. Refinance Loans are loans made to refinance
existing loans. The Value of the Mortgaged Property securing a Refinance Loan is
the appraised value thereof determined in an appraisal obtained at the time of
origination of the Refinance Loan. The Value of a Mortgaged Property as of the
date of initial issuance of the related series of Certificates may be less than
the value at origination and will fluctuate from time to time based upon changes
in economic conditions and the real estate market.
 
     Appraised values of income-producing properties may be based on the market
comparison method (recent resale value of comparable properties at the date of
the appraisal), the cost replacement method (the cost of replacing the property
at such date), the income capitalization method (a projection of value based
upon the property's projected net cash flow), or upon a selection from or
interpolation of the values derived from such methods. Each of these appraisal
methods presents analytical challenges. It is often difficult to find truly
comparable properties that have recently been sold; the replacement cost of a
property may have little to do with its current market value; and income
capitalization is inherently based on inexact projections of income and expense
and the selection of an appropriate capitalization rate. Where more than one of
these appraisal methods are used and create significantly different results, or
where a high Loan-to-Value Ratio accompanies a high Debt Service Coverage Ratio
(or vice versa), the analysis of default and loss risks is even more difficult.
 
     While the Depositor believes that the foregoing considerations are
important factors that generally distinguish the Mortgage Loans from
single-family mortgage loans and provide insight to the risks associated with
income-producing real estate, there is no assurance that such factors will in
fact have been considered by the Originators of the Mortgage Loans, or that, for
a particular Mortgage Loan, they are complete or relevant. See 'Risk
Factors--Risks Associated with Certain Mortgage Loans and Mortgaged Properties',
'--Balloon Payments', '--Mortgagor Default' and '--Mortgagor Type'.
 
MORTGAGE LOAN INFORMATION IN PROSPECTUS SUPPLEMENTS
 
     Each Prospectus Supplement will contain information, as of the date of such
Prospectus Supplement and to the extent then applicable and specifically known
to the Depositor, with respect to the Mortgage Loans constituting related Trust
Assets, including (i) the aggregate outstanding principal balance and the
largest, smallest and average outstanding principal balance of the Mortgage
 
                                       19
<PAGE>
Loans as of the applicable Cut-off Date, (ii) the type of property securing the
Mortgage Loans (e.g., Multifamily Property or Commercial Property and the type
of property in each such category), (iii) the original and remaining terms to
maturity of the Mortgage Loans, and the seasoning of the Mortgage Loans, (iv)
the earliest and latest origination date and maturity date and weighted average
original and remaining terms to maturity of the Mortgage Loans, (v) the

Loan-to-Value Ratios at origination of the Mortgage Loans, (vi) the Mortgage
Rates or range of Mortgage Rates and the weighted average Mortgage Rate borne by
the Mortgage Loans, (vii) the geographical distribution of the Mortgaged
Properties on a state-by-state basis, (viii) information with respect to
prepayment provisions, if any, of the Mortgage Loans, (ix) the weighted average
Retained Interest, if any, (x) with respect to Mortgage Loans with adjustable
Mortgage Rates ('ARM Loans'), the adjustment dates, the highest, lowest and
weighted average margin, and the maximum Mortgage Rate variation at the time of
any adjustment and over the life of the ARM Loan, (xi) the Debt Service Coverage
Ratio either at origination or as of a more recent date (or both) and (xii)
information regarding the payment characteristics of the Mortgage Loans,
including without limitation balloon payment and other amortization provisions.
The related Prospectus Supplement will also contain certain information
available to the Depositor with respect to the provisions of leases and the
nature of tenants of the Mortgaged Properties and other information referred to
in a general manner under 'Description of the Trust Funds--Mortgage
Assets--Default and Loss Considerations with Respect to the Mortgage Loans'
above. If specific information respecting the Mortgage Loans is not known to the
Depositor at the time Certificates are initially offered, more general
information of the nature described above will be provided in the Prospectus
Supplement, and specific information will be set forth in a report which will be
available to purchasers of the related Certificates at or before the initial
issuance thereof and will be filed as part of a Current Report on Form 8-K with
the Commission within fifteen days after such initial issuance.
 
MORTGAGE UNDERWRITING STANDARDS AND PROCEDURES
 
     The underwriting procedures and standards for Mortgage Loans included in a
Mortgage Pool will be specified in the related Prospectus Supplement to the
extent such procedures and standards are known or available. Such Mortgage Loans
may be originated by an affiliate of the Depositor in contemplation of the
transactions contemplated by this Prospectus and the related Prospectus
Supplement or may be have been originated by third-parties and acquired by the
Depositor directly or through its affiliates in negotiated transactions.
 
     Underwriting procedures are intended to evaluate, among other things, the
income derived from the Mortgaged Property, the capabilities of the management
of the project, including a review of management's past performance record, its
management reporting and control procedures (to determine its ability to
recognize and respond to problems) and its accounting procedures to determine
cash management ability, the obligor's credit standing and repayment ability and
the value and adequacy of the Mortgaged Property as collateral. Mortgage Loans
insured by the Federal Housing Administration ('FHA'), a division of the United
States Department of Housing and Urban Development ('HUD'), will have been
originated by mortgage lenders which are approved by HUD as an FHA mortgagee in
the orginated course of their real estate lending activities and will comply
with the underwriting policies of FHA.
 
     The adequacy of a Mortgaged Property as security for repayment will
generally have been determined by appraisal by appraisers selected in accordance
with preestablished guidelines established by or acceptable to the loan
originator for appraisers or other appropriate market studies. If so specified
in the related Prospectus Supplement, the appraiser must have personally
inspected the property and verified that it was in good condition and that

construction, if new, has been completed. An appraisal can be based upon, among
other things, a cash flow analysis and/or a market data analysis of recent sales
of comparable properties or a replacement cost analysis based on the current
cost of constructing or purchasing a similar property.
 
     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. Further, there is no assurance that appreciation of real
estate values generally will limit loss experiences on commercial properties or
multifamily properties. If the commercial real estate market should experience
an overall decline in property values such that the outstanding balances of the
Mortgage Loans and any additional 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. Even where Credit Support covers all losses resulting from defaults
and foreclosure, the effect of defaults and foreclosures may be to increase
prepayment experience on the Mortgage Loans, thus shortening weighted average
life and affecting yield to maturity.
 
                                       20
<PAGE>
PAYMENT PROVISIONS OF THE MORTGAGE LOANS
 
     The Mortgage Loans generally will (i) have individual principal balances at
origination of not less than $25,000, (ii) have original terms to maturity of
not more than 40 years and (iii) provide for payments of principal, interest or
both, on due dates that occur monthly, quarterly or semi-annually or at such
other interval as is specified in the related Prospectus Supplement. Mortgage
Loan may: (i) provide for no accrual of interest or for accrual of interest
thereon at an interest rate (a 'Mortgage Rate') that is fixed over its term or
that adjusts from time to time, or that may be converted from an adjustable to a
fixed Mortgage Rate, or from a fixed to an adjustable Mortgage Rate, from time
to time at the mortgagor's election; (ii) provide for scheduled payments to
maturity or payments that adjust from time to time to accommodate changes in the
Mortgage Rate or to reflect the occurrence of certain events, and may provide
for negative amortization or accelerated amortization, (iii) be fully amortizing
or require a balloon payment due on its stated maturity date; and (iv) contain
prohibitions on prepayment (a 'Lock-out Period' and the date of expiration
thereof, a 'Lock-out Date') or require payment of a premium or a yield
maintenance penalty (a 'Prepayment Premium') in connection with a prepayment, in
each case as described in the related Prospectus Supplement. In the event that
holders of any class or classes of Offered Certificates will be entitled to all
or a portion of any Prepayment Premiums collected in respect of Mortgage Loans,
the related Prospectus Supplement will specify the method or methods by which
any such amounts will be allocated. A Mortgage Loan may also contain provisions
entitling the mortgagee to a share of profits realized from the operation or
disposition of the Mortgaged Property ('Equity Participations'), as described in
the related Prospectus Supplement. In the event that holders of any class or
classes of Offered Certificates will be entitled to all or a portion of an
Equity Participation, the related Prospectus Supplement will specify the terms
and provisions of the Equity Participation and the method or methods by which
distributions in respect thereof will be allocated among such Certificates.
 

MBS
 
     Any MBS will have been issued pursuant to a participation and servicing
agreement, a pooling and servicing agreement, an indenture or similar agreement
(an 'MBS Agreement'). A seller (the 'MBS Issuer') and/or servicer (the 'MBS
Servicer') of the underlying Mortgage Loans will have entered into the MBS
Agreement with a trustee or a custodian under the MBS Agreement (the 'MBS
Trustee'), if any, or with the original purchaser of the interest in the
underlying Mortgage Loans evidenced by the MBS.
 
     The MBS Issuer of any MBS may include the Depositor or an affiliate of the
Depositor. Any MBS (i) will have been issued in an offering exempt from the
registration requirements of the 1933 Act and, if offered in a private
placement, will have been held by persons other than the issuer of such MBS or
its affiliates for at least two years or (ii) will have been issued in an
offering registered under the 1933 Act, and thus may include one or more Classes
of Certificates.
 
     Distributions of principal and interest will be made on MBS on the dates
specified in the related Prospectus Supplement. The MBS may be issued in one or
more classes with characteristics similar to the classes of Certificates
described in this Prospectus. Principal and interest distributions will be made
on the MBS by the MBS Trustee or the MBS Servicer. The MBS Issuer or the MBS
Servicer or another person specified in the related Prospectus Supplement may
have the right or obligation to repurchase or substitute assets underlying the
MBS after a certain date or under other circumstances specified in the related
Prospectus Supplement.
 
     Enhancement in the form of reserve funds, subordination of other credit
support similar to that described for the Certificates under 'Description of
Credit Support' may be provided with respect to the MBS. The type,
characteristics and amount of such credit support, if any, will be a function of
certain characteristics of the Mortgage Loans evidenced or secured by such MBS
and other factors and generally will have been established for the MBS on the
basis of requirements of either any Rating Agency that may have assigned a
rating to the MBS or the initial purchasers of the MBS. In addition, MBS may
consist of classes of MBS which are subordinate to other classes of MBS of the
same series.
 
     The Prospectus Supplement for a series of Certificates evidencing interests
in Mortgage Assets that included MBS will specify, to the extent available, (i)
the aggregate approximate initial and outstanding principal amount and type of
the MBS to be included in the Trust Fund, (ii) the original and remaining term
to stated maturity of the MBS, if applicable, (iii) the pass-through or bond
rate of the MBS or formula for determining such rates, (iv) the applicable
payment provisions for the MBS, (v) the MBS Issuer, MBS Servicer and MBS
Trustee, as applicable, (vi) certain characteristics of the credit support, if
any, such as subordination, reserve funds, insurance policies, letters of credit
or guarantees relating to the related Underlying Mortgage Loans or directly to
such MBS, (vii) the characteristics of any subordination to which such MBS may
be subject; (viii) the terms on which the related Underlying Mortgage Loans for
such MBS or the MBS may, or are required to, be purchased prior to their
maturity, (ix) the terms on which Mortgage Loans may be substituted for those
originally underlying the MBS, (x) the servicing fees payable under the MBS

Agreement, (xi) to the extent available to the Depositor, the type of
information in respect of the Underlying
 
                                       21
<PAGE>
Mortgage Loans described under 'Description of the Trust Funds-- Mortgage
Assets--Mortgage Loan Information in Prospectus Supplements' and (xii) the
characteristics of any cash flow agreements that are included as part of the
trust fund evidenced or secured by the MBS.
 
COLLECTION ACCOUNTS
 
     Each Trust Fund will include one or more accounts (collectively, the
'Collection Account') established and maintained on behalf of the
Certificateholders into which the person or persons designated in the related
Prospectus Supplement will deposit all payments and collections received or
advanced with respect to the Mortgage Assets and other assets in the Trust Fund.
A Collection Account may be maintained as an interest bearing or a non-interest
bearing account, and funds held therein may be invested in certain short-term,
investment grade obligations.
 
CREDIT SUPPORT
 
     If so provided in the related Prospectus Supplement, partial or full
protection against certain defaults and losses on the Mortgage Assets in the
related Trust Fund may be provided to one or more classes of Certificates in the
related series in the form of subordination of one or more other classes of
Certificates in such series or by one or more other types of credit support,
such as a letter of credit, insurance policy for the Mortgage Loans, certificate
guarantee insurance, guarantee, reserve fund or another type of credit support,
or a combination thereof (any such coverage with respect to the Certificates of
any series, 'Credit Support'). The amount and types of coverage, the
identification of the entity providing the coverage (if applicable) and related
information with respect to each type of Credit Support, if any, will be
described in the Prospectus Supplement for a series of Certificates. See 'Risk
Factors--Credit Support Limitations' and 'Description of Credit Support'.
 
CASH FLOW AGREEMENTS
 
     The Trust Fund may include guaranteed investment contracts pursuant to
which moneys held in the funds and accounts established for the related series
will be invested at a specified rate. The Trust Fund may also include certain
other agreements, such as interest rate exchange agreements, interest rate cap
or floor agreements, currency exchange agreements or similar agreements provided
to reduce the effects of interest rate or currency exchange rate fluctuations on
the Mortgage Assets on one or more classes of Certificates. The principal terms
of any such guaranteed investment contract or other agreement (any such
agreement, a 'Cash Flow Agreement'), including, without limitation, provisions
relating to the timing, manner and amount of payments thereunder and provisions
relating to the termination thereof, will be described in the Prospectus
Supplement for the related series. In addition, the related Prospectus
Supplement will provide certain information with respect to the obligor under
any such Cash Flow Agreement.
 

                                USE OF PROCEEDS
 
     The net proceeds to be received from the sale of the Certificates will be
applied by the Depositor primarily to the purchase of Trust Assets. Any
remaining proceeds will be used by the Depositor for general corporate purposes
(such as paying its allocable share of rent, administrative expenses and the
cost of services rendered by employees of its affiliates) and
transaction-specific expenses (including, but not limited to, obtaining any
external credit enhancement, establishing any reserve funds and paying other
costs incurred in connection with structuring and issuing the Certificates). The
Depositor expects to sell the Certificates from time to time, but the timing and
amount of offerings of Certificates will depend on a number of factors,
including the volume of Mortgage Assets acquired by the Depositor, prevailing
interest rates, availability of funds and general market conditions.
 
                              YIELD CONSIDERATIONS
 
GENERAL
 
     The yield on any Offered Certificate will depend on the price paid by the
Certificateholder, the Pass-Through Rate of the Certificate, the receipt and
timing of receipt of distributions on the Certificate and the weighted average
life of the Mortgage Assets in the related Trust Fund. See 'Risk
Factors--Average Life of Certificates; Prepayments; Yields'.
 
PASS-THROUGH RATE
 
     Certificates of any class within a series may have fixed, variable or
adjustable Pass-Through Rates, which may or may not be based upon the interest
rates borne by the Mortgage Assets in the related Trust Fund. The Prospectus
Supplement with respect to any series of Certificates will specify the
Pass-Through Rate for each class of such Certificates or in the case of a
variable or
 
                                       22
<PAGE>
adjustable Pass-Through Rate, the method of determining the Pass-Through Rate;
the effect, if any, of the prepayment of any Mortgage Asset on the Pass-Through
Rate of one or more classes of Certificates; and whether the distributions of
interest on the Certificates of any class will be dependent, in whole or in
part, on the performance of any obligor under a Cash Flow Agreement.
 
TIMING OF PAYMENT OF INTEREST AND PRINCIPAL
 
     Each payment of interest on the Certificates (or addition to the
Certificate Balance of a class of Accrual Certificates) on a Distribution Date
will include interest accrued during the Interest Accrual Period for such
Distribution Date. If the Interest Accrual Period ends on a date other than a
Distribution Date for the related series, the yield realized by the holders of
such Certificates may be lower than the yield that would result in the Interest
Accrual Period ended on such Distribution Date. In addition, interest accrued
for an Interest Accrual period for one or more classes of Certificates may be
calculated on the assumption that distributions of principal (and additions to
the Certificate Balance of Accrual Certificates) and allocations of losses on

the Mortgage Assets may be made on the first day of the Interest Accrual Period
for a Distribution Date and not on such Distribution Date. Such method would
produce a lower effective yield than if interest were calculated on the basis of
the actual principal amount outstanding during an Interest Accrual Period. The
Interest Accrual Period for any class of Offered Certificates will be described
in the related Prospectus Supplement.
 
PRINCIPAL PREPAYMENTS
 
     The yield to maturity on the Certificates will be affected by the rate of
principal payments on the Mortgage Assets (including principal prepayments on
Mortgage Loans resulting from both voluntary prepayments by the mortgagors and
involuntary liquidations). The rate at which principal prepayments occur on the
Mortgage Loans will be affected by a variety of factors, including, without
limitation, the terms of the Mortgage Loans, the level of prevailing interest
rates, the availability of mortgage credit and economic, demographic,
geographic, tax, legal and other factors. In general, however, if prevailing
interest rates fall significantly below the Mortgage Rates on the Mortgage Loans
comprising or underlying the Mortgage Assets in a particular Trust Fund, such
Mortgage Loans are likely to be the subject of higher principal prepayments than
if prevailing rates remain at or above the rates borne by such Mortgage Loans.
In this regard, it should be noted that certain Mortgage Assets may consist of
Mortgage Loans with different Mortgage Rates and the stated pass-through or
pay-through interest rate of certain MBS may be a number of percentage points
higher or lower than certain of the Underlying Mortgage Loans. The rate of
principal payments on some or all of the classes of Certificates of a series
will correspond to the rate of principal payments on the Mortgage Assets in the
related Trust Fund and is likely to be affected by the existence of Lock-out
Periods and Prepayment Premium provisions of the Mortgage Loans underlying or
comprising such Mortgage Assets, and by the extent to which the servicer of any
such Mortgage Loan is able to enforce such provisions. Mortgage Loans with a
Lock-out Period or a Prepayment Premium provision, to the extent enforceable,
generally would be expected to experience a lower rate of principal prepayments
than otherwise identical Mortgage Loans without such provisions, with shorter
Lock-out Periods or with lower Prepayment Premiums.
 
     If the purchaser of a Certificate offered at a discount calculates its
anticipated yield to maturity based on an assumed rate of distributions of
principal that is faster than that actually experienced on the Mortgage Assets,
the actual yield to maturity will be lower than that so calculated. Conversely,
if the purchaser of a Certificate offered at a premium calculates its
anticipated yield to maturity based on an assumed rate of distributions or
principal that is slower than that actually experienced on the Mortgage Assets,
the actual yield to maturity will be lower than that so calculated. In either
case, the effect of voluntary and involuntary prepayments of the Mortgage Assets
on the yield on one or more classes of the Certificates of such series in the
related Trust Fund may be mitigated or exacerbated by any provisions for
sequential or selective distribution of principal to such classes.
 
     The timing of changes in the rate of principal payments on the Mortgage
Assets may significantly affect an investor's actual yield to maturity, even if
the average rate of distributions of principal is consistent with an investor's
expectation. In general, the earlier a principal payment is received on the
Mortgage Assets and distributed on a Certificate, the greater the effect on such

investor's yield to maturity. The effect of an investor's yield of principal
payments occurring at a rate higher (or lower) than the rate anticipated by the
investor during a given period may not be offset by a subsequent like decrease
(or increase) in the rate of principal payments.
 
PREPAYMENTS--MATURITY AND WEIGHTED AVERAGE LIFE
 
     The rates at which principal payments are received on the Mortgage Assets
included in or comprising a Trust Fund and the rate at which payments are made
from any Credit Support or Cash Flow Agreement for the related series of
certificates may affect the ultimate maturity and the weighted average life of
each class of such series. Prepayments on the Mortgage Loans comprising or
 
                                       23
<PAGE>
underlying the Mortgage Assets in a particular Trust Fund will generally
accelerate the rate at which principal is paid on some or all of the classes of
the Certificates of the related series.
 
     Weighted average life refers to the average amount of time that will elapse
from the date of issue of a security until each dollar of principal of such
security will be repaid to the investor. The weighted average life of a class of
Certificates of a series will be influenced by the rate at which principal on
the Mortgage Loans comprising or underlying the Mortgage Assets is paid to such
class, which may be in the form of scheduled amortization or prepayments (for
this purpose, the term 'prepayment' includes prepayments, in whole or in part,
and liquidations due to default).
 
     In addition, the weighted average life of the Certificates may be affected
by the varying maturities of the Mortgage Loans comprising or underlying the
Mortgage Assets. If any Mortgage Loans comprising or underlying the Mortgage
Assets in a particular Trust Fund have actual terms to maturity of less than
those assumed in calculating final scheduled Distribution Dates for the classes
of Certificates of the related series, one or more classes of such Certificates
may be fully paid prior to their respective final scheduled Distribution Dates,
even in the absence of prepayments. Accordingly, the prepayment experience of
the Mortgage Assets will, to some extent, be a function of the mix of Mortgage
Rates and maturities of the Mortgage Loans comprising or underlying such
Mortgage Assets. See 'Description of the Trust Funds'.
 
     Prepayments on loans are also commonly measured relative to a prepayment
standard or model, such as the Constant Prepayment Rate ('CPR') prepayment model
or the Standard Prepayment Assumption ('SPA') prepayment model, each as
described below. CPR represents a constant assumed rate of prepayment each month
relative to the then outstanding principal balance of a pool of loans for the
life of such loans. SPA represents an assumed rate of prepayment each month
relative to the then outstanding principal balance of a pool of loans. A
prepayment assumption of 100% SPA assumes prepayment rates of 0.2% per annum of
the then outstanding principal balance of such loans in the first month of the
life of the loans and an additional 0.2% per annum in each month thereafter
until the thirtieth month. Beginning in the thirtieth month and in each month
thereafter during the life of the loans, 100% of SPA assumes a constant
prepayment rate of 6% per annum each month.
 

     Neither CPR nor SPA nor any other prepayment model or assumption purports
to be a historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any pool of loans, including the Mortgage
Loans underlying or comprising the Mortgage Assets. Moreover, CPR and SPA were
developed based upon historical prepayment experience for single-family loans.
Thus, it is likely that prepayment of any Mortgage Loans comprising or
underlying the Mortgage Assets for any series will not conform to any particular
level of CPR or SPA.
 
     The Prospectus Supplement with respect to each series of Certificates will
contain tables, if applicable, setting forth the projected weighted average life
of each life of Offered Certificates of such series and the percentage of the
Initial Certificate Balance of each such class that would be outstanding on
specified Distribution Dates based on the assumptions stated in such Prospectus
Supplement, including assumptions that prepayments on the Mortgage Loans
comprising or underlying the related Mortgage Assets are made at rates
corresponding to various prepayment rates. Such tables and assumptions are
intended to illustrate the sensitivity of weighted average life of the
Certificates to various prepayment rates and will not be intended to predict or
to provide information that will enable investors to predict the actual weighted
average life of the Certificates. It is unlikely that prepayment of any Mortgage
Loans comprising or underlying the Mortgage Assets for any series will conform
to any particular prepayment rate.
 
OTHER FACTORS AFFECTING WEIGHTED AVERAGE LIFE
 
  TYPE OF MORTGAGE LOAN
 
     A number of Mortgage Loans may have balloon payments due at maturity, and
because the ability of a mortgagor to make a balloon payment typically will
depend upon its ability either to refinance the loan or to sell the related
Mortgaged Property, there is a risk that a number of Mortgage Loans having
balloon payments may default at maturity, or that the servicer may extend the
maturity of such a Mortgage Loan in connection with a workout. In the case of
defaults, recovery of proceeds may be delayed by, among other things, bankruptcy
of the mortgagor or adverse conditions in the market where the property is
located. In order to minimize losses on defaulted Mortgage Loans, the servicer
may be given considerable flexibility to modify Mortgage Loans that are in
default or as to which a default is reasonably foreseeable. Any defaulted
balloon payment or modification that extends the maturity of a Mortgage Loan
will tend to extend the weighted average life of the Certificates, thereby
lengthening the period of time elapsed from the date of issuance of a
Certificate until it is retired.
 
                                       24
<PAGE>
FORECLOSURES AND PAYMENT PLANS
 
     The number of foreclosures and the principal amount of the Mortgage Loans
comprising or underlying the Mortgage Assets that are foreclosed in relation to
the number of Mortgage Loans that are repaid in accordance with their terms will
affect the weighted average life of the Mortgage Loans comprising or underlying
the Mortgage Assets and that of the related series of Certificates. Servicing
decisions made with respect to the Mortgage Loans, including the use of payment

plans prior to a demand for acceleration and the restructuring of Mortgage Loans
in bankruptcy proceeds, may also have an effect upon the payment patterns of
particular Mortgage Loans and thus the weighted average life of the
Certificates.
 
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE CLAUSES
 
     Acceleration of mortgage payments as a result of certain transfers of or
the creation of encumbrances upon underlying Mortgaged Property is another
factor affecting prepayment rates. A number of the Mortgage Loans comprising or
underlying the Mortgage Assets may include 'due-on-sale' clauses or
'due-on-encumbrance' clauses that allow the holder of the Mortgage Loans to
demand payment in full of the remaining principal balance of the Mortgage Loans
upon sale or certain other transfers of or the creation of encumbrances upon the
related Mortgaged Property. With respect to any Whole Loans, the Master Servicer
will, if required by the related Agreement, on behalf of the Trust Fund, employ
its usual practices in determining whether to exercise any such right that the
Trustee may have as mortgagee to accelerate payment of the Whole Loan. See
'Certain Legal Aspects of Mortgage Loans--Due-on-Sale and Due-on-Encumbrance'
and 'Description of the Agreements--Due-on-Sale and Due-on-Encumbrance
Provisions'.
 
                                 THE DEPOSITOR
 
     Nomura Asset Securities Corporation, the Depositor, is a Delaware
corporation organized on June 23, 1992 for the purpose of acquiring Mortgage
Assets and selling interests therein or bonds secured thereby. It is a wholly
owned subsidiary of Nomura Asset Capital Corporation, which is in turn a
wholly-owned subsidiary of Nomura Holding America Inc., a United States-based
holding company, incorporated in Delaware, which is wholly owned by The Nomura
Securities Co., Ltd., a Japanese corporation. The Nomura Securities Co., Ltd. is
engaged in the domestic and international securities business. The Depositor
maintains its principal office at Two World Financial Center--Building B, 21st
Floor, New York, New York 10281-1198. Its telephone number is (212) 667-9300.
 
     The Depositor does not have, nor is it expected in the future to have, any
significant assets.
 
                        DESCRIPTION OF THE CERTIFICATES
 
GENERAL
 
     The Certificates of each series (including any class of Certificates not
offered hereby) will represent the entire beneficial ownership interest in the
Trust Fund created pursuant to the related Agreement. Each series of
Certificates will consist of one or more classes or subclasses of Certificates
that may be senior (collectively, 'Senior Certificates') or subordinate
(collectively, 'Subordinate Certificates') Certificates. Each series may consist
of one or more of the types of Certificates described below.
 
     Types of Certificates classified by interest payments can include:
 
<TABLE>
<CAPTION>

CATEGORY OF CLASS         DEFINITION
- ------------------------- ------------------------------------------------------
 
<S>                       <C>
Ascending Rate........... Certificates that have predetermined Pass-Through
                          Rates that change one or more times on dates
                          determined before issuance.
 
Fixed Rate............... Certificates with Pass-Through Rates that are fixed
                          throughout the life of such Certificates.
 
Floating Rate............ Certificates with Pass-Through Rates that are reset
                          periodically based on an index and that vary directly
                          with changes in the index.
 
Inverse Floating Rate.... Certificates with Pass-Through Rates that are reset
                          periodically based on an index and that vary inversely
                          with changes in the index.
 
Stripped Interest........ Certificates that receive some or all of the interest
                          payments made on the underlying Mortgage Loans or
                          other Trust Fund assets and little or no principal.
                          Stripped Interest
</TABLE>
 
                                       25
<PAGE>
<TABLE>
<S>                       <C>
                          Certificates have either a nominal or a notional
                          principal amount. A nominal principal amount
                          represents actual principal that will be paid on the
                          class. It is referred to as nominal since it is
                          extremely small compared to other classes of
                          Certificates. A notional principal amount is the
                          amount used as a reference to calculate the amount of
                          interest due on a Stripped Interest Certificate that
                          is not entitled to any principal.
 
Stripped Principal....... Certificates that do not receive any interest.
 
WAC (or Weighted Average
  Coupon)................ Certificates whose Pass-Through Rate represents a
                          blended interest rate that may change from period to
                          period.
 
Accrual.................. Certificates that accrete all or a portion of their
                          interest, which is added to the outstanding principal
                          balance. This accretion may continue until the class
                          of Certificates begins receiving principal payments,
                          until some other event has occurred or until the class
                          is retired.
 
Types of Certificates classified by allocation of principal distributions can

  include:
 
PAC (or Planned
  Amortization
  Class)................. Certificates that are designed to receive principal
                          payments using a predetermined schedule derived by
                          assuming two constant prepayment rates for the
                          underlying Mortgage Loans. A PAC schedule will reflect
                          a 'structuring range' both above and below the
                          Prepayment Assumption for the related series. The PAC
                          Certificates in any series may include two or more
                          'types'. The PAC Certificates within any typehave a
                          single structuring range. The different types have
                          different structuring ranges and/or different
                          principal payment priorities.
 
Scheduled................ Certificates that are designed to receive principal
                          payments using a predetermined schedule, but that are
                          not designated as PAC or TAC Certificates. Classes
                          consisting of both PAC and TAC components are also
                          designated as Scheduled Classes.
 
Sequential Pay........... Certificates that receive principal payments in a
                          prescribed sequence, that do not have predetermined
                          schedules and that under all circumstances receive
                          payments of principal continuously from the first
                          Distribution Date on which they receive principal
                          until they are retired. Sequential Pay Certificates
                          may receive principal payments concurrently with one
                          or more other classes of Sequential Pay Certificates.
                          A single class of Certificates that receives principal
                          payments before or after all other classes in the same
                          series may be identified as a Sequential Pay
                          Certificate.
 
Sticky Jump/Non-Sticky
  Jump................... Certificates whose principal payment priorities change
                          temporarily or permanently upon the occurrence of one
                          or more 'trigger' events. A Sticky Jump Certificate
                          'jumps' to its new priority on the first Distribution
                          Date when the trigger condition is met and retains
                          ('sticks' to) that priority until retired. If the
                          principal payment change is not permanent, the
                          Certificate is referred to as a Non-Sticky Jump.
 
Strip.................... Certificates that receive a constant proportion, or
                          'strip', of the principal payments on the underlying
                          Mortgage Loans or other Trust Fund assets.
 
Support (or Companion)... Certificates that receive principal payments on any
                          Payment Date only if scheduled payments have been made
                          on specified PAC, TAC and/or Scheduled Classes.
 
TAC (or Targeted

  Amortization
  Class)................. Certificates that are designed to receive principal
                          payments using a predetermined schedule derived by
                          assuming a single constant prepayment rate for the
                          underlying Mortgage Loans. The TAC Certificates in any
                          series may include two or more 'types'. The different
                          types have different principal payment priorities
                          and/or have schedules that are derived from different
                          assumed prepayment rates.
 
Index Allocation Class... Certificates whose principal payment allocations are
                          based on the value of an index.
</TABLE>
 
                                       26
<PAGE>
     The Prospectus Supplement for any series including classes similar to any
of those described above will contain a complete description of their
characteristics and risk factors, including, as applicable, (i) mortgage
principal prepayment effects on the weighted average lives of classes; (ii) the
risk that Stripped Interest Certificates purchased at a premium may not return
their purchase prices under rapid prepayment scenarios and (iii) the degree to
which an investor's yield is sensitive to principal prepayment. Any class of
Certificates may be divided into two or more subclasses of Certificates.
 
     Each class of Offered Certificates of a series will be issued in minimum
denominations corresponding to Certificate Balances or, in case of Stripped
Interest Certificates, notional amounts specified in the related Prospectus
Supplement. The transfer of any Offered Certificates may be registered and such
Certificates may be exchanged without the payment of any service charge payable
in connection with such registration of transfer or exchange, but the Depositor
or the Trustee or any agent thereof may require payment of a sum sufficient to
cover any tax or other governmental charge. One or more classes of Certificates
of a series may be issued in definitive form ('Definitive Certificates') or in
book-entry form ('Book-Entry Certificates'), as provided in the related
Prospectus Supplement. See 'Risk Factors--Book-Entry Registration' and
'Description of the Certificates--Book-Entry Registration and Definitive
Certificates'. Definitive Certificates will be exchangeable for other
Certificates of the same class and series of a like aggregate Certificate
Balance or notional amount but of different authorized denominations. See 'Risk
Factors-- Limited Liquidity' and '--Limited Assets'.
 
DISTRIBUTIONS
 
     Distributions allocable to principal and interest on the Certificates of
each series will be made by or on behalf of the Trustee on each Distribution
Date as specified in the related Prospectus Supplement from the Available Funds
for such series on such Distribution Date. Distributions (other than the final
distribution) will be made to the persons in whose names the Certificates are
registered (the 'Record Date'), and the amount of each distribution will be
determined (the 'Determination Date') as of the close of business on the date
specified in the related Prospectus Supplement. All distributions with respect
to each class of Certificates on each Distribution Date will be allocated pro
rata among the outstanding Certificates in such class. Payments will be made

either by wire transfer in immediately available funds to the account of a
Certificateholder at a bank or other entity having appropriate facilities
therefor, if such Certificateholder has so notified the Trustee or its designee
no later than the date specified in the related Prospectus Supplement (and, if
so provided in the related Prospectus Supplement, holds Certificates in the
requisite amount specified therein), or by check mailed to the address of the
person entitled thereto as it appears on the Certificate Register; provided,
however, that the final distribution in retirement of the Certificates (whether
Definitive Certificates or Book-Entry Certificates) will be made only upon
presentation and surrender of the Certificates at the office or agency of the
Trustee or its agent specified in the notice to Certificateholders of such final
distribution.
 
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. 'Available Funds' for
each Distribution Date will generally equal the sum of the following amounts:
 
     (i) the total amount of all cash on deposit in the related Collection
Account as of the corresponding Determination Date, exclusive of:
 
     (a) all scheduled payments of principal and interest collected but due on a
date subsequent to the related Collection Period (a 'Collection Period' with
respect to any Distribution Date will usually commence on the second day of the
month in which the immediately preceding Distribution Date occurs, or the day
after Cut-off Date in the case of the first Collection Period, and will end on
the first day of the month of the related Distribution Date).
 
     (b) all prepayments, together with related payments of the interest
thereon, Liquidation Proceeds, Insurance Proceeds, and other unscheduled
recoveries received subsequent to the related Prepayment Period, as defined in
the related Prospectus Supplement, and
 
     (c) all amounts in the Collection Account that are due or reimbursable to
the Depositor, the Trustee, a Mortgage Asset Seller, a Sub-Servicer or the
Master Servicer or that are payable in respect of certain expenses of the
related Trust Fund;
 
     (ii) if the related Prospectus Supplement so provides, interest or
investment income on amounts on deposit in the Collection Account, including any
net amounts paid under any Cash Flow Agreements;
 
     (iii) all advances made by a Master Servicer with respect to such
Distribution Date;
 
     (iv) if and to the extent the related Prospectus Supplement so provides,
amounts paid by a Master Servicer with respect to interest shortfalls resulting
from voluntary and involuntary prepayments during the related Prepayment Period;
and
 
                                       27
<PAGE>

     (v) to the extent not on deposit in the related Collection Account as of
the corresponding Determination Date, any amounts collected under, from or in
respect of any Credit Support with respect to such Distribution Date.
 
     As described below, the entire Available Distribution Amount will be
distributed among the related Certificates (including any Certificates not
offered hereby) on each Distribution Date, and accordingly will be released from
the Trust Fund and will not be available for any future distributions.
 
DISTRIBUTIONS OF INTEREST ON THE CERTIFICATES
 
     Each class of Certificates (other than classes of Stripped Principal
Certificates that have no Pass-Through Rate) may have a different Pass-Through
Rate, which may be a fixed, variable or adjustable Pass-Through Rate. The
related Prospectus Supplement will specify the Pass-Through Rate for each class
or, in the case of a variable or adjustable Pass-Through Rate, the method for
determining the Pass-Through Rate. Interest on the Certificates will typically
be calculated on the basis of a 360-day year consisting of twelve 30-day months.
 
     Distributions of interest in respect of the Certificates of any class will
be made on each Distribution Date (other than any class of Accrual Certificates,
which will be entitled to distributions of accrued interest commencing only on
the Distribution Date, or under the circumstances, specified in the related
Prospectus Supplement, and any class of Stripped Principal Certificates that are
not entitled to any distributions of interest) based on the Accrued Certificate
Interest for such class and such Distribution Date, subject to the sufficiency
of the portion of the Available Distribution Amount allocable to such class on
such Distribution Date. Prior to the time interest is distributable on any class
of Accrual Certificates, Accrued Certificate Interest on such class will be
added to the Certificate Balance thereof on each Distribution Date. With respect
to each class of Certificates and each Distribution Date (other than certain
classes of Stripped Interest Certificates), 'Accrued Certificate Interest' will
be equal to interest accrued during the related Interest Accrual Period on the
outstanding Certificate Balance thereof immediately prior to the Distribution
Date, at the applicable Pass-Through Rate, reduced to reflect prepayment
interest shortfalls as described below (for this purpose, the term 'prepayment'
includes prepayments, in whole or in part, and liquidations due to default).
Accrued Certificate Interest on Stripped Interest Certificates will be equal to
interest accrued on the outstanding notional amount thereof immediately prior to
each Distribution Date, at the applicable Pass-Through Rate, reduced as
described below. The method of determining the notional amount for any class of
Stripped Interest Certificates will be described in the related Prospectus
Supplement. Reference to notional amount is solely for convenience in certain
calculations and does not represent the right to receive any distributions of
principal. The Accrued Certificate Interest on each class of Certificates will
be reduced in the event of prepayment interest shortfalls, which are shortfalls
in collections of interest for a full accrual period resulting from prepayments
prior to the due date in such accrual period on the Mortgage Loans comprising or
underlying the Mortgage Assets in the Trust Fund for the related series, with
such shortfall allocated among all of the classes of Certificates of that series
in the manner specified in the related Prospectus Supplement. See 'Risk
Factors--Average Life of Certificates; Prepayments; Yields' and 'Yield
Considerations'.
 

DISTRIBUTIONS OF PRINCIPAL OF THE CERTIFICATES
 
     The Certificates of each series, other than certain classes of Stripped
Interest Certificates, will have a 'Certificate Balance' which, at any time,
will equal the then maximum amount that the holder will be entitled to receive
in respect of principal out of the future cash flow on the Mortgage Assets and
other assets included in the related Trust Fund. The outstanding Certificate
Balance of a Certificate will be reduced to the extent of distributions of
principal thereon from time to time, and by the amount of losses allocated to
such Certificate incurred in respect of the related Mortgage Assets, may be
increased in respect of deferred interest on the related Mortgage Loans to the
extent provided in the related Prospectus Supplement and, in the case of Accrual
Certificates prior to the Distribution Date on which distributions of interest
are required to commence, will be increased by any Accrued Certificate Interest.
The initial aggregate Certificate Balance of all classes of Certificates of a
series will not be greater than the outstanding aggregate principal balance of
the related Mortgage Assets as of the applicable Cut-off Date. The initial
aggregate Certificate Balance of a series and each class thereof will be
specified in the related Prospectus Supplement. Distributions of principal will
be made on each Distribution Date to the class or classes of Certificates
entitled thereto in accordance with the provisions described in such Prospectus
Supplement until the Certificate Balance of such class has been reduced to zero.
Stripped Interest Certificates with no Certificate Balance are not entitled to
any distributions of principal.
 
DISTRIBUTIONS ON THE CERTIFICATES OF PREPAYMENT PREMIUMS OR IN RESPECT OF EQUITY
PARTICIPATIONS
 
     Prepayment Premiums or payments in respect of Equity Participations that
are collected on the Mortgage Assets in the related Trust Fund will be
distributed on each Distribution Date to the class or classes of Certificates
entitled thereto in accordance with the provisions described in the related
Prospectus Supplement.
 
                                       28
<PAGE>
ALLOCATION OF LOSSES AND SHORTFALLS
 
     With respect to a series of Certificates consisting of one or more classes
of Subordinate Certificates, on any Distribution Date in respect of which losses
or shortfalls in collections on the Mortgage Assets have been incurred, the
amount of such losses or shortfalls will be borne first by a class of
Subordinate Certificates in the priority and manner and subject to the
limitations specified in the related Prospectus Supplement. See 'Description of
Credit Support' for a description of the types of protection that may be
included in a Trust Fund against losses and shortfalls on Mortgage Assets
comprising such Trust Fund.
 
ADVANCES IN RESPECT OF DELINQUENCIES
 
     With respect to any series of Certificates evidencing an interest in a
Trust Fund consisting of Mortgage Assets other than MBS, the Master Servicer, if
required by the related Agreement, will be required as part of its servicing
responsibilities to advance on or before each Distribution Date its own funds or

funds held in the Collection Account that are not included in the Available
Funds for such Distribution Date, in an amount equal to the aggregate of
payments of principal (other than any balloon payments) and interest (net of
related servicing fees and Retained Interest) that were due on the Whole Loans
in such Trust Fund during the related Collection Period and were delinquent on
the related Determination Date, subject to the Master Servicer's good faith
determination that such advances will be reimbursable from (a) Related Proceeds
(as defined below) or (b) in the case of a series of Certificates that includes
one or more classes of Subordinate Certificates and if so provided in the
related Prospectus Supplement, the greater of (x) the outstanding Certificate
Balance of such Subordinate Certificates and (y) Related Proceeds. See
'Description of Credit Support'.
 
     Advances are intended to maintain a regular flow of scheduled interest and
principal payments to holders of the class or classes of Certificates entitled
thereto, rather than to guarantee or insure against losses. Advances of the
Master Servicer's funds will typically be reimbursable only out of related
recoveries on the Mortgage Loans (including amounts received under any form of
Credit Support) respecting which such advances were made (as to any Mortgage
Loan, 'Related Proceeds'); provided, however, that any such advance will be
reimbursable from any amounts in the Collection Account to the extent that the
Master Servicer shall determine that such advance (a 'Nonrecoverable Advance')
is not ultimately recoverable from Related Proceeds. If advances have been made
by the Master Servicer from excess funds in the Collection Account, the Master
Servicer is required to replace such funds in the Collection Account on any
future Distribution Date to the extent that funds in the Collection Account on
such Distribution Date are less than payments required to be made to
Certificateholders on such date. The obligations of the Master Servicer to make
advances may be secured by a cash advance reserve fund or a surety bond.
Information regarding the characteristics of, and the identity of any obligor
on, any such surety bond, will be set forth in the related Prospectus
Supplement.
 
     The Master Servicer will be entitled to receive interest at the rate
specified in the related Prospectus Supplement on its outstanding advances and
will be entitled to pay itself such interest periodically from general
collections on the Mortgage Loans prior to any payment to Certificateholders or
as otherwise provided in the related Agreement and described in such Prospectus
Supplement.
 
     The Prospectus Supplement for any series of Certificates evidencing an
interest in a Trust fund that includes MBS will describe any corresponding
advancing obligation of any person in connection with such MBS.
 
REPORTS TO CERTIFICATEHOLDERS
 
     With each distribution to holders of any class of Certificates of a series,
a Master Servicer or the Trustee, as provided in the related Prospectus
Supplement, will forward or cause to be forwarded to each such holder, to the
Depositor and to such other parties as may be specified in the related
Agreement, a statement setting forth, in each case to the extent applicable and
available:
 
     (i) the amount of such distribution to holders of Certificates of such

class applied to reduce the Certificate Balance thereof;
 
     (ii) the amount of such distribution to holders of Certificates of such
class allocable to Accrued Certificate Interest;
 
     (iii) the amount of such distribution allocable to (a) Prepayment Premiums
and (b) payments on account of Equity Participations;
 
     (iv) the amount of related servicing compensation received by a Master
Servicer, any Special Servicer and any Sub-Servicer and such other customary
information as any such Master Servicer or the Trustee deems necessary or
desirable, or that a Certificateholder reasonably requests, to enable
Certificateholders to prepare their tax returns;
 
     (v) the aggregate amount of advances included in such distribution, and the
aggregate amount of unreimbursed advances at the close of business on such
Distribution Date;
 
     (vi) the aggregate principal balance of the Mortgage Assets at the close of
business on such Distribution Date;
 
                                       29
<PAGE>
     (vii) the number and aggregate principal balance of Mortgage Loans in
respect of which (a) one scheduled payment is delinquent, (b) two scheduled
payments are delinquent, (c) three or more scheduled payments are delinquent and
(d) foreclosure proceedings have been commenced;
 
     (viii) with respect to each Mortgage Loan that is delinquent two or more
months, (a) the loan number thereof, (b) the unpaid balance thereof, (c) whether
the delinquency is in respect of any balloon payment, (d) the aggregate amount
of unreimbursed servicing expenses and unreimbursed advances in respect thereof,
(e) the aggregate amount of any interest accrued and payable on related
servicing expenses and related advances assuming such Mortgage Loan is
subsequently liquidated through foreclosure, (f) whether a notice of
acceleration has been sent to the mortgagor and, if so, the date of such notice,
(g) whether foreclosure proceedings have been commenced and, if so, the date so
commenced and (h) if such Mortgage Loan is more than three months delinquent and
foreclosure has not been commenced, the reason therefor;
 
     (ix) with respect to any Whole Loan liquidated during the related
Collection Period or Prepayment Period, as applicable (other than by payment in
full), (a) the loan number thereof, (b) the manner in which it was liquidated,
(c) the aggregate amount of liquidation proceeds received, (d) the portion of
such liquidation proceeds payable or reimbursable to the Master Servicer in
respect of such Mortgage Loan and (e) the amount of any loss to
Certificateholders;
 
     (x) with respect to each REO Property relating to a Whole Loan and included
in the Trust Fund as of the end of the related Collection Period or Prepayment
Period, as applicable, (a) the loan number of the related Mortgage Loan, (b) the
date of acquisition, (c) the book value, (d) the principal balance of the
related Mortgage Loan immediately following such Distribution Date (calculated
as if such Mortgage Loan were still outstanding taking into account certain

limited modifications to the terms thereof specified in the Agreement), (e) the
aggregate amount of unreimbursed servicing expenses and unreimbursed advances in
respect thereof and (f) if applicable, the aggregate amount of interest accrued
and payable on related servicing expenses and related advances;
 
     (xi) with respect to any such REO Property sold during the related Due
Period or Prepayment Period, as applicable, (a) the loan number of the related
Mortgage Loan, (b) the aggregate amount of sale proceeds, (c) the portion of
such sales proceeds payable or reimbursable to the Master Servicer or a Special
Servicer in respect of such REO Property or the related Mortgage Loan and (d)
the amount of any loss to Certificateholders in respect of the related Mortgage
Loan;
 
     (xii) the aggregate Certificate Balance or notional amount, as the case may
be, of each class of Certificates (including any class of Certificates not
offered hereby) at the close of business on such Distribution Date, separately
identifying any reduction in such Certificate Balance due to the allocation of
any loss and increase in the Certificate Balance of a class of Accrual
Certificates in the event that Accrued Certificate Interest has been added to
such balance;
 
     (xiii) the aggregate amount of principal prepayments made during the
related Prepayment Period;
 
     (xiv) the amount deposited in the reserve fund, if any, on such
Distribution Date;
 
     (xv) the amount remaining in the reserve fund, if any, as of the close of
business on such Distribution Date;
 
     (xvi) the aggregate unpaid Accrued Certificate Interest, if any, on each
class of Certificates at the close of business on such Distribution Date;
 
     (xvii) in the case of Certificates with a variable Pass-Through Rate, the
Pass-Through Rate applicable to such Distribution Date, as calculated in
accordance with the method specified in the related Prospectus Supplement;
 
     (xviii) in the case of Certificates with an adjustable Pass-Through Rate,
for statements to be distributed in any month in which an adjustment date
occurs, the adjustable Pass-Through Rate applicable to the next succeeding
Distribution Date as calculated in accordance with the method specified in the
related Prospectus Supplement;
 
     (xix) as to any series which incudes Credit Support, the amount of coverage
of each instrument of Credit Support included therein as of the close of
business on such Distribution Date; and
 
     (xx) the aggregate amount of payments by the mortgagors of (a) default
interest, (b) late charges and (c) assumption and modification fees collected
during the related Collection Period or Prepayment Period, as applicable. In the
case of information furnished pursuant to subclauses (i)-(iv) above, the amounts
shall be expressed as a dollar amount per minimum denomination of Certificates
or for such other specified portion thereof. The Prospectus Supplement for each
series of Offered Certificates will describe any additional information to be

included in reports to the holders of such Certificates.
 
     Within a reasonable period of time after the end of each calendar year, the
Master Servicer, if any, or the Trustee, as provided in the related Prospectus
Supplement, shall furnish to each person who at any time during the calendar
year was a holder of a Certificate a statement containing the information set
forth in subclauses (i)-(iv) above, aggregated for such calendar year or the
 
                                       30
<PAGE>
applicable portion thereof during which such person was a Certificateholder.
Such obligation of the Master Servicer or the Trustee shall be deemed to have
been satisfied to the extent that substantially comparable information shall be
provided by the Master Servicer or the Trustee pursuant to any requirements of
the Code as are from time to time in force. See 'Description of the
Certificates-- Book-Entry Registration and Definitive Certificates'.
 
TERMINATION
 
     The obligations created by the Agreement for each series of Certificates
will terminate upon the payment to Certificateholders of that series of all
amounts held in the Collection Account or by the Master Servicer, if any, or the
Trustee and required to be paid to them pursuant to such Agreement following the
earlier of (i) the final payment or other liquidation of the last Mortgage Asset
subject thereto or the disposition of all property acquired upon foreclosure of
any Mortgage Loan subject thereto and (ii) the purchase of all of the assets of
the Trust Fund by the party entitled to effect such termination. In no event,
however, will the trust created by the Agreement continue beyond the date
specified in the related Prospectus Supplement. Written notice of termination of
the Agreement will be given to each Certificateholder, and the final
distribution will be made only upon surrender and cancellation of the
Certificates at an office or agency appointed by the Trustee, which will be
specified in the notice of termination.
 
   
     If so specified in the related Prospectus Supplement, upon the reduction of
the aggregate Certificate Balance of a series of Certificates by a specified
percentage (which percentage will exceed 90%), certain parties (which may
include the Depositor, the Servicer, the Special Servicer, the holders of
certain Classes of Certificates or such other party as is identified therein)
will have the option to effect an early termination through the repurchase of
the assets in the related Trust Fund by the party specified therein. If so
provided in the related Prospectus Supplement, the party specified therein will
solicit bids for the purchase of all assets of the Trust Fund under the
circumstances and in the manner set forth therein; provided, however, that the
Trustee will not be permitted to accept any bid for the purchase of the assets
of such Trust Fund which is less than the greater of (1) the aggregate fair
market value of all the Mortgage Loans and REO Properties then included in the
Trust Fund, as mutually determined by the Master Servicer and the Trustee, and
(2) the sum of (i) the aggregate Purchase Price of all the Mortgage Loans then
included in the Trust Fund, (ii) the aggregate amount of unreimbursed advances,
if any, with interest thereon at the rate specified in the related Prospectus
Supplement and (iii) the fair market value of all REO Properties then included
in the Trust Fund, as determined by an appraiser mutually agreed upon by the

Master Servicer and the Trustee. Upon the termination of a Trust Fund and the
sale of the assets of the Trust Fund neither the Trust Fund, the Trustee, the
Depositor, the Master Servicer, the Special Servicer nor the holders of any
Class of Certificates will have any liability with respect to the sale of the
assets of the Trust Fund; provided however that the foregoing will not limit or
otherwise affect any Certificateholders rights under any of the federal
securities laws. In the event that the fair market value of any REO Properties
included in the Trust Fund at the time of any such termination is less than the
principal balance of the related Mortgage Loans, a Realized Loss may occur in
connection with such termination.
    
 
BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES
 
     If so provided in the Prospectus Supplement for a series of Certificates,
the Offered Certificates of one or more classes of such series will be issued as
Book-Entry Certificates, and each such class will be represented by one or more
single Certificates registered in the name of the depository, 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 UCC and a 'clearing agency' registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was created
to hold securities for its participating organizations ('Participants') and
facilitate the clearance and settlement of securities transactions between
Participants through electronic book-entry changes in their accounts, thereby
eliminating the need for physical movement of certificates. Participants include
Nomura Securities International, Inc., securities brokers and dealers, banks,
trust companies and clearing corporations and may include certain other
organizations. Indirect access to the DTC system also is available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ('Indirect Participants').
 
     Holders of Certificates that are not Participants or Indirect Participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, Offered Certificates may do so only through Participants and
Indirect Participants. In addition, such Certificateholders will receive all
distributions of principal of and interest on the Offered Certificates from the
Trustee or the applicable paying agent 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 &
Co. ('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. The only 'Certificateholder' (as
such term is used in the Agreement) will be Cede, as nominee of DTC, and the
Certificateholders will not be recognized by the Trustee as Certificateholders
under the Agreement.
 
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<PAGE>
Certificateholders will be permitted to exercise the rights of
Certificateholders under the related Agreement only indirectly through DTC and

its Participants who in turn will exercise their rights through DTC.
 
     Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among Participants
on whose behalf it acts with respect to the Certificates and is required to
receive and transmit distributions of principal and interest on 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 act only 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 has advised the Depositor 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.
 
     Certificates initially issued in book-entry form will be issued in fully
registered, certificated form to Certificateholders or their nominees
('Definitive Certificates'), rather than to DTC or its nominee only if (i) the
Depositor 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 Depositor is unable to locate a qualified successor or (ii)
the Depositor, at its option, elects to terminate the book-entry system through
DTC.
 
     Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Certificates for the Certificates. Under
surrender by DTC of the certificate or certificates representing such
Certificates and instructions for reregistration, the Trustee will issue such
Certificates in the form of Definitive Certificates, and thereafter the Trustee
will recognize the holders of such Definitive Certificates as Certificateholders
under the Agreement. In the event that Definitive Certificates are issued or DTC
ceases to be the clearing agency for the Certificates, the Agreement will
provide that the applicable Certificateholders will be notified of such event.
 
                         DESCRIPTION OF THE AGREEMENTS
 
     The Certificates of each series evidencing interests in a Trust Fund
consisting of Mortgage Loans will be issued pursuant to a Pooling and Servicing
Agreement among the Depositor, a Master Servicer, any Special Servicer appointed
as of the date of the Pooling and Servicing Agreement and the Trustee. The
Certificates of each series evidencing interests in a Trust Fund consisting
exclusively of MBS will be issued pursuant to a Trust Agreement between the
Depositor and a Trustee. Any Master Servicer, any such Special Servicer and the
Trustee with respect to any series of Certificates will be named in the related
Prospectus Supplement. 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 a Pooling and Servicing Agreement has been filed
as an exhibit to the Registration Statement of which this Prospectus is a part.
The following summaries describe certain provisions that 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 Trust Fund and
the related Prospectus Supplement. As used herein with respect to any series,
the term 'Certificate' refers to all of the Certificates of that series, whether
or not offered hereby and by the related Prospectus Supplement, unless the
context otherwise requires. The Depositor will provide a copy of the Agreement
(without exhibits) relating to any series of Certificates without charge upon
written request of a holder of a Certificate of such series addressed to Nomura
Asset Securities Corporation, Two World Financial Center--Building B, 21st
Floor, New York, New York 10281-1198. Attention: Secretary.
 
ASSIGNMENT OF MORTGAGE ASSETS; REPURCHASES
 
     At the time of issuance of any series of Certificates, the Depositor will
cause the Mortgage Assets included in the related Trust Fund to be assigned to
the Trustee, together with all principal and interest received by or on behalf
of the Depositor on or with respect to such Mortgage Assets after the Cut-off
Date, other than principal and interest due on or before the Cut-off Date and
other than any Retained Interest. The Trustee will, concurrently with such
assignment, deliver the Certificates to the Depositor in exchange for the
Mortgage Assets and the other assets comprising the Trust Fund for such series.
Each Mortgage Asset will be identified in a schedule appearing as an exhibit to
the related Agreement. Such schedule will include detailed information in
respect of each Mortgage Loan included in the related Trust Fund such as the
address of the related Mortgaged Property and type of such property, the
Mortgage Rate and, if applicable, the applicable index, margin, adjustment date
and any rate cap information, the
 
                                       32
<PAGE>
original and remaining term to maturity, the original and outstanding principal
balance and balloon payment, if any, the Value, Loan-to-Value Ratio and Debt
Service Coverage Ratio as of the date indicated and payment and prepayment
provisions, if applicable and in respect of each MBS included in the related
Trust Fund, including without limitation, the MBS Issuer, MBS Servicer and MBS
Trustee, the pass-through or bond rate or formula for determining such rates,
the issue date and original and remaining term to maturity, if applicable, the
original and outstanding principal amount and payment provisions, if applicable.
 
     With respect to each Whole Loan, the Depositor will deliver or cause to be
delivered to the Trustee (or to the custodian hereinafter referred to) certain
loan documents, including the Mortgage Note endorsed, without recourse, to the
order of the Trustee, the Mortgage with evidence of recording indicated thereon
(except for any Mortgage not returned from the public recording office, in which
case the Depositor will deliver or cause to be delivered a copy of such Mortgage
together with its certificate that the original of such Mortgage was delivered
to such recording office) and an assignment of the Mortgage to the Trustee in
recordable form. The Depositor will promptly cause the assignment of each

related Whole Loan to be recorded in the appropriate public office for real
property records, except in the State of California or in other states where, in
the opinion of counsel acceptable to the Trustee, such recording is not required
to protect the Trustee's interest in the Whole Loan against the claim of any
subsequent transferee or any successor to or creditor of the Depositor, the
Master Servicer, the relevant Mortgage Asset Seller or any other prior holder of
the Whole Loan.
 
     The Trustee (or the custodian) will review such Whole Loan documents within
a specified period of days after receipt thereof, and the Trustee (or the
custodian) will hold such documents in trust for the benefit of the
Certificateholders. If any such document is found to be missing or defective in
any material respect, the Trustee (or such custodian) shall take such action as
required in the Agreement, which may include immediately notifying the Master
Servicer and the Depositor. If the Mortgage Asset Seller, upon notification,
cannot cure the omission or defect within a specified number of days after
receipt of such notice, the Mortgage Asset Seller will be obligated, within a
specified number of days of receipt of such notice, to repurchase the related
Whole Loan from the Trustee at the Purchase Price or substitute for such
Mortgage Loan. There can be no assurance that a Mortgage Asset Seller will
fulfill this repurchase or substitution obligation. Although the Master Servicer
is obligated to use its best efforts to enforce such obligation to the extent of
its obligations with respect to a Warranting Party as described under
'--Representations and Warranties; Repurchases', neither the Master Servicer nor
the Depositor will be obligated to repurchase or substitute for such Mortgage
Loan if the Mortgage Asset Seller defaults on its obligation. This repurchase or
substitution obligation may constitute the sole remedy available to the
Certificateholders or the Trustee for omission of, or a material defect in, a
constituent document.
 
     With respect to each MBS, the Depositor will deliver or cause to be
delivered to the Trustee (or the custodian) the original certificate or other
definitive evidence of the MBS, together with bond power or other instruments,
certifications or documents required to transfer fully the MBS to the Trustee
for the benefit of the Certificateholders in accordance with the related MBS
Agreement. The Depositor will promptly cause the Trustee to be registered, with
the applicable persons, as the holder of the MBS.
 
REPRESENTATIONS AND WARRANTIES; REPURCHASES
 
     The Depositor may make or assign certain representations and warranties
pursuant to the related Agreement with respect to each Whole Loan constituting a
Mortgage Asset in the related Trust Fund, as of a specified date (the person
making such representations and warranties, the 'Warranting Party') covering, by
way of example, the following types of matters: (i) the accuracy of the
information set forth for such Whole Loan on the schedule of Mortgage Assets
appearing as an exhibit to the Agreement; (ii) the existence of title insurance
insuring the lien priority of the Whole Loan; (iii) the authority of the
Mortgage Asset Seller to sell the Whole Loan; (iv) the payment status of the
Whole Loan and the status of payments of taxes, assessments and other charges
affecting the related Mortgaged Property; (v) the existence of customary
provisions in the related Mortgage Note and Mortgage to permit realization
against the Mortgaged Property of the benefit of the security of the Mortgage;
and (vi) the existence of hazard and extended perils insurance coverage on the

Mortgaged Property.
 
     Any Warranting Party shall be a Mortgage Asset Seller or an affiliate
thereof or such other person acceptable to the Depositor and shall be identified
in the related Prospectus Supplement.
 
     Representations and warranties made in respect of a Whole Loan may have
been made as of a date prior to the applicable Cut-off Date. A substantial
period of time may have elapsed between such date and the date of initial
issuance of the related series of Certificates evidencing an interest in such
Whole Loan. In the event of a breach of any such representation or warranty, the
Warranting Party may be obligated pursuant to the related Agreement to cure such
breach or repurchase or replace the affected Whole Loan as described below.
Since the representations and warranties may not address events that may occur
following the date as of which they were made, the Warranting Party will have a
cure, repurchase or substitution obligation in connection with a breach of such
a representation and warranty only if the relevant event that causes such breach
occurs prior to such date. Such party would have no such obligations if the
relevant event that causes such breach occurs after such date. However, the
Depositor will
 
                                       33
<PAGE>
not include any Whole Loan in the Trust Fund for any series of Certificates if
anything has come to the Depositor's attention that would cause it to believe
that the representations and warranties made in respect of such Whole Loan will
not be accurate and complete in all material respects as of the date of initial
issuance of the related series of Certificates.
 
     Each Agreement will provide that the Master Servicer and/or Trustee will be
required to notify promptly the relevant Warranting Party of any breach of any
representation or warranty made by or on behalf of it in respect of a Whole Loan
that materially and adversely affects the value of such Mortgage Loan or the
interests therein of the Certificateholders. If such Warranting Party cannot
cure such breach within a specified period following the date on which such
party was notified of such breach, then such Warranting Party will be obligated
to repurchase such Mortgage Loan from the Trustee within a specified period from
the date on which the Warranting Party was notified of such breach, at the
Purchase Price therefor. As to any Whole Loan, the 'Purchase Price' will
typically equal to the sum of the unpaid principal balance thereof plus unpaid
accrued interest thereon at the Mortgage Rate from the date as to which interest
was last paid to the end of the accrual period in which the relevant purchase is
to occur. If so provided in the Prospectus Supplement for a series, a Warranting
Party, rather than repurchase a Mortgage Loan as to which a breach has occurred,
will have the option, within a specified period after initial issuance of such
series of Certificates, to cause the removal of such Mortgage Loan from the
Trust Fund and substitute in its place one or more other Whole Loans, in
accordance with the standards described in the related Prospectus Supplement.
The Master Servicer will be required under the applicable Agreement to use its
best efforts to enforce such obligations of the Warranting Party 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 Whole
Loan. This repurchase or substitution obligation will constitute the sole remedy
available to holders of Certificates or the Trustee for a breach of

representation by a Warranting Party.
 
     Neither the Depositor (except to the extent that it is the Warranting
Party) nor the Master Servicer will be obligated to purchase or substitute for a
Whole Loan if a Warranting Party defaults on its obligation to do so, and no
assurance can be given that Warranting Parties will carry out such obligations
with respect to Whole Loans.
 
     With respect to a Trust Fund that includes MBS, the related Prospectus
Supplement will describe any representations or warranties made or assigned by
the Depositor with respect to such MBS, the person making them and the remedies
for breach thereof.
 
     A Master Servicer will make certain representations and warranties
regarding its authority to enter into, and its ability to perform its
obligations under, the related Agreement. Upon a breach of any such
representation of the Master Servicer which materially and adversely affects the
interests of the Certificateholders, the Master Servicer will be obligated to
cure the breach in all material respects.
 
PAYMENTS ON MORTGAGE ASSETS; DEPOSITS TO COLLECTION ACCOUNT
 
     The Master Servicer, if any, and/or the Trustee will, as to each Trust
Fund, establish and maintain or cause to be established and maintained one or
more Collection Accounts for the collection of payments on the related Mortgage
Assets, which must be either (i) maintained with a bank or trust company, and in
a manner, satisfactory to the Rating Agency or Agencies rating any class of
Certificates of such series or (ii) an account or accounts the deposits in which
are insured by the Bank Insurance Fund ('BIF') or the Savings Association
Insurance Fund ('SAIF') of the Federal Deposit Insurance Corporation ('FDIC')
(to the limits established by the FDIC) and the uninsured deposits in which are
otherwise secured such that the Certificateholders have a claim with respect to
the funds in the Collection Account or a certified first priority security
interest against any collateral securing such funds that is superior to the
claims of any other depositors or general creditors of the institution with
which the Collection Account is maintained. The collateral eligible to secure
amounts in the Collection Account is limited to United States government
securities and other investment grade investments specified in the Agreement
('Permitted Investments'). A Collection Account may be maintained as an interest
bearing or a non-interest bearing account and the funds held therein may be
invested pending each succeeding Distribution Date in Permitted Investments. Any
interest or other income earned on funds in the Collection Account will
generally be paid to a Master Servicer or its designee as additional servicing
compensation. The Collection Account may be maintained with an institution that
is an affiliate of the Master Servicer, if applicable, provided that such
institution meets the standards set forth above. If permitted by the Rating
Agency or Agencies and so specified in the related Prospectus Supplement, a
Collection Account may contain funds relating to more than one series of
mortgage pass-through certificates and may contain other funds respecting
payments on mortgage loans belonging to the Master Servicer or serviced or
master serviced by it on behalf of others.
 
     A Master Servicer or the Trustee will deposit or cause to be deposited in
the Collection Account for each Trust Fund on a daily basis, unless otherwise

provided in the Agreement and described in the related Prospectus Supplement,
the following
 
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<PAGE>
payments and collections received, or advances made, by the Master Servicer or
the Trustee or on its behalf subsequent to the Cut-off Date (other than payments
due on or before the Cut-off Date, and exclusive of any amounts representing a
Retained Interest):
 
     (i) all payments on account of principal, including principal prepayments,
and on account of modification or assumption fees, on the Mortgage Assets;
 
     (ii) all payments on account of interest on the Mortgage Assets, including
any late charges or default interest collected, and to the extent that any class
or classes of Certificates is entitled thereto, all payments on account of
Prepayment Premiums or Equity Participations, in each case net of any portion
thereof retained by a Master Servicer or a Sub-Servicer as its servicing
compensation and net of any Retained Interest;
 
     (iii) all proceeds of the hazard 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 normal servicing procedures of a Master
Servicer or the related Sub-Servicer, subject to the terms and conditions of the
related Mortgage and Mortgage Note) (collectively, 'Insurance Proceeds') and all
other amounts received and retained in connection with a taking of a Mortgaged
Property by exercise of a power of eminent domain or condemnation or the
liquidation of defaulted Mortgage Loans, by foreclosure or otherwise
('Liquidation Proceeds'), together with the net proceeds on a monthly basis with
respect to any Mortgaged Properties acquired for the benefit of
Certificateholders by foreclosure or by deed in lieu of foreclosure or
otherwise;
 
     (iv) any amounts paid under any instrument or drawn from any fund that
constitutes Credit Support for the related series of Certificates as described
under 'Description of Credit Support';
 
     (v) any advances made as described under 'Description of the
Certificates--Advances in Respect of Delinquencies';
 
     (vi) any amounts paid under any Cash Flow Agreement, as described under
'Description of the Trust Funds--Cash Flow Agreements';
 
     (vii) all proceeds of any Mortgage Loan or property in respect thereof
purchased by the Master Servicer, the Depositor, any Sub-Servicer or any
Mortgage Asset Seller as described under 'Description of the
Agreements--Assignment of Mortgage Assets; Repurchases'--and '--Representations
and Warranties; Repurchases', exclusive of the Retained Interest, if any, in
respect of such Mortgage Loan, and all proceeds of any Mortgage Asset purchased
as described under 'Description of the Certificates-- Termination';
 
     (viii) all payments required to be deposited in the Collection Account with
respect to any deductible clause in any blanket insurance policy described under
'--Hazard Insurance Policies'; and

 
     (ix) any amount required to be deposited by a Master Servicer or the
Trustee in connection with losses realized on investments for the benefit of the
Master Servicer or the Trustee, as the case may be, of funds held in the
Collection Account.
 
     The Agreement for a series of Certificates may provide that a special trust
account (the 'REO Account') will be established and maintained in order to be
used in connection with REO Properties and, if specified in the related
Prospectus Supplement, certain other Mortgaged Properties. To the extent set
forth in the Agreement, certain withdrawals from the REO Account will be made
to, among other things, (i) make remittances to the Collection Account as
required by the Agreement, (ii) pay taxes, assessments, insurance premiums,
other amounts necessary for the proper operation, management and maintenance of
the REO Properties and such Mortgaged Properties and certain third-party
expenses in accordance with the Agreement and (iii) provide for the
reimbursement of certain expenses in respect of the REO Properties and such
Mortgaged Properties.
 
     The amount at any time credited to the REO Account will be fully insured to
the maximum coverage possible or will be invested in Permitted Investments that
mature, or are subject to withdrawal or redemption, on or before the business
day on which such amounts are required to be remitted to the Master Servicer for
deposit in the Collection Account. The income from the investment of funds in
the REO Account in Permitted Investments shall be deposited in the REO Account
for remittance to the Collection Account, and the risk of loss of funds in the
REO Account resulting from such investments will be borne by the Trust Fund.
 
COLLECTION AND OTHER SERVICING PROCEDURES
 
     The Master Servicer, directly or through Sub-Servicers, is required to make
reasonable efforts to collect all scheduled payments under the Whole Loans and
will follow or cause to be followed such collection procedures as it would
follow with respect to mortgage loans that are comparable to the Whole Loans and
held for its own account, provided such procedures are consistent with the
Agreement and any related hazard insurance policy or instrument of Credit
Support included in the related Trust Fund described herein or under
'Description of Credit Support'. Each Master Servicer will be required to
perform the customary functions of a servicer of comparable loans, including
collecting payments from mortgagors; maintaining hazard insurance policies
 
                                       35
<PAGE>
as described herein and in any related Prospectus Supplement, and filing and
settling claims thereunder; maintaining escrow or impoundment accounts of
mortgagors for payment of taxes, insurance and other items required to be paid
by any mortgagor pursuant to the Whole Loan; processing assumptions or
substitutions, although 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; and maintaining accounting records relating to the Whole
Loans. The Master Servicer will be responsible for filing and settling claims in
respect of particular Whole Loans under any applicable instrument of Credit

Support. See 'Description of Credit Support'.
 
     Consistent with the general servicing standard set forth above, the Master
Servicer may, in its discretion, waive any late payment charge in respect of a
late Whole Loan payment and, only upon determining that the coverage under any
related hazard insurance policy or instrument of Credit Support will not be
affected, extend or cause to be extended the due dates for payments due on a
Whole Loan for a period not greater than that specified in the applicable
Agreement.
 
     The Master Servicer may agree to modify, waive or amend any term of any
Whole Loan in a manner consistent with the general servicing standards set forth
above so long as the modification, waiver or amendment will not (i) affect the
amount or timing of any payments of principal or interest on the Whole Loan or
(ii) in its judgment, materially impair the security for the Whole Loan or
reduce the likelihood of timely payment of amounts due thereon. The Master
Servicer also may agree to any modification, waiver or amendment that would so
affect or impair the payments on, or the security for, a Whole Loan if (i) in
its judgment, a material default on the Whole Loan has occurred or a payment
default is imminent and (ii) in its judgment, such modification, waiver or
amendment will minimize the loss that might otherwise be experienced with
respect to the Whole Loan. The Master Servicer is required to notify the Trustee
in the event of any modification, waiver or amendment of any Whole Loan.
 
SPECIAL SERVICERS
 
     To the extent so specified in the related Prospectus Supplement, generally
in the event that a Mortgage Loan is in default or if certain events occur that
indicate that a default is imminent, a special servicer (the 'Special Servicer')
may be appointed to perform certain servicing functions in connection with such
Mortgage Loan. The related Prospectus Supplement will set forth certain
information with respect to the Special Servicer and will describe the rights,
obligations and compensation of a Special Servicer. A Master Servicer will only
be responsible for the duties and obligations of a Special Servicer to the
extent set forth in the Prospectus Supplement. A Special Servicer may be an
affiliate of the Depositor and may have other business relationships with the
Depositor and its affiliates.
 
SUB-SERVICERS
 
     A Master Servicer and/or any Special Servicer may each delegate their
respective servicing obligations in respect of the Whole Loans to third-party
servicers (each, a 'Sub-Servicer'), but such Master Servicer and/or Special
Servicer will remain obligated under the related Agreement. The sub-servicing
agreement between a Master Servicer and/or Special Servicer and a Sub-Servicer
(a 'Sub-Servicing Agreement') will be consistent with the terms of the related
Agreement and will not result in a withdrawal or downgrading of the rating of
any class of Certificates issued pursuant to such Agreement. Although each Sub-
Servicing Agreement will be a contract solely between the Master Servicer or
Special Servicer, as applicable, and the Sub-Servicer, the related Agreement
will provide that, if for any reason the Master Servicer or Special Servicer for
such series of Certificates is no longer acting in such capacity, the Trustee or
any successor Master Servicer or Special Servicer must recognize the Sub-
Servicer's rights and obligations under such Sub-Servicing Agreement.

 
     The Master Servicer or Special Servicer, as applicable, will be solely
liable for all fees owed by it to any Sub-Servicer, irrespective of whether the
Master Servicer's or Special Servicer's compensation pursuant to the related
Agreement is sufficient to pay such fees. However, a Sub-Servicer may be
entitled to a Retained Interest in certain Whole Loans. Each Sub-Servicer will
be reimbursed by the Master Servicer or Special Servicer, as applicable, for
certain expenditures which it makes, generally to the same extent the Master
Servicer or Special Servicer, as applicable, would be reimbursed under an
Agreement. See '--Retained Interest, Servicing Compensation and Payment of
Expenses'.
 
     The Master Servicer or Special Servicer, as applicable, may require any
Sub-Servicer to agree to indemnify the Master Servicer or Special Servicer for
any liability or obligation sustained by the Master Servicer or Special Servicer
in connection with any act or failure to act by the Sub-Servicer in its
servicing capacity. An Agreement may require a Sub-Servicer 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 or Special Servicer.
 
                                       36
<PAGE>
REALIZATION UPON DEFAULTED WHOLE LOANS
 
     A mortgagor's failure to make required payments may reflect inadequate
operating income or the diversion of that income from the service of payments
due under the Mortgage Loan, and may call into question such mortgagor's ability
to make timely payment of taxes and to pay for necessary maintenance of the
related Mortgaged Property. The Master Servicer is required to monitor any Whole
Loan which is in default, contact the mortgagor concerning the default, evaluate
whether the causes of the default can be cured over a reasonable period without
significant impairment of the value of the Mortgaged Property, initiate
corrective action in cooperation with the mortgagor if cure is likely, inspect
the Mortgaged Property and take such other actions as it would normally take
with respect to similar loans serviced for its own portfolio. A significant
period of time may elapse before the Master Servicer is able to assess the
success of such corrective action or the need for additional initiatives.
 
     The time within which the Master Servicer makes the initial determination
of appropriate action, evaluates the success of corrective action, develops
additional initiatives, institutes foreclosure proceedings and actually
forecloses (or takes a deed to a Mortgaged Property in lieu of foreclosure) on
behalf of the Certificateholders, may vary considerably depending on the
particular Whole Loan, the Mortgaged Property, the mortgagor, the presence of an
acceptable party to assume the Mortgage Loan and the laws of the jurisdiction in
which the Mortgaged Property is located. Under federal bankruptcy law, in
certain cases the Master Servicer may not be permitted to accelerate a Whole
Loan or to foreclose on a Mortgaged Property for a considerable period of time.
See 'Certain Legal Aspects of Mortgage Loans'.
 
     If so specified in the Prospectus Supplement for a series of Certificates
that includes one or more subordinate classes, any holder or holders of a class
of Subordinate Certificates having the lowest priority of payment may purchase

from the Trust Fund at the purchase price described in such Supplement any Whole
Loan as to which the number of scheduled payments thereunder specified in such
Supplement are delinquent.
 
     The Master Servicer, on behalf of the Trustee, may at any time institute
foreclosure proceedings, exercise any power of sale contained in any mortgage,
obtain a deed in lieu of foreclosure, or otherwise acquire title to a Mortgaged
Property securing a Whole Loan by operation of law or otherwise, if such action
is consistent with the servicing standard described herein and a default on the
related Mortgage Loan has occurred or, in the Master Servicer's judgment, is
imminent. The Master Servicer may not, however, acquire title to any Mortgaged
Property or take any action that would cause the Trust Fund to be an 'owner' or
an 'operator' within the meaning of certain federal or state environmental laws,
unless the Master Servicer has also previously determined, based on a report
prepared by a person who regularly conducts environmental audits (which report
will be an expense of the Trust Fund), that:
 
     (i) The Mortgaged Property is in compliance with applicable environmental
laws or, if not, that it would be in the best economic interest of the Trust
Fund to take such actions as are necessary to cause the Mortgaged Property to
comply therewith (the cost of which actions will be an expense of the Trust
Fund); and
 
     (ii) There are no circumstances or conditions present at the Mortgaged
Property relating to the use, management or disposal of any hazardous
substances, hazardous materials, wastes, or petroleum-based materials for which
investigation, testing, monitoring, containment, clean-up or remediation could
be required under any federal, state or local law or regulation, or, if such
substances, materials or wastes are present for which such action could be
required, that it would be in the best economic interest of the Trust Fund to
take such actions with respect to the Mortgaged Property (the cost of which
actions will be an expense of the Trust Fund).
 
     If title to any Mortgaged Property is acquired by the Trust Fund, the
Master Servicer, pursuant to the related Agreement and on behalf of the Trust
Fund, will be required to sell the Mortgaged Property within two years of
acquisition, unless the Trustee receives (i) an opinion of independent counsel
to the effect that the holding of the property by the Trust Fund subsequent to
two years after its acquisition will not result in the imposition of a tax on
the Trust Fund or cause the Trust Fund to fail to qualify as a REMIC under the
Code at any time that any Certificate is outstanding or (ii) an extension from
the Internal Revenue Service.
 
     If the Trust Fund acquires title to any Mortgaged Property, the Master
Servicer, on behalf of the Trust Fund, may retain an independent contractor to
manage and operate such property. The retention of an independent contractor,
however, will not relieve the Master Servicer of any of its obligations with
respect to the management and operation of such Mortgaged Property. Any such
property acquired by the Trust Fund will be managed in a manner consistent with
the management and operation by the Master Servicer of similar property owned by
it.
 
     The limitations imposed by the Agreement and the REMIC provisions of the
Code (if a REMIC election has been made with respect to the related Trust Fund)

on the operations and ownership of any Mortgaged Property acquired on behalf of
the Trust Fund may result in the recovery of an amount less than the amount that
would otherwise be recovered. See 'Certain Legal Aspects of Mortgage
Loans--Foreclosure'.
 
                                       37
<PAGE>
     If recovery on a defaulted Whole Loan under any related instrument of
Credit Support is not available, the Master Servicer nevertheless 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 Whole Loan. If
the proceeds of any liquidation of the property securing the defaulted Whole
Loan are less than the outstanding principal balance of the defaulted Whole Loan
plus interest accrued thereon at the Mortgage Rate plus the aggregate amount of
expenses incurred by the Master Servicer in connection with such proceedings and
which are reimbursable under the Agreement, the Trust Fund will realize a loss
in the amount of such difference. The Master Servicer will be entitled to
withdraw or cause to be withdrawn from the Collection Account out of the
Liquidation Proceeds recovered on any defaulted Whole Loan, prior to the
distribution of such Liquidation Proceeds to Certificateholders, amounts
representing its normal servicing compensation on the Whole Loan, unreimbursed
servicing expenses incurred with respect to the Whole Loan and any unreimbursed
advances of delinquent payments made with respect to the Whole Loan.
 
     If any property securing a defaulted Whole Loan is damaged and proceeds, if
any, from the related hazard insurance policy are insufficient to restore the
damaged property to a condition sufficient to permit recovery under the related
instrument of Credit Support, if any, the Master Servicer is not required to
expend its own funds to restore the damaged property unless it determines (i)
that such restoration will increase the proceeds to Certificateholders on
liquidation of the Whole 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.
 
     As servicer of the Whole Loans, a Master Servicer, on behalf of itself, the
Trustee and the Certificateholders, will present claims to the obligor under
each instrument of Credit Support, and will take such reasonable steps as are
necessary to receive payment or to permit recovery thereunder with respect to
defaulted Whole Loans.
 
     If a Master Servicer or its designee recovers payments under any instrument
of Credit Support with respect to any defaulted Whole Loan, the Master Servicer
will be entitled to withdraw or cause to be withdrawn from the Collection
Account out of such proceeds, prior to distribution thereof to
Certificateholders, amounts representing its normal servicing compensation on
such Whole Loan, unreimbursed servicing expenses incurred with respect to the
Whole Loan and any unreimbursed advances of delinquent payments made with
respect to the Whole Loan. See '--Hazard Insurance Policies' and 'Description of
Credit Support'.
 
HAZARD INSURANCE POLICIES
 
     Any Agreement for a Trust Fund that includes Whole Loans will require the
Master Servicer to cause the mortgagor on each Whole Loan to maintain a hazard

insurance policy providing for coverage of the standard form of fire insurance
policy with extended coverage customary in the state in which the Mortgaged
Property is located. Such coverage generally will be in general in an amount
equal to the lesser of the principal balance owing on such Whole Loan and the
amount necessary to fully compensate for any damage or loss to the improvements
on the Mortgaged Property on a replacement cost basis, but in either case not
less than the amount necessary to avoid the application of any co-insurance
clause contained in the hazard insurance policy. The ability of the Master
Servicer to assure that hazard insurance proceeds are appropriately applied may
be dependent upon its being named as an additional insured under an hazard
insurance policy and under any flood insurance policy referred to below, or upon
the extent to which information in this regard is furnished by mortgagors. All
amounts collected by the Master Servicer under any such policy (except for
amounts to be applied to the restoration or repair of the Mortgaged Property or
released to the mortgagor in accordance with the Master Servicer's normal
servicing procedures, subject to the terms and conditions of the related
Mortgage and Mortgage Note) will be deposited in the Collection Account. The
Agreement will provide that the Master Servicer may satisfy its obligation to
cause each mortgagor to maintain such a hazard insurance policy by the Master
Servicer's maintaining a blanket policy insuring against hazard losses on the
Whole Loans. If such blanket policy contains a deductible clause, the Master
Servicer will be required to deposit in the Collection Account all sums that
would have been deposited therein but for such clause. The Master Servicer will
also be required to maintain a fidelity bond and errors and omission policy with
respect to its officers and employees that provides coverage against losses that
may be sustained as a result of an officer's or employee's misappropriation of
funds or errors and omissions in failing to maintain insurance, subject to
certain limitations as to amount of coverage, deductible amounts, conditions,
exclusions and exceptions.
 
     In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements of the property by fire,
lightning, explosion, smoke, windstorm and hail, and riot, strike and civil
commotion, subject to the conditions and exclusions specified in each policy.
Although the policies relating to the Whole Loans will be underwritten by
different insurers under different state laws in accordance with different
applicable state forms, and therefore will 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
war, revolution, governmental actions, floods and other water-related causes,
earth movement (including earthquakes, landslides and mudflows), wet or dry rot,
vermin, domestic animals and certain
 
                                       38
<PAGE>
other kinds of uninsured risks. When a Mortgaged Property securing a Whole Loan
is located at origination in a federally designated flood area, each Agreement
requires the Master Servicer to cause the mortgagor to acquire and maintain
flood insurance in an amount equal in general to the lesser of (i) the amount
necessary to fully compensate for any damage or loss to the improvements which
are part of the Mortgaged Property or a replacement cost basis and (ii) the
maximum amount of insurance available under the federal flood insurance program,
whether or not the area is participating in the program.
 

     The hazard insurance policies covering the Mortgaged Properties securing
the Whole Loans will typically contain a co-insurance clause that 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 improvements on the
property in order to recover the full amount of any partial loss. If the
insured's coverage falls below this specified percentage, such clause generally
provides that the insurer's liability in the event of partial loss does not
exceed the lesser of (i) the replacement cost of the improvements less physical
depreciation and (ii) such proportion of the loss as the amount of insurance
carried bears to the specified percentage of the full replacement cost of such
improvements.
 
     Under the terms of the Whole Loans, mortgagors will be required to present
claims to insurers under hazard insurance policies maintained on the related
Mortgaged Properties. The Master Servicer, on behalf of the Trustee and
Certificateholders, is obligated to present or cause to be presented claims
under any blanket insurance policy insuring against hazard losses on Mortgaged
Properties securing the Whole Loans. However, the ability of the Master Servicer
to present or cause to be presented such claims is dependent upon the extent to
which information in this regard is furnished to the Master Servicer by
mortgagors.
 
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS
 
     Certain of the Whole Loans may contain clauses requiring the consent of the
mortgagee to any sale or other transfer of the related Mortgaged Property, or
due-on-sale clauses entitling the mortgagee to accelerate payment of the Whole
Loan upon any sale or other transfer of the related Mortgaged Property. Certain
of the Whole Loans may contain clauses requiring the consent of the mortgagee to
the creation of any other lien or encumbrance on the Mortgaged Property or
due-on-encumbrance clauses entitling the mortgagee to accelerate payment of the
Whole Loan upon the creation of any other lien or encumbrance upon the Mortgaged
Property. The Master Servicer, on behalf of the Trust Fund, will determine
whether to exercise any right the Trustee may have as mortgagee to accelerate
payment of any such Whole Loan or to withhold its consent to any transfer or
further encumbrance in accordance with the general servicing standard described
herein under 'Description of the Agreements--Collection and Other Servicing
Procedures'.
 
     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. See 'Certain Legal Aspects of Mortgage
Loans--Due-on-Sale and Due-on-Encumbrance'.
 
RETAINED INTEREST; SERVICING COMPENSATION AND PAYMENT OF EXPENSES
 
     The Prospectus Supplement for a series of Certificates will specify whether
there will be any Retained Interest in the Mortgage Assets, and, if so, the
owner thereof. If so, the Retained Interest will be established on a
loan-by-loan basis and will be specified on an exhibit to the related Agreement.
A 'Retained Interest' in a Mortgage Asset represents a specified portion of the
interest payable thereon. The Retained Interest will be deducted from mortgagor
payments as received and will not be part of the related Trust Fund.
 

     A Master Servicer's primary servicing compensation with respect to a series
of Certificates will come from the periodic payment to it of a portion of the
interest payment on each Whole Loan. Since any Retained Interest and a Master
Servicer's primary compensation are percentages of the principal balance of each
Mortgage Asset, such amounts will decrease in accordance with the amortization
schedule of the Mortgage Loans underlying or comprising such Mortgage Asset. The
Prospectus Supplement with respect to a series of Certificates evidencing
interests in a Trust Fund that includes Whole Loans may provide that, as
additional compensation, the Master Servicer or the Sub-Servicers may retain all
or a portion of assumption fees, modification fees, late payment charges or
Prepayment Premiums collected from mortgagors and any interest or other income
which may be earned on funds held in the Collection Account or any Sub-Servicing
Account. Any Sub-Servicer will receive a portion of the Master Servicer's
compensation as its sub-servicing compensation.
 
     In addition to amounts payable to any Sub-Servicer, a Master Servicer may,
to the extent provided in the related Prospectus Supplement, pay from its
servicing compensation certain expenses incurred in connection with its
servicing of the Mortgage Loans, including, without limitation, payment of the
fees and disbursements of the Trustee and independent accountants, payment of
expenses incurred in connection with distributions and reports to
Certificateholders, and payment of any other expenses described in the related
Prospectus Supplement. Certain other expenses, including certain expenses
relating to defaults and liquidations on the
 
                                       39
<PAGE>
Mortgage Loans and, to the extent so provided in the related Prospectus
Supplement, interest thereon at the rate specified therein, and the fees of any
Special Servicer, may be borne by the Trust Fund.
 
EVIDENCE AS TO COMPLIANCE
 
     Each Agreement relating to Mortgage Assets which include Whole Loans will
provide that on or before a specified date in each year, beginning with the
first such date at least six months after the related Cut-off Date, a firm of
independent public accountants will furnish a statement to the Trustee to the
effect that, on the basis of the examination by such firm conducted
substantially in compliance with either 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 under pooling
and servicing agreements substantially similar to each other (including the
related Agreement) was conducted in compliance with the terms of such agreements
except for any significant exceptions or errors in records that, in the opinion
of the firm, either the Audit Program for Mortgages serviced for FHLMC, or
paragraph 4 of the Uniform Single Audit Program for Mortgage Bankers, requires
it to report. In rendering its statement such firm may rely, as to matters
relating to the direct servicing of mortgage loans by Sub-Servicers, upon
comparable statements for examinations conducted substantially in compliance
with the Uniform Single Audit Program for Mortgage Bankers or the Audit Program
for Mortgages serviced for FHLMC (rendered within one year of such statement) of
firms of independent public accountants with respect to the related
Sub-Servicer.
 

     Each such Agreement will also provide for delivery to the Trustee, on or
before a specified date in each year, of an annual statement signed by two
officers of the Master Servicer to the effect that the Master Servicer has
fulfilled its obligations under the Agreement throughout the preceding year.
 
     Copies of the annual accountants' statement and the statement of officers
of a Master Servicer will be obtainable by Certificateholders without charge
upon written request to the Master Servicer at the address set forth in the
related Prospectus Supplement.
 
CERTAIN MATTERS REGARDING A MASTER SERVICER, A SPECIAL SERVICER AND THE
DEPOSITOR
 
     The Master Servicer, if any, under each Agreement will be named in the
related Prospectus Supplement. The entity serving as Master Servicer may be an
affiliate of the Depositor and may have other normal business relationships with
the Depositor or Depositor's affiliates.
 
     The Agreement will provide that the Master Servicer may resign from its
obligations and duties thereunder only if such resignation, and the appointment
of a successor, will not result in a downgrading of the rating of any class of
Certificates or upon a determination that its duties under the Agreement 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 any Master Servicer, the
Depositor nor any director, officer, employee, or agent of a Master Servicer or
the Depositor will be under any liability to 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; provided, however, that
neither a Master Servicer, the Depositor nor any such person will be protected
against 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 any Master Servicer, the
Depositor and any director, officer, employee or agent of a Master Servicer or
the Depositor will be entitled to indemnification by the related Trust Fund and
will be held harmless against any loss, liability or expense incurred in
connection with any legal action relating to the Agreement or the Certificates,
other than any loss, liability or expense related to any specific Mortgage Loan
or Mortgage Loans (unless any such loss, liability or expense is 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 any Master Servicer nor the Depositor will be under any obligation to
appear in, prosecute or defend any legal action which is not incidental to its
respective responsibilities under the Agreement and which in its opinion may
involve it in any expense or liability. Any such Master Servicer or the
Depositor may, however, in its discretion undertake any such action which it may
deem necessary or desirable with respect to the Agreement and the rights and
duties of the parties thereto and the interests of the Certificateholders
thereunder. In such event, the legal expenses and costs of such action and any

liability resulting therefrom will be expenses, costs and liabilities of the
Certificateholders, and the Master Servicer or the Depositor, as the case may
be, will be entitled to be reimbursed therefor and to charge the Collection
Accounts.
 
     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
 
                                       40
<PAGE>
successor of the Master Servicer under the related Agreement, provided that such
person satisfies the criteria specified in the Agreement.
 
     If the Master Servicer retains a Special Servicer, the standard of care
for, and any indemnification to be provided to, the Special Servicer will be set
forth in the related Agreement.
 
EVENT OF DEFAULT
 
     Events of Default under the related Agreement for a Trust Fund that
includes Whole Loans will, in general, consist of (i) any failure by the Master
Servicer to distribute or cause to be distributed to Certificateholders, or to
remit to the Trustee for distribution to Certificateholders, any required
payment that continues unremedied for five days after the giving of written
notice of such failure to the Master Servicer by the Trustee or the Depositor,
or to the Master Servicer, the Depositor and the Trustee by the holders of
Certificates evidencing not less than 25% of the Voting Rights, (ii) any failure
by the Master Servicer duly to observe or perform in any material respect any of
its other covenants or obligations under the Agreement which continues
unremedied for thirty days (fifteen days in the case of a failure to pay the
premium for any insurance policy or instrument of Credit Support required to be
maintained pursuant to the Agreement) after the giving of written notice of such
failure to the Master Servicer by the Trustee or the Depositor, or to the Master
Servicer, the Depositor and the Trustee by the holders of Certificates
evidencing not less than 25% of the Voting Rights; and (iii) certain events of
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings and certain actions by or on behalf of the Master Servicer
indicating its insolvency or inability to pay its obligations.
 
RIGHTS UPON EVENT OF DEFAULT
 
     So long as an Event of Default under an Agreement remains unremedied, the
Depositor or the Trustee may, at the direction of holders of Certificates
evidencing not less than 51% of the Voting Rights, 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 (other than any
Retained Interest of the Master Servicer), whereupon the Trustee will succeed to
all of the responsibilities, duties and liabilities of the Master Servicer under
the Agreement (except that if the Trustee is prohibited by law from obligating
itself to make advances regarding delinquent mortgage loans, then the Trustee
will not be so obligated) and will be entitled to similar compensation
arrangements. In the event that the Trustee is unwilling or unable so to act, it

may or, at the written request of the holders of Certificates entitled to at
least 51% of the Voting Rights, it shall appoint, or petition a court of
competent jurisdiction for the appointment of, a loan servicing institution
acceptable to the Rating Agency with a net worth at the time of such appointment
of at least $15,000,000 to act as successor to the Master Servicer under the
Agreement. Pending such appointment, the Trustee is obligated to act in such
capacity. The Trustee and any such successor may agree upon the servicing
compensation to be paid, which in no event may be greater than the compensation
payable to the Master Servicer under the Agreement.
 
     No Certificateholder will have the right under any Agreement to institute
any proceeding with respect thereto unless such holder previously has given to
the Trustee written notice of default and unless the holders of Certificates
evidencing not less than 25% of the Voting Rights 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
fifteen days has neglected or refused to institute any such proceeding. The
Trustee, however, is under no obligation to exercise any of the trusts or powers
vested in it by any Agreement or to make any investigation of matters arising
thereunder or to institute, conduct or defend any litigation thereunder or in
relation thereto at the request, order or direction of any of the holders of
Certificates covered by such Agreement, unless such Certificateholders have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which may be incurred therein or thereby.
 
AMENDMENT
 
     Each Agreement may be amended by the Depositor, the Master Servicer, if
any, and the Trustee, without the consent of any of the holders of Certificates
covered by the Agreement, to cure any ambiguity, to correct, modify or
supplement any provision therein, or to make any other provisions 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 holder of Certificates covered by
the Agreement. An Agreement may also be amended by the Depositor, the Master
Servicer, if any, and the Trustee with the consent of the holders of
Certificates evidencing not less than 66% of the Voting Rights, for any purpose;
provided, however, that no such amendment may (i) reduce in any manner the
amount of or delay the timing of, payments received on Mortgage Loans which are
required to be distributed on any Certificate without the consent of the holder
of such Certificate, (ii) adversely affect in any material respect the interests
of the holders of any class of Certificates in a manner other than as described
in (i), without the consent of the holders of Certificates of such class
evidencing not less than 66% of the aggregate
 
                                       41
<PAGE>
Voting Rights of such class or (iii) reduce the aforesaid percentage of Voting
Rights required for the consent to any such amendment without the consent of the
holders of all Certificates covered by such Agreement then outstanding. However,
with respect to any series of Certificates as to which one or more REMIC
elections is to be made, the Trustee will not consent to any amendment of the
Agreement unless it shall first have received an opinion of counsel to the
effect that such amendment will not cause the Trust Fund (or designated portion

thereof) to fail to qualify as a REMIC at any time that the related Certificates
are outstanding.
 
DUTIES OF THE TRUSTEE
 
     The Trustee will make no representations as to the validity or sufficiency
of any Agreement, the Certificates or any Mortgage Loan or related document and
is not accountable for the use or application by or on behalf of any Master
Servicer of any funds paid to the Master Servicer or its designee or any Special
Servicer in respect of the Certificates or the Mortgage Loans, or deposited into
or withdrawn from the Certificate Account or any other account by or on behalf
of the Master Servicer or any Special Servicer. If no Event of Default has
occurred and is continuing, the Trustee is required to perform only those duties
specifically required under the related Agreement. However, upon receipt of the
various certificates, reports or other instruments required to be furnished to
it, the Trustee is required to examine such documents and to determine whether
they conform to the requirements of the Agreement.
 
THE TRUSTEE
 
     The Trustee under each Agreement will be named in the related Prospectus
Supplement. The commercial bank, national banking association or trust company
serving as Trustee may have typical banking relationships with the Depositor and
its affiliates and with any Master Servicer and its affiliates.
 
                         DESCRIPTION OF CREDIT SUPPORT
 
GENERAL
 
     For any series of Certificates, Credit Support may be provided with respect
to one or more classes thereof or the related Mortgage Assets. Credit Support
may be in the form of the subordination of one or more classes of Certificates,
letters of credit, insurance policies on the Mortgage Loans, certificate
guarantee insurance, guarantees, the establishment of one or more reserve funds
or another method of Credit Support described in the related Prospectus
Supplement, or any combination of the foregoing. If so provided in the related
Prospectus Supplement, any form of Credit Support may be structured so as to be
drawn upon by more than one series to the extent described therein.
 
     Credit Support will generally not provide protection against all risks of
loss and will not guarantee repayment of the entire Certificate Balance of the
Certificates and interest thereon. If losses or shortfalls occur that exceed the
amount covered by Credit Support or that are not covered by Credit Support,
Certificateholders will bear their allocable share of deficiencies. Moreover,
holders of Certificates of a Covered Trust will be subject to the risk that such
Credit Support will be exhausted by the claims of other Covered Trusts prior to
such Covered Trust receiving any of its intended share of such coverage.
 
     If Credit Support is provided with respect to one or more classes of
Certificates of a series, or the related Mortgage Assets, the related Prospectus
Supplement will include a description of (a) the nature and amount of coverage
under such Credit Support, (b) any conditions to payment thereunder not
otherwise described herein, (c) the conditions (if any) under which the amount
of coverage under such Credit Support may be reduced and under which such Credit

Support may be terminated or replaced and (d) the material provisions relating
to such Credit Support. Additionally, the related Prospectus Supplement will set
forth certain information with respect to the obligor under any instrument of
Credit Support, including (i) a brief description of its principal business
activities, (ii) its principal place of business, place or incorporation and the
jurisdiction under which it is chartered or licensed to do business, (iii) if
applicable, the identity of regulatory agencies that exercise primary
jurisdiction over the conduct of its business and (iv) its total assets, and its
stockholders' or policyholders' surplus, if applicable, as of the date specified
in the Prospectus Supplement. See 'Risk Factors--Credit Support Limitations'.
 
SUBORDINATE CERTIFICATES
 
     If so specified in the related Prospectus Supplement, one or more classes
of Certificates of a series may be Subordinate Certificates. The rights of the
holders of Subordinate Certificates to receive distributions of principal and
interest from the Certificate Account on any Distribution Date will be
subordinated to such rights of the holders of Senior Certificates to the extent
specified in the related Prospectus Supplement. The subordination of a class may
apply only in the event of (or may be limited to) certain types of losses or
shortfalls. The relative interests of the Senior Certificates and the
Subordinate Certificates of a Series may
 
                                       42
<PAGE>
be subject to adjustment from time to time on the basis of distributions
received in respect thereof. The related Prospectus Supplement will set forth
information concerning the amount of subordination of a class or classes of
Subordinate Certificates in a series, the circumstances in which such
subordination will be applicable and the manner, if any, in which the amount of
subordination will be effected. If one or more classes of Subordinate
Certificates of a series are Offered Certificates, the related Prospectus
Supplement will provide information as to the sensitivity of distributions on
such Certificates based on certain default assumptions.
 
CROSS-SUPPORT PROVISIONS
 
     If the Mortgage Assets for a series are divided into separate groups, each
supporting a separate class or classes of Certificates of a series, credit
support may be provided by cross-support provisions requiring that distributions
be made on Senior Certificates evidencing interests in one group of Mortgage
Assets prior to distributions on Subordinate Certificates evidencing interests
in a different group of Mortgage Assets within the Trust Fund. The Prospectus
Supplement for a series that includes a cross-support provision will describe
the manner and conditions for applying such provisions.
 
INSURANCE OR GUARANTEES WITH RESPECT TO THE MORTGAGE ASSETS
 
     If so provided in the Prospectus Supplement for a series of Certificates,
the Mortgage Loans underlying or comprising the Mortgage Assets in the related
Trust Fund will be covered for various default risks by insurance policies or
guarantees, or the MBS comprising the Mortgage Assets in the related Trust Fund
will be covered by the types of Credit Support described herein. A copy of any
such material instrument for a series will be filed with the Commission as an

exhibit to a Current Report on Form 8-K to be filed within 15 days of issuance
of the Certificates of the related series.
 
LETTER OF CREDIT
 
     If so provided in the Prospectus Supplement for a series of Certificates,
the Mortgage Loans underlying or comprising the Mortgage Assets in the related
Trust Fund will be covered by one or more letters of credit, issued by a bank or
financial institution specified in such Prospectus Supplement (the 'L/C Bank').
Under a letter of credit, the L/C Bank will be obligated to honor draws
thereunder in an aggregate fixed dollar amount, net of unreimbursed payments
thereunder, equal to the percentage specified in the related Prospectus
Supplement of the aggregate principal balance of the Mortgage Assets on the
related Cut-off Date or one or more classes of Certificates. If so specified in
the related Prospectus Supplement, the letter of credit may permit draws in the
event of only certain types of losses. The amount available under the letter of
credit will, in all cases, be reduced to the extent of the unreimbursed payments
thereunder. The obligations of the L/C Bank under the letter of credit for each
series of Certificates will expire at the earlier of the date specified in the
related Prospectus Supplement or the termination of the Trust Fund. A copy of
any such letter of credit for a series will be filed with the Commission as an
exhibit to a Current Report on Form 8-K to be filed within 15 days of issuance
of the Certificates of the related series.
 
INSURANCE POLICIES AND SURETY BONDS
 
     If so provided in the Prospectus Supplement for a series of Certificates,
the Mortgage Loans underlying or comprising the Mortgage Assets in the related
Trust Fund will be covered by insurance policies and/or surety bonds provided by
one or more insurance companies or sureties. Such instruments may cover, with
respect to one or more classes of Certificates of the related series, timely
distributions of interest and/or full distributions of principal on the basis of
a schedule of principal distributions set forth in or determined in the manner
specified in the related Prospectus Supplement. A copy of any such instrument
for a series will be filed with the Commission as an exhibit to a Current Report
on Form 8-K to be filed with the Commission within 15 days of issuance of the
Certificates of the related series.
 
CERTIFICATE GUARANTEE INSURANCE
 
     If so specified in the related Prospectus Supplement, certificate guarantee
insurance, if any, with respect to a series of Certificates will be provided by
one or more insurance companies. Such certificate guarantee insurance will
guarantee, with respect to one or more classes of Certificates of the applicable
series, timely distributions of interest and full distributions of principal on
the basis of a schedule of principal distributions set forth in or determined in
the manner specified in the related Prospectus Supplement. If so specified in
the related Prospectus Supplement, the certificate guarantee insurance will also
guarantee against any payment made to a Certificateholder which is subsequently
recovered as a 'voidable preference' payment under the Bankruptcy Code. A copy
of the certificate guarantee insurance for a series, if any, will be filed with
the Commission as an exhibit to a Current Report on Form 8-K to be filed with
the Commission within 15 days of issuance of the Certificates of the applicable
series.

 
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<PAGE>
RESERVE FUNDS
 
     If so provided in the Prospectus Supplement for a series of Certificates,
the Mortgage Loans underlying or comprising the Mortgage Assets in the related
Trust Fund will be covered by one or more reserve funds in which cash, a letter
of credit, Permitted Investments, a demand note or a combination thereof will be
deposited, in the amounts so specified in such Prospectus Supplement. The
reserve funds for a series may also be funded over time by depositing therein a
specified amount of the distributions received on the related Mortgage Assets as
specified in the related Prospectus Supplement.
 
     Amounts on deposit in any reserve fund for a series, together with the
reinvestment income thereon, if any, will be applied for the purposes, in the
manner, and to the extent specified in the related Prospectus Supplement. A
reserve fund may be provided to increase the likelihood of timely distributions
of principal of and interest on the Certificates. Reserve funds may be
established to provide limited protection against only certain types of losses
and shortfalls. Following each Distribution Date amounts in a reserve fund in
excess of any amount required to be maintained therein may be released from the
reserve fund under the conditions and to the extent specified in the related
Prospectus Supplement and will not be available for further application to the
Certificates.
 
     Moneys deposited in any Reserve Funds will be invested in Permitted
Investments. Any reinvestment income or other gain from such investments will be
credited to the related Reserve Fund for such series, and any loss resulting
from such investments will be charged to such Reserve Fund. However, such income
may be payable to any related Master Servicer or another service provider as
additional compensation. Whether a Reserve Fund, if any, for a series will be a
part of the Trust Fund will be disclosed in the related Prospectus Supplement.
 
     Additional information concerning any Reserve Fund will be set forth in the
related Prospectus Supplement, including the initial balance of such Reserve
Fund, the balance required to be maintained in the Reserve Fund, the manner in
which such required balance will decrease over time, the manner of funding such
Reserve Fund, the purposes for which funds in the Reserve Fund may be applied to
make distributions to Certificateholders and use of investment earnings from the
Reserve Fund, if any.
 
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<PAGE>
                    CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
 
     The following discussion contains general summaries of certain legal
aspects of loans secured by commercial and multifamily residential properties
that are general in nature. Because such legal aspects are governed by
applicable state law (which laws may differ substantially), the summaries do not
purport to be complete nor to reflect the laws of any particular state, nor 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
applicable federal and state laws governing the Mortgage Loans. See 'Description

of the Trust Funds--Mortgage Assets'.
 
GENERAL
 
     All of the Mortgage Loans are loans evidenced by a note or bond and secured
by instruments granting a security interest in real property which may be
mortgages, deeds of trust, or deeds to secure debt, depending upon the
prevailing practice and law in the state in which the Mortgaged Property is
located. Mortgages, deeds of trust and deeds to secure debt are herein
collectively referred to as 'mortgages'. Any of the foregoing types of mortgages
will create a lien upon, or grant a title interest in, the subject property, the
priority of which will depend on the terms of the particular security
instrument, as well as separate, recorded, contractual arrangements with others
holding interests in the mortgaged property, the knowledge of the parties to
such instrument as well as the order of recordation of the instrument in the
appropriate public recording office. However, recording does not generally
establish priority over governmental claims for real estate taxes and
assessments and other charges imposed under governmental police powers.
 
TYPES OF MORTGAGE INSTRUMENTS
 
     A mortgage either creates a lien against or constitutes a conveyance of
real property between two parties--a mortgagor (the borrower and usually the
owner of the subject property) and a mortgagee (the lender). In contrast, a deed
of trust is a three-party instrument, among a trustor (the equivalent of a
mortgagor), a trustee to whom the mortgaged property is conveyed, and a
beneficiary (the lender) for whose benefit the conveyance is made. As used in
this Prospectus, unless the context otherwise requires, 'mortgagor' includes the
trustor under a deed of trust and a grantor under a deed to secure debt. Under a
deed of trust, the mortgagor grants the property, irrevocably until the debt is
paid, in trust, generally with a power of sale as security for the indebtedness
evidenced by the related note. A deed to secure debt typically has two parties.
By executing a 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, generally with a power of sale as security for
the indebtedness evidenced by the related mortgage note. As used in this
Prospectus, unless the context otherwise requires, the term 'mortgagee' means
the lender and, in the case of the deed of trust, the trustee thereunder in
certain cases. In case the mortgagor under a mortgage is a land trust, there
would be an additional party because legal title to the property is held by a
land trustee under a land trust agreement for the benefit of the mortgagor. At
origination of a mortgage loan involving a land trust, the mortgagor executes a
separate undertaking to make payments on the mortgage note. The mortgagee's
authority under a mortgage, the trustee's authority under a deed of trust and
the grantee's authority under a deed to secure debt are governed by the express
provisions of the mortgage, the law of the state in which the real property is
located, certain federal laws (including, without limitation, the Soldiers' and
Sailor's Civil Relief Act of 1940) and, in some cases, in deed of trust
transactions, the directions of the beneficiary.
 
LEASES AND RENTS
 
     Mortgages that encumber income-producing property often contain an
assignment of rents and leases, pursuant to which the mortgagor assigns its

right, title and interest as landlord under each lease and the income derived
therefrom to the lender, while the mortgagor retains a revocable license to
collect the rents for so long as there is no unremedied default. If the
mortgagor defaults and such default is not remedied by the mortgagor within the
cure period, if any, the license terminates and the lender is entitled to
collect the rents. Local law may require that the lender take possession of the
property and/or obtain a court-appointed receiver before becoming entitled to
collect the rents. In most States, hotel and motel room rates are considered
accounts receivable under the Uniform Commercial Code ('UCC'); generally these
rates are either assigned by the mortgagor, which remains entitled to collect
such rates absent a default, or pledged by the mortgagor, as security for the
loans. In general, the lender must file financing statements in order to perfect
its security interest in the rates and must file continuation statements,
generally every five years, to maintain perfection of such security interest.
Even if the lender's security interest in room rates is perfected under the UCC,
the lender will generally be required to commence a foreclosure or otherwise
take possession of the property in order to collect the room rates after a
default. Even after a foreclosure, the potential rent payments from the property
may be less than the periodic payments that had been due under the mortgage. For
instance, the net income that would otherwise be generated from the property
 
                                       45
<PAGE>
may be less than the amount that would have been needed to service the mortgage
debt if the leases on the property are at below-market rents, or as the result
of excessive maintenance, repair or other obligations which a lender succeeds to
as landlord.
 
PERSONALTY
 
     Certain types of Mortgaged Properties, such as hotels, motels and
industrial plants, are likely to derive a significant part of their value from
personal property which does not constitute 'fixtures' under applicable state
real property law, and hence, would not be subject to the lien of a mortgage.
Such property is generally pledged or assigned as security to the lender under
the UCC. In order to perfect its security interest therein, the lender generally
must file UCC financing statements and, to maintain perfection of such security
interest, file continuation statements generally every five years.
 
INSTALLMENT CONTRACTS
 
     The Mortgage Loans included in a Trust Fund may also consist of Installment
Contracts. Under an Installment Contract the seller (hereinafter referred to in
this Section as the 'lender') retains legal title to the property and enters
into an agreement with the purchaser (hereinafter referred to in this Section as
the 'borrower') for the payment of the purchase price, plus interest, over the
term of such contract. Only after full performance by the borrower of the
contract is the lender obligated to convey title to the real estate to the
borrower. As with mortgage or deed of trust financing, during the effective
period of the Installment Contract, the borrower is generally responsible for
maintaining the property in good condition and for paying real estate taxes,
assessments and hazard insurance premiums associated with the property.
 
     The method of enforcing the rights of the lender under an Installment

Contract varies on a state-by-state basis depending upon the extent to which
state courts are willing, or able pursuant to state statute, to enforce the
contract strictly according to its terms. The terms of Installment Contracts
generally provide that upon a default by the borrower, the borrower loses his or
her right to occupy the property, the entire indebtedness is accelerated, and
the buyer's equitable interest in the property is forfeited. The lender in such
a situation does not have to foreclose in order to obtain title to the property,
although in some cases a quiet title action is in order if the borrower has
filed the Installment Contract in local land records and an ejectment action may
be necessary to recover possession. In a few states, particularly in cases of
borrower default during the early years of an Installment Contract, the courts
will permit ejectment of the buyer and a forfeiture of his or her interest in
the property. However, most state legislatures have enacted provisions by
analogy to mortgage law protecting borrowers under Installment Contracts from
the harsh consequences of forfeiture. Under such statutes, a judicial or
nonjudicial foreclosure may be required, the lender may be required to give
notice of default and the borrower may be granted some grace period during which
the contract may be reinstated upon full payment of the default amount and the
borrower may have a post-foreclosure statutory redemption right. In other
states, courts in equity may permit a borrower with significant investment in
the property under an Installment Contract for the sale of real estate to share
in the proceeds of sale of the property after the indebtedness is repaid or may
otherwise refuse to enforce the forfeiture clause. Nevertheless, generally
speaking, the lender's procedures for obtaining possession and clear title under
an Installment Contract for the sale of real estate in a given state are simpler
and less time-consuming and costly than are the procedures for foreclosing and
obtaining clear title to a mortgaged property.
 
JUNIOR MORTGAGES; RIGHTS OF SENIOR MORTGAGES OR BENEFICIARIES
 
     Some of the Mortgage Loans included in the Mortgage Pool for a series will
be secured by junior mortgages or deeds of trust which are subordinate to senior
mortgages or deeds of trust held by other lenders or institutional investors.
The rights of the Trust Fund (and therefore the Certificateholders), as
beneficiary under a junior deed of trust or as mortgagee under a junior
mortgage, are subordinate to those of the mortgagee or beneficiary under the
senior mortgage or deed of trust, including the prior rights of the senior
mortgagee or beneficiary to receive rents, hazard insurance and condemnation
proceeds and to cause the property securing the Mortgage Loan to be sold upon
default of the mortgagor or trustor, thereby extinguishing the junior
mortgagee's or junior beneficiary's lien unless the Master Servicer asserts its
subordinate interest in a property in foreclosure litigation or satisfies the
defaulted senior loan. As discussed more fully below, in many states a junior
mortgagee or beneficiary may satisfy a defaulted senior loan in full, adding the
amounts expended to the balance due on the junior loan. Absent a provision in
the senior mortgage, no notice of default is required to be given to the junior
mortgagee.
 
     The form of the mortgage or deed of trust used by many institutional
lenders confers on the mortgagee or beneficiary the right both to receive all
proceeds collected under any hazard insurance policy and all awards made in
connection with any condemnation proceedings, and to apply such proceeds and
awards to any indebtedness secured by the mortgage or deed of trust, in such
order as the mortgage or beneficiary may determine. Thus, in the event

improvements on the property are damaged or destroyed by fire or
 
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<PAGE>
other casualty, or in the event the property is taken by condemnation, the
mortgagee or beneficiary under the senior mortgage or deed of trust will have
the prior right to collect any insurance proceeds payable under a hazard
insurance policy and any award of damages in connection with the condemnation
and to apply the same to the indebtedness secured by the senior mortgage or deed
of trust. Proceeds in excess of the amount of senior mortgage indebtedness will,
in most cases, be applied to the indebtedness of a junior mortgage or trust deed
to the extent the junior mortgage or deed of trust so provides. The laws of
certain states may limit the ability of mortgagees or beneficiaries to apply the
proceeds of hazard insurance and partial condemnation awards to the secured
indebtedness. In such states, the mortgagor or trustor must be allowed to use
the proceeds of hazard insurance to repair the damage unless the security of the
mortgagee or beneficiary has been impaired. Similarly, in certain states, the
mortgagee or beneficiary is entitled to the award for a partial condemnation of
the real property security only to the extent that its security is impaired.
 
      The form of mortgage or deed of trust used by many institutional lenders
typically contains a 'future advance' clause, which provides, in essence, that
additional amounts advanced to or on behalf of the mortgagor or trustor by the
mortgagee or beneficiary are to be secured by the mortgage or deed of trust.
While such a clause is valid under the laws of most states, the priority of any
advance made under the clause depends, in some states, on whether the advance
was an 'obligatory' or 'optional' advance. If the mortgagee or beneficiary is
obligated to advance the additional amounts, the advance may be entitled to
receive the same priority as amounts initially made under the mortgage or deed
of trust, notwithstanding that there may be intervening junior mortgages or
deeds of trust and other liens between the date of recording of the mortgage or
deed of trust and the date of the future advance, and notwithstanding that the
mortgagee or beneficiary had actual knowledge of such intervening junior
mortgages or deeds of trust and other liens at the time of the advance. Where
the mortgagee or beneficiary is not obligated to advance the additional amounts
and has actual knowledge of the intervening junior mortgages or deeds of trust
and other liens, the advance may be subordinate to such intervening junior
mortgages or deeds of trust and other liens. Priority of advances under a
'future advance' clause rests, in many other states, on state law giving
priority to all advances made under the loan agreement up to a 'credit limit'
amount stated in the recorded mortgage.
 
     Another provision typically found in the form of the mortgage or deed of
trust used by many institutional lenders obligates the mortgagor or trustor to
pay before delinquency all taxes and assessments on the property and, when due,
all encumbrances, charges and liens on the property which appear prior to the
mortgage or deed of trust, to provide and maintain fire insurance on the
property, to maintain and repair the property and not to commit or permit any
waste thereof, and to appear in and defend any action or proceeding purporting
to affect the property or the rights of the mortgagee or beneficiary under the
mortgage or deed of trust. Upon a failure of the mortgagor or trustor to perform
any of these obligations, the mortgagee or beneficiary is given the right under
the mortgage or deed of trust to perform the obligation itself, at its election,
with the mortgagor or trustor agreeing to reimburse the mortgagee or beneficiary

for any sums expended by the mortgagee or beneificary on behalf of the trustor.
All sums so expended by the mortgagee or beneficiary become part of the
indebtedness secured by the mortgage or deed of trust.
 
     The form of mortgage or deed of trust used by many institutional lenders
typically requires the mortgagor or trustor to obtain the consent of the
mortgagee or beneficiary in respect of actions affecting the mortgaged property,
including, without limitation, leasing activities (including new leases and
termination or modification of existing leases), alterations and improvements to
buildings forming a part of the mortgaged property and management and leasing
agreements for the mortgaged property. Tenants will often refuse to execute
lease unless the mortgagee or beneficiary executes a written agreement with the
tenant not to disturb the tenant's possession of its premises in the event of a
foreclosure. A senior mortgagee or beneficiary may refuse to consent to matters
approved by a junior mortgagee or beneficiary with the result that the value of
the security for the junior mortgage or deed of trust is diminished. For
example, a senior mortgagee or beneficiary may decide not to approve a lease or
to refuse to grant to a tenant a non-disturbance agreement. If, as a result, the
lease is not executed, the value of the mortgaged property may be diminished.
 
SUBORDINATE FINANCING
 
     Where the mortgagor encumbers mortgaged property with one or more junior
liens, the senior lender is subjected to additional risk. First, the mortgagor
may have difficulty servicing and repaying multiple loans. In addition, if the
junior loan permits recourse to the mortgagor (as junior loans often do) and the
senior loan does not, a mortgagor may be more likely to repay sums due on the
junior loan than those on the senior loan. Second, acts of the senior lender
that prejudice the junior lender or impair the junior lender's security may
create a superior equity in favor of the junior lender. For example, if the
mortgagor and the senior lender agree to an increase in the principal amount of
or the interest rate payable on the senior loan, the senior lender may lose its
priority to the extent any existing junior lender is harmed or the mortgagor is
additionally burdened. Third, if the mortgagor defaults on the senior loan
and/or any junior loan or loans, the existence of junior loans and actions taken
by junior lenders can impair the security available to the senior lender and can
interfere with or delay the taking of action by the senior lender. Moreover, the
bankruptcy of a junior lender may operate to stay foreclosure or similar
proceedings by the senior lender.
 
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<PAGE>
FORECLOSURE
 
     Foreclosure is a legal procedure that allows the mortgagee to recover its
mortgage debt by enforcing its rights and available legal remedies under the
mortgage. If the mortgagor defaults in payment or performance of its obligations
under the note or mortgage and, by reason thereof, the indebtedness has been
accelerated, the mortgagee has the right to institute foreclosure proceedings to
sell the mortgaged property at public auction to satisfy the indebtedness.
 
     Foreclosure procedures with respect to the enforcement of a mortgage vary
from state to state. Two primary methods of foreclosing a mortgage are judicial
foreclosure and non-judicial foreclosure pursuant to a power of sale granted in

the mortgage instrument. There are other foreclosure procedures available in
some states that are either infrequently used or available only in certain
limited circumstances, such as strict foreclosure.
 
JUDICIAL FORECLOSURE
 
     A judicial foreclosure proceeding is conducted in a court having
jurisdiction over the mortgaged property. Generally, the action is initiated by
the service of legal pleadings upon all parties having a subordinate interest of
record in the real property and all parties in possession of the property, under
leases or otherwise, whose interests are subordinate to the mortgage. Delays in
completion of the foreclosure may occasionally result from difficulties in
locating defendants. When the lender's right to foreclosure is contested, the
legal proceedings can be costly and time-consuming. Upon successful completion
of a judicial foreclosure proceeding, the court generally issues a judgment of
foreclosure and appoints a referee or other officer to conduct a public sale of
the mortgaged property, the proceeds of which are used to satisfy the judgment.
Such sales are made in accordance with procedures that vary from state to state.
 
NON-JUDICIAL FORECLOSURE/POWER OF SALE
 
     Foreclosure of a deed of trust is generally accomplished by a non-judicial
trustee's sale pursuant to the power of sale granted in the deed of trust. A
power of sale is typically granted in a deed of trust. It may also be contained
in any other type of mortgage instrument. A power of sale allows a non-judicial
public sale to be conducted generally following a request from the
beneficiary/lender to the trustee to sell the property upon any default by the
mortgagor under the terms of the mortgage note or the mortgage instrument and
after notice of sale is given in accordance with the terms of the mortgage
instrument, as well as applicable state law. In some states, prior to such sale,
the trustee under a deed of trust must record a notice of default and notice of
sale and send a copy to the mortgagor and to any other party who has recorded a
request for a copy of a notice of default and notice of sale. In addition, in
some states the trustee must provide notice to any other party having an
interest of record in the real property, including junior lienholders. A notice
of sale must be posted in a public place and, in most states, published for a
specified period of time in one or more newspapers. The mortgagor or junior
lienholder may then have the right, during a reinstatment period required in
some states, to cure the default by paying the entire actual amount in arrears
(without acceleration) plus the expenses incurred in enforcing the obligation.
In other states, the mortgagor or the junior lienholder is not provided a period
to reinstate the loan, but has only the right to pay off the entire debt to
prevent the foreclosure sale. Generally, the procedure for public sale, the
parties entitled to notice, the method of giving notice and the applicable time
periods are governed by state law and vary among the states. Foreclosure of a
deed to secure debt is also generally accomplished by a non-judicial sale
similar to that required by a deed of trust, except that the lender or its
agent, rather than a trustee, is typically empowered to perform the sale in
accordance with the terms of the deed to secure debt and applicable law.
 
LIMITATIONS ON LENDER'S RIGHTS
 
     United States courts have traditionally imposed general equitable
principles to limit the remedies available to a mortgagee in connection with

foreclosure. These equitable principles are generally designed to relieve the
mortgagor from the legal effect of mortgage defaults, to the extent that such
effect is perceived as harsh or unfair. Relying on such principles, a court may
alter the specific terms of a loan to the extent it considers necessary to
prevent an injustice, undue oppression or overreaching, or may require the
lender to undertake affirmative and expensive actions to determine the cause of
the mortgagor's default and the likelihood that the mortgagor will be able to
reinstate the loan. In some cases, courts have substituted their judgment for
the lender's and have required that lenders reinstate loans or recast payment
schedules in order to accommodate mortgagors who are suffering from a temporary
financial disability. In other cases, courts have limited the right of the
lender to foreclose if the default under the mortgage is not monetary, e.g., the
mortgagor failed to maintain the mortgaged property adequately or the mortgagor
executed a junior mortgage on the mortgaged property. The exercise by the court
of its equity powers will depend on the individual circumstances of each case
presented to it. Finally, some courts have been faced with the issue of whether
federal or state
 
                                       48
<PAGE>
constitutional provisions reflecting due process concerns for adequate notice
require that a mortgagor receive notice in addition to statutorily-prescribed
minimum notice. For the most part, these cases have upheld the reasonableness of
the notice provisions or have found that a public sale under a mortgage
providing for a power of sale does not involve sufficient state action to afford
constitutional protections to the mortgagor.
 
     A foreclosure action is subject to most of the delays and expenses of other
lawsuits if defenses are raised or counterclaims are interposed, and sometimes
require several years to complete.
 
     Also, a third party may be unwilling to purchase a mortgaged property at a
public sale because of the difficulty in determining the value of such property
at the time of sale, due to, among other things, redemption rights which may
exist and the possibility of physical deterioration of the property during the
foreclosure proceedings. Potential buyers may be reluctant to purchase property
at a foreclosure sale as a result of the 1980 decision of the United States
Court of Appeals for the Fifth Circuit in Durrett v. Washington National
Insurance Company and other decisions that have followed its reasoning. The
court in Durrett held that even a non-collusive, regularly conducted foreclosure
sale was a fraudulent transfer under the federal Bankruptcy Code, as amended
from time to time (11 U.S.C.) and, therefore, could be rescinded in favor of the
bankrupt's estate, if (i) the foreclosure sale was held while the debtor was
insolvent and not more than one year prior to the filing of the bankruptcy
petition and (ii) the price paid for the foreclosed property did not represent
'fair consideration' ('reasonably equivalent value' under the Bankruptcy Code).
Although the reasoning and result of Durrett in respect of the Bankruptcy Code
was rejected by the United States Supreme Court in May 1994, the case could
nonetheless be persuasive to a court applying a state fraudulent conveyance law
which has provisions similar to those construed in Durrett. For these reasons,
it is common for the lender to purchase the mortgaged property for an amount
equal to the lesser of fair market value and the underlying debt and accrued and
unpaid interest plus the expenses of foreclosure. Generally, state law controls
the amount of foreclosure costs and expenses which may be recovered by a lender.

Thereafter, subject to the mortgagor's right in some states to remain in
possession during a redemption period, if applicable, the lender will become the
owner of the property and have both the benefits and burdens of ownership of the
mortgaged property. For example, the lender will have the obligation to pay debt
service on any senior mortgages, to pay taxes, obtain casualty insurance and to
make such repairs at its own expense as are necessary to render the property
suitable for sale. Frequently, the lender employs a third party management
company to manage and operate the property. The costs of operating and
maintaining a commercial or multifamily residential property may be significant
and may be greater than the income derived from that property. The costs of
management and operation of those mortgaged properties which are hotels, motels
or restaurants or nursing or convalescent homes or hospitals may be particularly
significant because of the expertise, knowledge and, with respect to nursing or
convalescent homes or hospitals, regulatory compliance, required to run such
operations and the effect which foreclosure and a change in ownership may have
on the public's and the industry's (including franchisors') perception of the
quality of such operations. 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.
Moreover, a lender commonly incurs substantial legal fees and court costs in
acquiring a mortgaged property through contested foreclosure and/or bankruptcy
proceedings. Furthermore, a few states require that any environmental
contamination at certain types of properties be cleaned up before a property may
be resold. In addition, a lender may be responsible under federal or state law
for the cost of cleaning up a mortgaged property that is environmentally
contaminated. See '--Environmental Legislation'. Generally state law controls
the amount of foreclosure expenses and costs, including attorneys' fees, that
may be recovered by a lender.
 
     A junior mortgagee may not foreclose on the property securing the junior
mortgage unless it forecloses subject to senior mortgages and any other prior
liens, in which case it may be obliged to make payments on the senior mortgages
to avoid their foreclosure. In addition, in the event that the foreclosure of a
junior mortgage triggers the enforcement of a 'due-on-sale' clause contained in
a senior mortgage, the junior mortgagee may be required to pay the full amount
of the senior mortgage to avoid its foreclosure. Accordingly, with respect to
those Mortgage Loans which are junior mortgage loans, if the lender purchases
the property the lender's title will be subject to all senior mortgages, prior
liens and certain governmental liens.
 
     The proceeds received by the referee or trustee from the sale are generally
applied first to the costs, fees and expenses of sale, to unpaid real estate
taxes and assessments and then in satisfaction of the indebtedness secured by
the mortgage under which the sale was conducted. Any proceeds remaining after
satisfaction of senior mortgage debt are generally payable to the holders of
junior mortgages and other liens and claims in order of their priority, whether
or not the mortgagor is in default. Any additional proceeds are generally
payable to the mortgagor. The payment of the proceeds to the holders of junior
mortgages may occur in the foreclosure action of the senior mortgage or a
subsequent ancillary proceeding or may require the institution of separate legal
proceedings by such holders.
 
                                       49

<PAGE>
     In connection with a series of Certificates for which an election is made
to qualify the Trust Fund, or a portion thereof, as a REMIC, the REMIC
Regulations and the Agreement may require the Master Servicer to hire an
independent contractor to operate any foreclosed property relating to Whole
Loans.
 
RIGHTS OF REDEMPTION
 
     The purposes of a foreclosure action are to enable the mortgagee to realize
upon its security and to bar the mortgagor, and all persons who have an interest
in the property which is subordinate to the mortgage being foreclosed, from
exercise of their 'equity of redemption'. The doctrine of equity of redemption
provides that, until the property covered by a mortgage has been sold in
accordance with a properly conducted foreclosure and foreclosure sale, those
having an interest which is subordinate to that of the foreclosing mortgagee
have an equity of redemption and may redeem the property by paying the entire
debt with interest. In addition, in some states, when a foreclosure action has
been commenced, the redeeming party must pay certain costs of such action. Those
having an equity of redemption must generally be made parties and joined in the
foreclosure proceeding in order for their equity of redemption to be cut off and
terminated.
 
     The equity of redemption is generally a common-law (non-statutory) right
which exists prior to completion of the foreclosure, is not waivable by the
mortgagor, must be exercised prior to foreclosure sale and should be
distinguished from the post-sale statutory rights of redemption. In some states,
after sale pursuant to a deed of trust or foreclosure of a mortgage, the
mortgagor and foreclosed junior lienors are given a statutory period in which to
redeem the property from the foreclosure sale. In some states, statutory
redemption may occur only upon payment of the foreclosure sale price. In other
states, redemption may be authorized if the former mortgagor pays only a portion
of the sums due. The effect of a statutory right of redemption is to diminish
the ability of the lender to sell the foreclosed property. The exercise of a
right of redemption would defeat the title of any purchaser from a foreclosure
sale or sale under a deed of trust. Consequently, the practical effect of the
redemption right is to force the lender to maintain the property and pay the
expenses of ownership until the redemption period has expired. In some states, a
post-sale statutory right of redemption may exist following a judicial
foreclosure, but not following a trustee's sale under a deed of trust.
 
     Under the REMIC Regulations currently in effect, property acquired by
foreclosure generally must not be held for more than two years. With respect to
a series of Certificates for which an election is made to qualify the Trust Fund
or a part thereof as a REMIC, the Agreement will permit foreclosed property to
be held for more than two years if the Trustee receives (i) an extension from
the Internal Revenue Service or (ii) an opinion of counsel to the effect that
holding such property for such period is permissible under the REMIC
Regulations.
 
ANTI-DEFICIENCY LEGISLATION
 
     Some or all of the Mortgage Loans may be nonrecourse loans, as to which
recourse may be had only against the specific property securing the related

Mortgage Loan and a personal money judgment may not be obtained against the
mortgagor. Even if a mortgage loan by its terms provides for recourse to the
mortgagor, some states impose prohibitions or limitations on such recourse. For
example, statutes in some states limit the right of the lender to obtain a
deficiency judgment against the mortgagor following foreclosure or sale under a
deed of trust. A deficiency judgment would be a personal judgment against the
former mortgagor equal to the difference between the net amount realized upon
the public sale of the real property and the amount due to the lender. Some
states require the lender to exhaust the security afforded under a mortgage by
foreclosure in an attempt to satisfy the full debt before bringing a personal
action against the mortgagor. In certain other states, the lender has the option
of bringing a personal action against the mortgagor on the debt without first
exhausting such security; however, in some of these states, the lender,
following judgment on such personal action, may be deemed to have elected a
remedy and may be precluded from exercising remedies with respect to the
security. In some cases, a lender will be precluded from exercising any
additional rights under the note or mortgage if it has taken any prior
enforcement action. Consequently, the practical effect of the election
requirement, in those states permitting such election, is that lenders will
usually proceed against the security first rather than bringing a personal
action against the mortgagor. Finally, other statutory provisions limit any
deficiency judgment against the former mortgagor following a judicial sale to
the excess of the outstanding debt over the fair market value of the property at
the time of the public sale. The purpose of these statutes is generally to
prevent a lender from obtaining a large deficiency judgment against the former
mortgagor as a result of low or no bids at the judicial sale.
 
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<PAGE>
LEASEHOLD RISKS
 
     Mortgage Loans may be secured by a mortgage on a ground lease. Leasehold
mortgages are subject to certain risks not associated with mortgage loans
secured by the fee estate of the mortgagor. The most significant of these risks
is that the ground lease creating the leasehold estate could terminate, leaving
the leasehold mortgagee without its security. The ground lease may terminate if,
among other reasons, the ground lessee breaches or defaults in its obligations
under the ground lease or there is a bankruptcy of the ground lessee or the
ground lessor. This risk may be minimized if the ground lease contains certain
provisions protective of the mortgagee, but the ground leases that secure
Mortgage Loans may not contain some of these protective provisions, and
mortgages may not contain the other protections discussed in the next paragraph.
Protective ground lease provisions include the right of the leasehold mortgagee
to receive notices from the ground lessor of any defaults by the the mortgagor;
the right to cure such defaults, with adequate cure periods; if a default is not
susceptible of cure by the leasehold mortgagee, the right to acquire the
leasehold estate through foreclosure or otherwise; the ability of the ground
lease to be assigned to and by the leasehold mortgagee or purchaser at a
foreclosure sale and for the concomitant release of the ground lessee's
liabilities thereunder; and the right of the leasehold mortgagee to enter into a
new ground lease with the ground lessor on the same terms and conditions as the
old ground lease in the event of a termination thereof.
 
     In addition to the foregoing protections, a leasehold mortgagee may require

that the ground lease or leasehold mortgage prohibit the ground lessee from
treating the ground lease as terminated in the event of the ground lessor's
bankruptcy and rejection of the ground lease by the trustee for the
debtor-ground lessor. As further protection, a leasehold mortgage may provide
for the assignment of the debtor-ground lessee's right to reject a lease
pursuant to Section 365 of the Bankruptcy Reform Act of 1978, as amended (11
U.S.C.) (the 'Bankruptcy Code'), although the enforceability of such clause has
not been established. Without the protections described in the foregoing
paragraph, a leasehold mortgagee may lose the collateral securing its leasehold
mortgage. In addition, terms and conditions of a leasehold mortgage are subject
to the terms and conditions of the ground lease. Although certain rights given
to a ground lessee can be limited by the terms of a leasehold mortgage, the
rights of a ground lessee or a leasehold mortgagee with respect to, among other
things, insurance, casualty and condemnation will be governed by the provisions
of the ground lease.
 
BANKRUPTCY LAWS
 
     The Bankruptcy Code and related state laws may interfere with or affect the
ability of a lender to realize upon collateral and/or to enforce a deficiency
judgment. For example, under the Bankruptcy Code, virtually all actions
(including foreclosure actions and deficiency judgment proceedings) are
automatically stayed upon the filing of the bankruptcy petition, and, usually,
no interest or principal payments are made during the course of the bankruptcy
case. The delay and the consequences thereof caused by such automatic stay can
be significant. Also, under the Bankruptcy Code, the filing of a petition in
bankruptcy by or on behalf of a junior lienor may stay the senior lender from
taking action to foreclose out such junior lien.
 
     Under the Bankruptcy Code, provided certain substantive and procedural
safeguards for the lender are met, the amount and terms of a mortgage secured by
property of the debtor may be modified under certain circumstances. The
outstanding amount of the loan secured by the real property may be reduced to
the then-current value of the property (with a corresponding partial reduction
of the amount of lender's security interest) pursuant to a confirmed plan or
lien avoidance proceeding, thus leaving the lender a general unsecured creditor
for the difference between such value and the outstanding balance of the loan.
Other modifications may include the modification or denial of enforceability of
due-on-sale or due-on-encumbrance clauses, the reduction in the amount of each
scheduled payment, which reduction may result from a reduction in the rate of
interest and/or the alteration of the repayment schedule (with or without
affecting the unpaid principal balance of the loan), and/or an extension (or
reduction) of the final maturity date. Some courts with federal bankruptcy
jurisdiction have approved plans, based on the particular facts of the
reorganization case, that effected the curing of a mortgage loan default by
paying arrearages over a number of years. Also, under federal bankruptcy law, a
bankruptcy court may permit a debtor through its rehabilitative plan to
de-accelerate a secured loan and to reinstate the loan even though the lender
accelerated the mortgage loan and final judgment of foreclosure had been entered
in state court (provided no sale of the property had yet occurred) prior to the
filing of the debtor's petition. This may be done even if the full amount due
under the original loan is never repaid.
 
     The Bankruptcy Code has been amended to provide that a lender's perfected

pre-petition security interest in leases, rents and hotel revenues continues in
the post-petition leases, rents and hotel revenues, unless a bankruptcy court
orders to the contrary 'based on the equities of the case.' Thus, unless a court
orders otherwise, revenues from a Mortgaged Property generated after the date
the bankruptcy petition is filed will constitute 'cash collateral' under the
Bankruptcy Code. Debtors may only use cash collateral upon obtaining the
lender's consent or a prior court order finding that the lender's interest in
the Mortgaged Properties
 
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<PAGE>
and the cash collateral is 'adequately protected' as such term is defined and
interpreted under the Bankruptcy Code. It should be noted, however, that the
court may find that the lender has no security interest in either pre-petition
or post-petition revenues if the court finds that the loan documents do not
contain language covering accounts, room rents, or other forms of personalty
necessary for a security interest to attach to hotel revenues.
 
     To the extent that a mortgagor's ability to make payment on a mortgage loan
is dependent on its receipt of payments of rent under a lease of the related
property, such ability may be impaired by the commencement of a bankruptcy
proceeding relating to a lessee under such lease. Under the Bankruptcy Code, the
commencement of a bankruptcy proceeding in which the lessee is the debtor
results in a stay in bankruptcy against the commencement or continuation of any
state court proceeding for past due rent, for accelerated rent, for damages or
for a summary eviction order with respect to a default under the lease that
occurred prior to the filing of the lessee's petition.
 
     In addition, the Bankruptcy Code generally provides that a trustee or
debtor-in-possession may, subject to approval of the court, (a) assume the lease
and retain it or assign it to a third party or (b) reject the lease. If the
lease is assumed, the trustee or debtor in possession (or assignee, if
applicable) must cure any defaults under the lease, compensate the lessor for
its losses and provide the lessor with 'adequate assurance' of future
performance. Such remedies may be insufficient, however, as the lessor may be
forced to continue under the lease with a lessee that is a poor credit risk or
an unfamiliar tenant if the lease was assigned, and any assurances provided to
the lessor may, in fact, be inadequate. If the lease is rejected, the lessor
will be treated as an unsecured creditor with respect to its claim for damages
for termination of the lease. In addition, pursuant to Section 502(b)(6) of the
Bankruptcy Code, a lessor's damages for lease rejection in respect of future
rent installments are limited to the rent reserved by the lease, without
acceleration, for the greater of one year, or 15%, not to exceed three years, of
the remaining term of the lease.
 
     In a bankruptcy or similar proceeding, action may be taken seeking the
recovery as a preferential transfer of any payments made by the mortgagor under
the related Mortgage Loan to the Trust Fund. Payments on long-term debt may be
protected from recovery as preferences if they are payments in the ordinary
course of business made on debts incurred in the ordinary course of business.
Whether any particular payment would be protected depends upon the facts
specific to a particular transaction.
 
     A trustee in bankruptcy, in some cases, may be entitled to collect its

costs and expenses in preserving or selling the mortgaged property ahead of
payment to the lender. In certain circumstances, a debtor in bankruptcy may have
the power to grant liens senior to the lien of a mortgage, and analogous state
statutes and general principles of equity may also provide a mortgagor with
means to halt a foreclosure proceeding or sale and to force a restructuring of a
mortgage loan on terms a lender would not otherwise accept. Moreover, the laws
of certain states also give priority to certain tax liens over the lien of a
mortgage or deed of trust. Under the Bankruptcy Code, if the court finds that
actions of the mortgagee have been unreasonable, the lien of the related
mortgage may be subordinated to the claims of unsecured creditors.
 
     Pursuant to the federal doctrine of 'substantive consolidation' or to the
(predominantly state law) doctrine of 'piercing the corporate veil', a
bankruptcy court, in the exercise of its equitable powers, also has the
authority to order that the assets and liabilities of a related entity be
consolidated with those of an entity before it. Thus, property ostensibly the
property of one entity may be determined to be the property of a different
entity in bankruptcy, the automatic stay applicable to the first bankrupt entity
extended to the second and the rights of creditors of the second entity impaired
in the fashion set forth above in the discussion of ordinary bankruptcy
principles. Depending on facts and circumstances not wholly in existence at the
time a loan is originated or transferred to the Trust Fund, the application of
any of these doctrines to one or more of the mortgagors in the context of the
bankruptcy of one or more of their affiliates could result in material
impairment of the rights of the Certificateholders. For each mortgagor that is
described as a 'special purpose entity', 'single purpose entity' or
'bankruptcy-remote entity' in the Prospectus Supplement, the activities that may
be conducted by such mortgagor and its ability to incur debt are restricted by
the applicable Mortgage or the organizational documents of such mortgagor in
such manner as is intended to make the likelihood of a bankruptcy proceeding
being commenced by or against such mortgagor remote, and such mortgagor has been
organized and is designed to operate in a manner such that its separate
existence should be respected notwithstanding a bankruptcy proceeding in respect
of one or more affiliated entities of such mortgagor. However, the Depositor
makes no representation as to the likelihood of the institution of a bankruptcy
proceeding by or in respect of any mortgagor or the likelihood that the separate
existence of any mortgagor would be respected if there were to be a bankruptcy
proceeding in respect of any affiliated entity of a mortgagor.
 
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<PAGE>
ENVIRONMENTAL LEGISLATION
 
     A lender may be subject to unforeseen environmental risks when taking a
security interest in real or personal property.
 
     Under the laws of many states, contamination on a property may give rise to
a lien on the property for cleanup costs. In several states, such a lien has
priority over all existing liens (a 'superlien') including those of existing
mortgages; in those states, the lien of a mortgage contemplated by this
transaction may lose its priority to such a superlien.
 
     CERCLA imposes strict, as well as joint and several, liability on several
classes of potentially responsible parties, including current owners and

operators of the property, regardless of whether they caused or contributed to
the contamination. Many states have laws similar to CERCLA. CERCLA excludes from
the definition of 'owner or operator' any person 'who, without participating in
the mangement of . . . [the] facility, holds indicia of ownership primarily to
protect his security interest' ('secured-creditor exemption').
 
     A lender may lose its secured-creditor exemption and be held liable under
CERCLA as an owner or operator, if such lender or its employees or agents
participate in management of the property. Also, if the lender takes title to or
possession of the property, the secured-creditor exemption may be deemed to be
unavailable, and the lender may be liable to the government or private parties
for clean-up or other remedial costs pursuant to CERCLA.
 
     A decision in May 1990 of the United States Court of Appeals for the
Eleventh Circuit in United States v. Fleet Factors Corp. very narrowly construed
the CERCLA secured-creditor exemption. The Court held that a mortgagee need not
have involved itself in the day-to-day operations of the mortgaged property or
in decisions relating to hazardous waste in order to be liable under CERCLA;
rather, liability could attach to a mortgagee if its involvement in the
management of the property is sufficiently broad to support the inference that
it had the capacity to influence the mortgagor's treatment of hazardous waste.
Such capacity to influence could be inferred from the extent of the mortgagee's
involvement in the mortgagor's financial management. A subsequent decision by
the United States Court of Appeals for the Ninth Circuit in In re Bergsoe Metal
Corp. disagreed with the Fleet Factors opinion, ruling that a secured lender had
no liability absent 'some actual management of the facility' on the part of the
lender. The scope of the secured-creditor exemption is thus unclear.
 
     If a lender is or becomes liable, it may bring an action for contribution
against the owner or operator who created the environmental contamination, but
that person or entity may be bankrupt or otherwise judgment proof. It is
possible that cleanup costs could become a liability of the Trust Fund and
occasion a loss to Certificateholders in certain circumstances described above
if such remedial costs were incurred.
 
     Unless otherwise provided in the related Prospectus Supplement, the
Warranting Party with respect to any Whole Loan included in a Trust Fund for a
particular series of Certificates will represent that a 'Phase I assessment' as
described in and meeting the requirements of the then current version of Chapter
5 of the Federal National Mortgage Association Multifamily Guide has been
received and reviewed. In addition, the Agreement may provide that the Master
Servicer, acting on behalf of the Trustee, will not acquire title to a Mortgaged
Property or take over its operation unless the Master Servicer has previously
determined, based on a report prepared by a person who regularly conducts
environmental audits, that (a) there are no circumstances or conditions present
at the Mortgaged Property relating to substances for which some investigation or
clean-up action could be required or that it would be in the best economic
interest of the Trust Fund to take such actions with respect to the affected
Mortgaged Property and (b) that the Mortgaged Property is in compliance with
applicable environmental laws or that it would be in the best economic interest
of the Trust Fund to take the actions necessary to comply with such laws. See
'Description of the Agreements-- Realization Upon Defaulted Whole Loans'.
 
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE

 
     Certain of the Mortgage Loans may contain due-on-sale and
due-on-encumbrance clauses. These clauses generally provide that the lender may
accelerate the maturity of the loan if the mortgagor sells or otherwise
transfers or encumbers the mortgaged property. Certain of these clauses may
provide that, upon an attempted breach thereof by the mortgagor of an otherwise
non-recourse loan, the mortgager becomes personally liable for the mortgage
debt. The enforceability of due-on-sale clauses has been the subject of
legislation or litigation in many states and, in some cases, the enforceability
of these clauses was limited or denied. However, with respect to certain loans
the Garn-St Germain Depository Institutions Act of 1982 preempts state
constitutional, statutory and case law that prohibits the enforcement of
due-on-sale clauses and permits lenders to enforce these clauses in accordance
with their terms subject to certain limited exceptions. Unless otherwise
provided in the related Prospectus Supplement, a Master Servicer, on behalf of
the Trust Fund, will determine whether to exercise any right the Trustee may
have as mortgagee to accelerate payment of any such Mortgage Loan or to withhold
its consent to any transfer or further encumbrance in accordance
 
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<PAGE>
with the general servicing standard described herein under 'Description of the
Agreements--Collection and Other Servicing Procedures'.
 
ACCELERATION ON DEFAULT
 
     Some of the Mortgage Loans included in a Trust Fund will include a
'debt-acceleration' clause, which permits the lender to accelerate the full debt
upon a monetary or nonmonetary default of the borrower. The courts of all states
will enforce clauses providing for acceleration in the event of a material
payment default after giving effect to any appropriate notices. The equity
courts of any state, however, may refuse to foreclose a mortgage or deed of
trust when an acceleration of the indebtedness would be inequitable or unjust or
the circumstances would render the acceleration unconscionable. Furthermore, in
some states, the borrower may avoid foreclosure and reinstate an accelerated
loan by paying only the defaulted amounts and the costs and attorneys' fees
incurred by the lender in collecting such defaulted payments.
 
     State courts also are known to apply various legal and equitable principles
to avoid enforcement of the forfeiture provisions of Installment Contracts. For
example, a lender's practice of accepting late payments from the borrower may be
deemed a waiver of the forfeiture clause. State courts also may impose equitable
grace periods for payment of arrearages or otherwise permit reinstatement of the
contract following a default. Not infrequently, if a borrower under an
Installment Contract has significant equity in the property, equitable
principles will be applied to reform or reinstate the contract or to permit the
borrower to share the proceeds upon a foreclosure sale of the property if the
sale price exceeds the debt.
 
DEFAULT INTEREST, PREPAYMENT CHARGES AND PREPAYMENTS
 
     Forms of notes and mortgages used by lenders may contain provisions
obligating the mortgagor to pay a late charge or additional interest if payments
are not timely made, and in some circumstances may provide for prepayment fees

or yield maintenance penalties if the obligation is paid prior to maturity or
prohibit such prepayment for a specified period. In certain states, there are or
may be specific limitations upon the late charges which a lender may collect
from a mortgagor for delinquent payments. Certain states also limit the amounts
that a lender may collect from a mortgagor as an additional charge if the loan
is prepaid. The enforceability, under the laws of a number of states of
provisions providing for prepayment fees or penalties upon, or prohibition of,
an involuntary prepayment is unclear, and no assurance can be given that, at the
time a Prepayment Premium is required to be made on a Mortgage Loan in
connection with an involuntary prepayment, the obligation to make such payment,
or the provisions of any such prohibition, will be enforceable under applicable
state law. The absence of a restraint on prepayment, particularly with respect
to Mortgage Loans having higher Mortgage Rates, may increase the likelihood of
refinancing or other early retirements of the Mortgage Loans.
 
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 (including
multifamily but not other commercial) first mortgage loans originated by certain
lenders after March 31, 1980. A similar federal statute was in effect with
respect to mortgage loans made during the first three months of 1980. The
statute authorized any state to reimpose interest rate limits by adopting,
before April 1, 1983, a law or constitutional provision that expressly rejects
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.
 
     The Depositor has been advised by counsel that a court interpreting Title V
would hold that first mortgage loans secured by primarily residential properties
that are originated on or after January 1, 1980 are subject to federal
preemption. Therefore, in a state that has not taken the requisite action to
reject application of Title V or to adopt a provision limiting discount points
or other charges prior to origination of such mortgage loans, any such
limitation under such state's usury law would not apply to such mortgage loans.
 
ALTERNATIVE MORTGAGE INSTRUMENTS
 
     Alternative mortgage instruments, including adjustable rate mortgage loans,
originated by non-federally chartered lenders have historically been subjected
to a variety of restrictions. Such restrictions differed from state to state,
resulting in difficulties in determining whether a particular alternative
mortgage instrument originated by a state-chartered lender was in compliance
with applicable law. These difficulties were alleviated substantially as a
result of the enactment of Title VIII of the Garn-St Germain Act
 
                                       54
<PAGE>
('Title VIII'). Title VIII provides that, notwithstanding any state law to the
contrary, state-chartered banks may originate alternative mortgage instruments
in accordance with regulations promulgated by the Comptroller of the Currency

with respect to origination of alternative mortgage instruments by national
banks, state-chartered credit unions may originate alternative mortgage
instruments in accordance with regulations promulgated by the National Credit
Union Administration (the 'NCUA') with respect to origination of alternative
mortgage instruments by federal credit unions, and all other non-federally
chartered housing creditors, including state-chartered savings and loan
associations, state-chartered savings banks and mortgage banking companies, may
originate alternative mortgage instruments in accordance with the regulations
promulgated by the Federal Home Loan Bank Board (now the Office of Thrift
Supervision) with respect to origination of alternative mortgage instruments by
federal savings and loan associations. Title VIII provides that any state may
reject applicability of the provision of Title VIII by adopting, prior to
October 15, 1985, a law or constitutional provision expressly rejecting the
applicability of such provisions. Certain states have taken such action.
 
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
 
     Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the 'Relief Act'), a mortgagor who enters military service after the
origination of such mortgagor's Mortgage Loan (including a mortgagor who was in
reserve status and is called to active duty after origination of the Mortgage
Loan), may not be charged interest (including fees and charges) above an annual
rate of 6% during the period of such mortgagor's active duty status, unless a
court orders otherwise upon application of the lender. The Relief Act applies to
mortgagors who are members of the Army, Navy, Air Force, Marines, National
Guard, Reserves, Coast Guard and officers of the U.S. Public Health Service
assigned to duty with the military. Because the Relief Act applies to mortgagors
who enter military service (including reservists who are called to active duty)
after origination of the related Mortgage Loan, no information can be provided
as to the number of loans that may be affected by the Relief Act. Application of
the Relief Act would adversely affect, for an indeterminate period of time, the
ability of any servicer to collect full amounts of interest on certain of the
Mortgage Loans. Any shortfalls in interest collections resulting from the
application of the Relief Act would result in a reduction of the amounts
distributable to the holders of the related series of Certificates and would not
be covered by advances or any form of Credit Support (if any) provided in
connection with such Certificates. In addition, the Relief Act imposes
limitations that would impair the ability of the servicer to foreclose on an
affected Mortgage Loan during the mortgagor's period of active duty status, and,
under certain circumstances, during an additional three month period thereafter.
Thus, in the event that such a Mortgage Loan goes into default, there may be
delays and losses occasioned thereby.
 
FORFEITURES IN DRUG AND RICO PROCEEDINGS
 
     Federal law provides that property owned by persons convicted of
drug-related crimes or of criminal violations of the Racketeer Influenced and
Corrupt Organizations ('RICO') statute can be seized by the government if the
property was used in, or purchased with the proceeds of, such crimes. Under
procedures contained in the Comprehensive Crime Control Act of 1984 (the 'Crime
Control Act'), the government may seize the property even before conviction. The
government must publish notice of the forfeiture proceeding and may give notice
to all parties 'known to have an alleged interest in the property', including
the holders of mortgage loans.

 
     A lender may avoid forfeiture of its interest in the property if it
establishes that: (i) its mortgage was executed and recorded before commission
of the crime upon which the forfeiture is based, or (ii) the lender was, at the
time of execution of the mortgage, 'reasonably without cause to believe' that
the property was used in, or purchased with the proceeds of, illegal drug or
RICO activities.
 
CERTAIN LAWS AND REGULATIONS
 
     The Mortgaged Properties will be subject to compliance with various
federal, state and local statutes and regulations. Failure to comply (together
with an inability to remedy any such failure) could result in material
diminution in the value of a Mortgaged Property which could, together with the
possibility of limited alternative uses for a particular Mortgaged Property
(i.e., a nursing or convalescent home or hospital), result in a failure to
realize the full principal amount of the related Mortgage Loan.
 
TYPE OF MORTGAGED PROPERTY
 
     The lender may be subject to additional risk depending upon the type and
use of the Mortgaged Property in question. For instance, Mortgaged Properties
which are hospitals, nursing homes or convalescent homes may present special
risks to lenders in large part due to significant governmental regulation of the
operation, maintenance, control and financing of health care
 
                                       55
<PAGE>
institutions. Mortgages on Mortgaged Properties which are owned by the borrower
under a condominium form of ownership are subject to the declaration, by-laws
and other rules and regulations of the condominium association. Mortgaged
Properties which are hotels or motels may present additional risk to the lender
in that: (i) hotels and motels are typically operated pursuant to franchise,
management and operating agreements which may be terminable by the operator; and
(ii) the transferability of the hotel's operating, liquor and other licenses to
the entity acquiring the hotel either through purchase or foreclosure is subject
to the vagaries of local law requirements. In addition, Mortgaged Properties
which are multifamily residential properties or cooperatively owned multifamily
properties may be subject to rent control laws, which could impact the future
cash flows of such properties.
 
AMERICANS WITH DISABILITIES ACT
 
     Under Title III of the Americans with Disabilities Act of 1990 and rules
promulgated thereunder (collectively, the 'ADA'), in order to protect
individuals with disabilities, public accommodations (such as hotels,
restaurants, shopping centers, hospitals, schools and social service center
establishments) must remove architectural and communication barriers which are
structural in nature from existing places of public accommodation to the extent
'readily achievable.' In addition, under the ADA, alterations to a place of
public accommodation or a commercial facility are to be made so that, to the
maximum extent feasible, such altered portions are readily accessible to and
usable by disabled individuals. The 'readily achievable' standard takes into
account, among other factors, the financial resources of the affected site,

owner, landlord or other applicable person. In addition to imposing a possible
financial burden on the borrower in its capacity as owner or landlord, the ADA
may also impose such requirements on a foreclosing lender who succeeds to the
interest of the borrower as owner or landlord. Furthermore, since the 'readily
achievable' standard may vary depending on the financial condition of the owner
or landlord, a foreclosing lender who is financially more capable than the
borrower of complying with the requirements of the ADA may be subject to more
stringent requirements than those to which the borrower is subject.
 
                        FEDERAL INCOME TAX CONSEQUENCES
 
   
     The following represents the opinion of Cadwalader, Wickersham & Taft as to
the matters discussed herein. The following is a general discussion of the
anticipated material federal income tax consequences of the purchase, ownership
and disposition of Certificates. The discussion below does not purport to
address all federal income tax consequences that may be applicable to particular
categories of investors, some of which may be subject to special rules. The
authorities on which this discussion is based are subject to change or differing
interpretations, and any such change or interpretation could apply
retroactively. This discussion reflects the applicable provisions of the
Internal Revenue Code of 1986, as amended (the 'Code'), as well as regulations
(the 'REMIC Regulations') promulgated by the U.S. Department of Treasury (the
'Treasury') on December 23, 1992. 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 discussion, where the applicable Prospectus Supplement
provides for a fixed retained yield with respect to the Mortgage Assets
underlying a series of Certificates, references to the Mortgage will be deemed
to refer to that portion of the Mortgage Assets held by the Trust Fund which
does not include the Retained Interest. References to a 'holder' or
'Certificateholder' in this discussion generally mean the beneficial owner of a
Certificate.
 
FEDERAL INCOME TAX CONSEQUENCES FOR REMIC CERTIFICATES
 
  GENERAL
 
     With respect to a particular series of Certificates, an election may be
made to treat the Trust Fund or one or more segregated pools of assets therein
as one or more REMICs within the meaning of Code Section 860D. A Trust Fund or a
portion thereof as to which a REMIC election will be made will be referred to as
a 'REMIC Pool'. For purposes of this discussion, Certificates of a series as to
which one or more REMIC elections are made are referred to as 'REMIC
Certificates' and will consist of one or more Classes of 'Regular Certificates'
and one Class of 'Residual Certificates' in the case of each REMIC Pool.
Qualification as a REMIC requires ongoing compliance with certain conditions.
With respect to each series of REMIC Certificates, Cadwalader, Wickersham &
Taft, tax counsel to the Depositor, has advised the Depositor that in the firm's
opinion, assuming (i) the making of such an election, (ii) compliance with the
Agreement and (iii) compliance with any changes in the law, including any
amendments to the Code or applicable Treasury regulations thereunder, each REMIC

Pool will qualify as a REMIC. In such case, the Regular Certificates will be
considered to be 'regular interests' in the REMIC Pool and generally will be
treated for federal income tax purposes as if they were newly originated debt
instruments, and the Residual Certificates will be considered to be 'residual
interests' in the REMIC Pool. The Prospectus Supplement for each series of
Certificates will indicate whether one or more
 
                                       56
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REMIC elections with respect to the related Trust Fund will be made, in which
event references to 'REMIC' or 'REMIC Pool' herein shall be deemed to refer to
each such REMIC Pool. If so specified in the applicable Prospectus Supplement,
the portion of a Trust Fund as to which a REMIC election is not made may be
treated as a grantor trust for federal income tax purposes. See '--Federal
Income Tax Consequences for Certificates as to Which No REMIC Election Is Made'.
For purposes of this discussion, unless otherwise specified, the term 'Mortgage
Loans' will be used to refer to Mortgage Loans, MBS and Installment Contracts.
 
STATUS OF REMIC CERTIFICATES
 
     REMIC Certificates held by a domestic building and loan association will
constitute 'a regular or residual interest in a REMIC' within the meaning of
Code Section 7701(a)(19)(C)(xi) but only in the same proportion that the assets
of the REMIC Pool would be treated as 'loans . . . secured by an interest in
real property which is . . . residential real property' (such as single family
or multifamily properties, but not commercial properties) within the meaning of
Code Section 7701(a)(19)(C)(v) or as other assets described in Code Section
7701(a)(19)(C), and otherwise will not qualify for such treatment. REMIC
Certificates held by a real estate investment trust will constitute 'real estate
assets' within the meaning of Code Section 856(c)(5)(A), and interest on the
Regular Certificates and income with respect to Residual Certificates will be
considered 'interest on obligations secured by mortgages on real property or on
interests in real property' within the meaning of Code Section 856(c)(3)(B) in
the same proportion that, for both purposes, the assets of the REMIC Pool would
be so treated. If at all times 95% or more of the assets of the REMIC Pool
qualify for each of the foregoing respective treatments, the REMIC Certificates
will qualify for the corresponding status in their entirety. For purposes of
Code Section 856(c)(5)(A), payments of principal and interest on the Mortgage
Loans that are reinvested pending distribution to holders of REMIC Certificates
qualify for such treatment. Where two REMIC Pools are a part of a tiered
structure they will be treated as one REMIC for purposes of the tests described
above respecting asset ownership of more or less than 95%. In addition, if the
assets of the REMIC include Buy-Down Mortgage Loans, it is possible that the
percentage of such assets constituting 'qualifying real property loans' or
'loans . . . secured by an interest in real property' for purposes of Code
Section 7701(a)(19)(C)(v), respectively, may be required to be reduced by the
amount of the related Buy-Down Funds. REMIC Certificates held by a regulated
investment company will not constitute 'Government securities' within the
meaning of Code Section 851(b)(4)(A)(i). REMIC Certificates held by certain
financial institutions will constitute an 'evidence of indebtedness' within the
meaning of Code Section 582(c)(1). The Small Business Job Protection Act of 1996
(the 'SBJPA of 1996') repealed the reserve method for bad debts of domestic
building and loan associations and mutual savings banks, and thus has eliminated
the asset category of 'qualifying real property loans' in former Code Section

593(d) for taxable years beginning after December 31, 1995. The requirement in
the SBJPA of 1996 that such institutions must 'recapture' a portion of their
existing bad debt reserves is suspended if a certain portion of their assets are
maintained in 'residential loans' under Code Section 7701(a)(19)(C)(v), but only
if such loans were made to acquire, construct or improve the related real
property and not for the purpose of refinancing. However, no effort will be made
to identify the portion of the Mortgage Loans of any Series meeting this
requirement, and no representation is made in this regard.
 
QUALIFICATION AS A REMIC
 
     In order for the REMIC Pool to qualify as a REMIC, there must be ongoing
compliance on the part of the REMIC Pool with the requirements set forth in the
Code. The REMIC Pool must fulfill an asset test, which requires that no more
than a de minimis portion of the assets of the REMIC Pool, as of the close of
the third calendar month beginning after the 'Startup Day' (which for purposes
of this discussion is the date of issuance of the REMIC Certificates) and at all
times thereafter, may consist of assets other than 'qualified mortgages' and
'permitted investments'. The REMIC Regulations provide a safe harbor pursuant to
which the de minimis requirement is met if at all times the aggregate adjusted
basis of the nonqualified assets is less than 1% of the aggregate adjusted basis
of all the REMIC Pool's assets. An entity that fails to meet the safe harbor may
nevertheless demonstrate that it holds no more than a de minimis amount of
nonqualified assets. A REMIC also must provide 'reasonable arrangements' to
prevent its residual interest from being held by 'disqualified organizations'
and must furnish applicable tax information to transferors or agents that
violate this requirement. See 'Taxation of Residual Certificates--Tax-Related
Restrictions on Transfer of Residual Certificates--Disqualified Organizations'.
 
     A qualified mortgage is any obligation that is principally secured by an
interest in real property and that is either transferred to the REMIC Pool on
the Startup Day or is purchased by the REMIC Pool within a three-month period
thereafter pursuant to a fixed price contract in effect on the Startup Day.
Qualified mortgages include whole mortgage loans, such as the Mortgage Loans,
certificates of beneficial interest in a grantor trust that holds mortgage
loans, such as the Mortgage Certificates, regular interests in another REMIC,
such as Mortgage Certificates in a trust as to which a REMIC election has been
made, loans secured by timeshare interests and loans secured by shares held by a
tenant stockholder in a cooperative housing corporation, provided, in general,
(i) the fair market value of the real property security (including buildings and
structural components thereof) is at least 80% of the
 
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<PAGE>
principal balance of the related Mortgage Loan or mortgage loan underlying the
Mortgage Certificate either at origination or as of the Startup Day (an original
loan-to-value ratio of not more than 125% with respect to the real property
security) or (ii) substantially all the proceeds of the Mortgage Loan or the
underlying mortgage loan were used to acquire, improve or protect an interest in
real property that, at the origination date, was the only security for the
Mortgage Loan or underlying mortgage loan. If the Mortgage Loan has been
substantially modified other than in connection with a default or reasonably
foreseeable default, it must meet the loan-to-value test in (i) of the preceding
sentence as of the date of the last such modification). A qualified mortgage

includes a qualified replacement mortgage, which is any property that would have
been treated as a qualified mortgage if it were transferred to the REMIC Pool on
the Startup Day and that is received either (i) in exchange for any qualified
mortgage within a three-month period thereafter or (ii) in exchange for a
'defective obligation' within a two-year period thereafter. A 'defective
obligation' includes (i) a mortgage in default or as to which default is
reasonably foreseeable, (ii) a mortgage as to which a customary representation
or warranty made at the time of transfer to the REMIC Pool has been breached,
(iii) a mortgage that was fraudulently procured by the mortgagor, and (iv) a
mortgage that was not in fact principally secured by real property (but only if
such mortgage is disposed of within 90 days of discovery). A Mortgage Loan that
is 'defective' as described in clause (iv) that is not sold or, if within two
years of the Startup Day, exchanged, within 90 days of discovery, ceases to be a
qualified mortgage after such 90-day period.
 
     The REMIC Regulations provide that obligations secured by interests in
manufactured housing which qualify as 'single family residences' within the
meaning of Code Section 25(e)(10) may be treated as 'qualified mortgages' of a
REMIC. Under Code Section 25(e)(10), the term 'single family residence' includes
any manufactured home which has a minimum of 400 square feet of living space and
a minimum width in excess of 102 inches and which is of a kind customarily used
at a fixed location. With respect to each series with respect to which Contracts
are included in a REMIC Pool, the Depositor will represent and warrant that each
of the manufactured homes securing the Contracts meets this definition of
'single family residence'.
 
     Permitted investments include cash flow investments, qualified reserve
assets, and foreclosure property. A cash flow investment is an investment,
earning a return in the nature of interest, of amounts received on or with
respect to qualified mortgages for a temporary period, not exceeding 13 months,
until the next scheduled distribution to holders of interests in the REMIC Pool.
A qualified reserve asset is any intangible property held for investment that is
part of any reasonably required reserve maintained by the REMIC Pool to provide
for payments of expenses of the REMIC Pool or amounts due on the regular or
residual interests in the event of defaults (including delinquencies) on the
qualified mortgages, lower than expected reinvestment returns, prepayment
interest shortfalls and certain other contingencies. The reserve fund will be
disqualified if more than 30% of the gross income from the assets in such fund
for the year is derived from the sale or other disposition of property held for
less than three months, unless required to prevent a default on the regular
interests caused by a default on one or more qualified mortgages. A reserve fund
must be reduced 'promptly and appropriately' as payments on the Mortgage Loans
are received. Foreclosure property is real property acquired by the REMIC Pool
in connection with the default or imminent default of a qualified mortgage and
generally held for not more than two years, with extensions granted by the
Internal Revenue Service (the 'Service').
 
     In addition to the foregoing requirements, the various interests in a REMIC
Pool also must meet certain requirements. All of the interests in a REMIC Pool
must be either of the following: (i) one or more classes of regular interests or
(ii) a single class of residual interests on which distributions, if any, are
made pro rata. A regular interest is an interest in a REMIC Pool that is issued
on the Startup Day with fixed terms, is designated as a regular interest, and
unconditionally entitles the holder to receive a specified principal amount (or

other similar amount), and provides that interest payments (or other similar
amounts), if any, at or before maturity either are payable based on a fixed rate
or a qualified variable rate, or consist of a specified, nonvarying portion of
the interest payments on qualified mortgages. Such a specified portion may
consist of a fixed number of basis points, a fixed percentage of the total
interest, or a fixed or qualified variable or inverse variable rate on some or
all of the qualified mortgages minus a different fixed or qualified variable
rate. The specified principal amount of a regular interest that provides for
interest payments consisting of a specified, nonvarying portion of interest
payments on qualified mortgages may be zero. A residual interest is an interest
in a REMIC Pool other than a regular interest that is issued on the Startup Day
and that is designated as a residual interest. An interest in a REMIC Pool may
be treated as a regular interest even if payments of principal with respect to
such interest are subordinated to payments on other regular interests or the
residual interest in the REMIC Pool, and are dependent on the absence of
defaults or delinquencies on qualified mortgages or permitted investments, lower
than reasonably expected returns on permitted investments, unanticipated
expenses incurred by the REMIC Pool or prepayment interest shortfalls.
Accordingly, the Regular Certificates of a series will constitute one or more
classes of regular interests, and the Residual Certificates with respect to that
series will constitute a single class of residual interests on which
distributions are made pro rata.
 
     If an entity, such as the REMIC Pool, fails to comply with one or more of
the ongoing requirements of the Code for REMIC status during any taxable year,
the Code provides that the entity will not be treated as a REMIC for such year
and thereafter. In this
 
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event, an entity with multiple classes of ownership interests may be treated as
a separate association taxable as a corporation under Treasury regulations, and
the Regular Certificates may be treated as equity interests therein. The Code,
however, authorizes the Treasury Department to issue regulations that address
situations where failure to meet one or more of the requirements for REMIC
status occurs inadvertently and in good faith, and disqualification of the REMIC
Pool would occur absent regulatory relief. Investors should be aware, however,
that the Conference Committee Report to the Tax Reform Act of 1986 (the '1986
Act') indicates that the relief may be accompanied by sanctions, such as the
imposition of a corporate tax on all or a portion of the REMIC Pool's income for
the period of time in which the requirements for REMIC status are not satisfied.
 
TAXATION OF REGULAR CERTIFICATES
 
  GENERAL
 
     In general, interest, original issue discount and market discount on a
Regular Certificate will be treated as ordinary income to a holder of the
Regular Certificate (the 'Regular Certificateholder') as they accrue, and
principal payments on a Regular Certificate will be treated as a return of
capital to the extent of the Regular Certificateholder's basis in the Regular
Certificate allocable thereto. Regular Certificateholders must use the accrual
method of accounting with regard to Regular Certificates, regardless of the
method of accounting otherwise used by such Regular Certificateholders.

 
ORIGINAL ISSUE DISCOUNT
 
     Accrual Certificates will be, and other Classes of Regular Certificates may
be, issued with 'original issue discount' within the meaning of Code Section
1273(a). Holders of any Class of Regular Certificates having original issue
discount generally must include original issue discount in ordinary income for
federal income tax purposes as it accrues, in accordance with the constant yield
method that takes into account the compounding of interest, in advance of
receipt of the cash attributable to such income. The following discussion is
based in part on temporary and final Treasury regulations issued on February 2,
1994 (the 'OID Regulations'), as amended on June 14, 1996, under Code Sections
1271 through 1273 and 1275 and in part on the provisions of the 1986 Act.
Regular Certificateholders should be aware, however, that the OID Regulations
and the Proposed OID Regulations do not adequately address certain issues
relevant to prepayable securities, such as the Regular Certificates. To the
extent such issues are not addressed in such regulations, the Depositor intends
to apply the methodology described in the Conference Committee Report to the
1986 Act. No assurance can be provided that the Service will not take a
different position as to those matters not currently addressed by the OID
Regulations. Moreover, the OID Regulations include an anti-abuse rule allowing
the Service to apply or depart from the OID Regulations where necessary or
appropriate to ensure a reasonable tax result in light of the applicable
statutory provisions. A tax result will not be considered unreasonable under the
anti-abuse rule in the absence of a substantial effect on the present value of a
taxpayer's tax liability. Investors are advised to consult their own tax
advisors as to the discussion herein and the appropriate method for reporting
interest and original issue discount with respect to the Regular Certificates.
 
     Each Regular Certificate (except to the extent described below with respect
to a Regular Certificate on which principal is distributed by random lot
('Random Lot Certificates')) will be treated as a single installment obligation
for purposes of determining the original issue discount includible in a Regular
Certificateholder's income. The total amount of original issue discount on a
Regular Certificate is the excess of the 'stated redemption price at maturity'
of the Regular Certificate over its 'issue price'. The issue price of a Class of
Regular Certificates offered pursuant to this Prospectus generally is the first
price at which a substantial amount of Regular Certificates of that Class is
sold to the public (excluding bond houses, brokers and underwriters). Although
unclear under the OID Regulations, the Depositor intends to treat the issue
price of a Class as to which there is no substantial sale as of the issue date
or that is retained by the Depositor as the fair market value of that Class as
of the issue date. The issue price of a Regular Certificate also includes the
amount paid by an initial Regular Certificateholder for accrued interest that
relates to a period prior to the issue date of the Regular Certificate, unless
the Regular Certificateholder elects on its federal income tax return to exclude
such amount from the issue price and to recover it on the first Distribution
Date. The stated redemption price at maturity of a Regular Certificate always
includes the original principal amount of the Regular Certificate, but generally
will not include distributions of stated interest if such interest distributions
constitute 'qualified stated interest'. Under the OID Regulations, qualified
stated interest generally means interest payable at a single fixed rate or a
qualified variable rate (as described below) provided that such interest
payments are unconditionally payable at intervals of one year or less during the

entire term of the Regular Certificate. Distributions of interest on an Accrual
Certificate, or on other Regular Certificates with respect to which deferred
interest will accrue, will not constitute qualified stated interest, in which
case the stated redemption price at maturity of such Regular Certificates
includes all distributions of interest as well as principal thereon. Likewise,
the Depositor intends to treat an 'interest only' class, or a class on which
interest is substantially disproportionate to its principal amount (a
so-called 'super-premium' class) as having no qualified stated interest. Where
the interval between the issue date and the first
 
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Distribution Date on a Regular Certificate is shorter than the interval between
subsequent Distribution Dates, the interest attributable to the additional days
will be included in the stated redemption price at maturity.
 
     Under a de minimis rule, original issue discount on a Regular Certificate
will be considered to be zero if such original issue discount is less than 0.25%
of the stated redemption price at maturity of the Regular Certificate multiplied
by the weighted average maturity of the Regular Certificate. For this purpose,
the weighted average maturity of the Regular Certificate is computed as the sum
of the amounts determined by multiplying the number of full years (i.e.,
rounding down partial years) from the issue date until each distribution is
scheduled to be made by a fraction, the numerator of which is the amount of each
distribution included in the stated redemption price at maturity of the Regular
Certificate and the denominator of which is the stated redemption price at
maturity of the Regular Certificate. The Conference Committee Report to the 1986
Act provides that the schedule of such distributions should be determined in
accordance with the assumed rate of prepayment of the Mortgage Loans (the
'Prepayment Assumption') and the anticipated reinvestment rate, if any, relating
to the Regular Certificates. The Prepayment Assumption with respect to a Series
of Regular Certificates will be set forth in the related Prospectus Supplement.
Holders generally must report de minimis OID pro rata as principal payments are
received, and such income will be capital gain if the Regular Certificate is
held as a capital asset. However, under the OID Regulations, Regular
Certificateholders may elect to accrue all de minimis original issue discount as
well as market discount and market premium under the constant yield method. See
'Election to Treat All Interest Under the Constant Yield Method'.
 
     A Regular Certificateholder generally must include in gross income for any
taxable year the sum of the 'daily portions,' as defined below, of the original
issue discount on the Regular Certificate accrued during an accrual period for
each day on which it holds the Regular Certificate, including the date of
purchase but excluding the date of disposition. The Depositor will treat the
monthly period ending on the day before each Distribution Date as the accrual
period. With respect to each Regular Certificate, a calculation will be made of
the original issue discount that accrues during each successive full accrual
period (or shorter period from the date of original issue) that ends on the day
before the related Distribution Date on the Regular Certificate. The Conference
Committee Report to the 1986 Act states that the rate of accrual of original
issue discount is intended to be based on the Prepayment Assumption. Other than
as discussed below with respect to a Random Lot Certificate, the original issue
discount accruing in a full accrual period would be the excess, if any, of (i)
the sum of (a) the present value of all of the remaining distributions to be

made on the Regular Certificate as of the end of that accrual period that are
included in the Regular Certificate's stated redemption price at maturity and
(b) the distributions made on the Regular Certificate during the accrual period
that are included in the Regular Certificate's stated redemption price at
maturity, over (ii) the adjusted issue price of the Regular Certificate at the
beginning of the accrual period. The present value of the remaining
distributions referred to in the preceding sentence is calculated based on (i)
the yield to maturity of the Regular Certificate at the issue date, (ii) events
(including actual prepayments) that have occurred prior to the end of the
accrual period and (iii) the Prepayment Assumption. For these purposes, the
adjusted issue price of a Regular Certificate at the beginning of any accrual
period equals the issue price of the Regular Certificate, increased by the
aggregate amount of original issue discount with respect to the Regular
Certificate that accrued in all prior accrual periods and reduced by the amount
of distributions included in the Regular Certificate's stated redemption price
at maturity that were made on the Regular Certificate in such prior periods. The
original issue discount accruing during any accrual period (as determined in
this paragraph) will then be divided by the number of days in the period to
determine the daily portion of original issue discount for each day in the
period. With respect to an initial accrual period shorter than a full accrual
period, the daily portions of original issue discount must be determined
according to an appropriate allocation under any reasonable method.
 
     Under the method described above, the daily portions of original issue
discount required to be included in income by a Regular Certificateholder
generally will increase to take into account prepayments on the Regular
Certificates as a result of prepayments on the Mortgage Loans that exceed the
Prepayment Assumption, and generally will decrease (but not below zero for any
period) if the prepayments are slower than the Prepayment Assumption. An
increase in prepayments on the Mortgage Loans with respect to a Series of
Regular Certificates can result in both a change in the priority of principal
payments with respect to certain Classes of Regular Certificates and either an
increase or decrease in the daily portions of original issue discount with
respect to such Regular Certificates.
 
     In the case of a Random Lot Certificate, the Depositor intends to determine
the yield to maturity of such Certificate based upon the anticipated payment
characteristics of the Class as a whole under the Prepayment Assumption. In
general, the original issue discount accruing on each Random Lot Certificate in
a full accrual period would be its allocable share of the original issue
discount with respect to the entire Class, as determined in accordance with the
preceding paragraph. However, in the case of a distribution in retirement of the
entire unpaid principal balance of any Random Lot Certificate (or portion of
such unpaid principal balance), (a) the remaining unaccrued original issue
discount allocable to such Certificate (or to such portion) will accrue at the
time of such distribution, and (b) the accrual of original issue discount
allocable to each remaining Certificate of such Class (or the
 
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remaining unpaid principal balance of a partially redeemed Random Lot
Certificate after a distribution of principal has been received) will be
adjusted by reducing the present value of the remaining payments on such Class
and the adjusted issue price of such Class to the extent attributable to the

portion of the unpaid principal balance thereof that was distributed. The
Depositor believes that the foregoing treatment is consistent with the 'pro rata
prepayment' rules of the OID Regulations, but with the rate of accrual of
original issue discount determined based on the Prepayment Assumption for the
Class as a whole. Investors are advised to consult their tax advisors as to this
treatment.
 
ACQUISITION PREMIUM
 
     A purchaser of a Regular Certificate at a price greater than its adjusted
issue price but less than its stated redemption price at maturity will be
required to include in gross income the daily portions of the original issue
discount on the Regular Certificate reduced pro rata by a fraction, the
numerator of which is the excess of its purchase price over such adjusted issue
price and the denominator of which is the excess of the remaining stated
redemption price at maturity over the adjusted issue price. Alternatively, such
a subsequent purchaser may elect to treat all such acquisition premium under the
constant yield method, as described below under the heading 'Election to Treat
All Interest Under the Constant Yield Method'.
 
VARIABLE RATE REGULAR CERTIFICATES
 
     Regular Certificates may provide for interest based on a variable rate.
Under the OID Regulations, interest is treated as payable at a variable rate if,
generally, (i) the issue price does not exceed the original principal balance by
more than a specified amount and (ii) the interest compounds or is payable at
least annually at current values of (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'. A floating rate is a qualified floating
rate if variations in the rate can reasonably be expected to measure
contemporaneous variations in the cost of newly borrowed funds, where such rate
is subject to a fixed multiple that is greater than 0.65 but not more than 1.35.
Such rate may also be increased or decreased by a fixed spread or subject to a
fixed cap or floor, or a cap or floor that is not reasonably expected as of the
issue date to affect the yield of the instrument significantly. An objective
rate is any rate (other than a qualified floating rate) that is determined using
a single fixed formula and that is based on objective financial or economic
information, provided that such information is not (i) within the control of the
issuer or a related party or (ii) unique to the circumstances of the issuer or a
related party. A qualified inverse floating rate is a rate equal to a fixed rate
minus a qualified floating rate that inversely reflects contemporaneous
variations in the cost of newly borrowed funds; an inverse floating rate that is
not a qualified inverse floating rate may nevertheless be an objective rate. A
Class of Regular Certificates may be issued under this Prospectus that does not
have a variable rate under the foregoing rules, for example, a Class that bears
different rates at different times during the period it is outstanding such that
it is considered significantly 'front-loaded' or 'back-loaded' within the
meaning of the OID Regulations. It is possible that such a Class may be
considered to bear 'contingent interest' within the meaning of the OID
Regulations. The OID Regulations, as they relate to the treatment of contingent
interest rate by their terms not applicable to Regular Certificates. However, if
final regulations dealing with contingent interest with respect to Regular
Certificates apply the same principles as the OID Regulations, such regulations

may lead to different timing of income inclusion that would be the case under
the OID Regulations. Furthermore, application of such principles could lead to
the characterization of gain on the sale of contingent interest Regular
Certificates as ordinary income. Investors should consult their tax advisors
regarding the appropriate treatment of any Regular Certificate that does not pay
interest at a fixed rate or variable rate as described in this paragraph.
 
     Under the REMIC Regulations, a Regular Certificate (i) bearing a rate that
qualifies as a variable rate under the OID Regulations that is tied to current
values of a variable rate (or the highest, lowest or average of two or more
variable rates, including a rate based on the average cost of funds of one or
more financial institutions), or a positive or negative multiple of such a rate
(plus or minus a specified number of basis points), or that represents a
weighted average of rates on some or all of the Mortgage Loans, including such a
rate that is subject to one or more caps or floors, or (ii) bearing one or more
such variable rates for one or more periods or one or more fixed rates for one
or more periods, and a different variable rate or fixed rate for other periods
qualifies as a regular interest in a REMIC. Accordingly, unless otherwise
indicated in the applicable Prospectus Supplement, the Depositor intends to
treat Regular Certificates that qualify as regular interests under this rule in
the same manner as obligations bearing a variable rate for original issue
discount reporting purposes.
 
     The amount of original issue discount with respect to a Regular Certificate
bearing a variable rate of interest will accrue in the manner described above
under 'Original Issue Discount' with the yield to maturity and future payments
on such Regular Certificate generally to be determined by assuming that interest
will be payable for the life of the Regular Certificate based on the initial
rate (or, if different, the value of the applicable variable rate as of the
pricing date) for the relevant Class. Unless otherwise specified in the
applicable Prospectus Supplement, the Depositor intends to treat such variable
interest as qualified stated interest,
 
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<PAGE>
other than variable interest on an interest-only or super-premium Class, which
will be treated as non-qualified stated interest includible in the stated
redemption price at maturity. Ordinary income reportable for any period will be
adjusted based on subsequent changes in the applicable interest rate index.
 
     Although unclear under the OID Regulations, the Depositor intends to treat
Regular Certificates bearing an interest rate that is a weighted average of the
net interest rates on Mortgage Loans or Mortgage Certificates having fixed or
adjustable rates, as having qualified stated interest. In the case of adjustable
rate Mortgage Loans, the applicable index used to compute interest on the
Mortgage Loans in effect on the pricing date (or possibly the issue date) will
be deemed to be in effect beginning with the period in which the first weighted
average adjustment date occurring after the issue date occurs. Adjustments will
be made in each accrual period either increasing or decreasing the amount or
ordinary income reportable to reflect the actual Pass-Through Rate on the
Regular Certificates.
 
DEFERRED INTEREST
 

     Under the OID Regulations, all interest on a Regular Certificate as to
which there may be Deferred Interest is includible in the stated redemption
price at maturity thereof. Accordingly, any Deferred Interest that accrues with
respect to a Class of Regular Certificates may constitute income to the holders
of such Regular Certificates prior to the time distributions of cash with
respect to such Deferred Interest are made.
 
MARKET DISCOUNT
 
     A purchaser of a Regular Certificate also may be subject to the market
discount rules of Code Section 1276 through 1278. Under these Code sections and
the principles applied by the OID Regulations in the context of original issue
discount, 'market discount' is the amount by which the purchaser's original
basis in the Regular Certificate (i) is exceeded by the then-current principal
amount of the Regular Certificate or (ii) in the case of a Regular Certificate
having original issue discount, is exceeded by the adjusted issue price of such
Regular Certificate at the time of purchase. Such purchaser generally will be
required to recognize ordinary income to the extent of accrued market discount
on such Regular Certificate as distributions includible in the stated redemption
price at maturity thereof are received, in an amount not exceeding any such
distribution. Such market discount would accrue in a manner to be provided in
Treasury regulations and should take into account the Prepayment Assumption. The
Conference Committee Report to the 1986 Act provides that until such regulations
are issued, such market discount would accrue either (i) on the basis of a
constant interest rate or (ii) in the ratio of stated interest allocable to the
relevant period to the sum of the interest for such period plus the remaining
interest as of the end of such period, or in the case of a Regular Certificate
issued with original issue discount, in the ratio of original issue discount
accrued for the relevant period to the sum of the original issue discount
accrued for such period plus the remaining original issue discount as of the end
of such period. Such purchaser also generally will be required to treat a
portion of any gain on a sale or exchange of the Regular Certificate as ordinary
income to the extent of the market discount accrued to the date of disposition
under one of the foregoing methods, less any accrued market discount previously
reported as ordinary income as partial distributions in reduction of the stated
redemption price at maturity were received. Such purchaser will be required to
defer deduction of a portion of the excess of the interest paid or accrued on
indebtedness incurred to purchase or carry a Regular Certificate over the
interest distributable thereon. The deferred portion of such interest expense in
any taxable year generally will not exceed the accrued market discount on the
Regular Certificate for such year. Any such deferred interest expense is, in
general, allowed as a deduction not later than the year in which the related
market discount income is recognized or the Regular Certificate is disposed of.
As an alternative to the inclusion of market discount in income on the foregoing
basis, the Regular Certificateholder may elect to include market discount in
income currently as it accrues on all market discount instruments acquired by
such Regular Certificateholder in that taxable year or thereafter, in which case
the interest deferral rule will not apply. See 'Election to Treat All Interest
Under the Constant Yield Method' below regarding an alternative manner in which
such election may be deemed to be made.
 
     Market discount with respect to a Regular Certificate will be considered to
be zero if such market discount is less than 0.25% of the remaining stated
redemption price at maturity of such Regular Certificate multiplied by the

weighted average maturity of the Regular Certificate (determined as described
above in the third paragraph under 'Original Issue Discount') remaining after
the date of purchase. It appears that de minimis market discount would be
reported in a manner similar to de minimis original issue discount. See
'Original Issue Discount' above. Treasury regulations implementing the market
discount rules have not yet been issued, and therefore investors should consult
their own tax advisors regarding the application of these rules. Investors
should also consult Revenue Procedure 92-67 concerning the elections to include
market discount in income currently and to accrue market discount on the basis
of the constant yield method.
 
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PREMIUM
 
     A Regular Certificate purchased at a cost greater than its remaining stated
redemption price at maturity generally is considered to be purchased at a
premium. If the Regular Certificateholder holds such Regular Certificate as a
'capital asset' within the meaning of Code Section 1221, the Regular
Certificateholder may elect under Code Section 171 to amortize such premium
under the constant yield method. The Conference Committee Report to the 1986 Act
indicates a Congressional intent that the same rules that will apply to the
accrual of market discount on installment obligations will also apply to
amortizing bond premium under Code Section 171 on installment obligations such
as the Regular Certificates, although it is unclear whether the alternatives to
the constant yield method described above under 'Market Discount' are available.
Amortizable bond premium will be treated as an offset to interest income on a
Regular Certificate rather than as a separate deduction item. See 'Election to
Treat All Interest Under the Constant Yield Method' below regarding an
alternative manner in which the Code Section 171 election may be deemed to be
made.
 
ELECTION TO TREAT ALL INTEREST UNDER THE CONSTANT YIELD METHOD
 
     A holder of a debt instrument such as a Regular Certificate may elect to
treat all interest that accrues on the instrument using the constant yield
method, with none of the interest being treated as qualified stated interest.
For purposes of applying the constant yield method to a debt instrument subject
to such an election, (i) 'interest' includes stated interest, original issue
discount, de minimis original issue discount, market discount and de minimis
market discount, as adjusted by any amortizable bond premium or acquisition
premium and (ii) the debt instrument is treated as if the instrument were issued
on the holder's acquisition date in the amount of the holder's adjusted basis
immediately after acquisition. It is unclear whether, for this purpose, the
initial Prepayment Assumption would continue to apply or if a new prepayment
assumption as of the date of the holder's acquisition would apply. A holder
generally may make such an election on an instrument by instrument basis or for
a class or group of debt instruments. However, if the holder makes such an
election with respect to a debt instrument with amortizable bond premium or with
market discount, the holder is deemed to have made elections to amortize bond
premium or to report market discount income currently as it accrues under the
constant yield method, respectively, for all debt instruments acquired by the
holder in the same taxable year or thereafter. The election is made on the
holder's federal income tax return for the year in which the debt instrument is

acquired and is irrevocable except with the approval of the Service. Investors
should consult their own tax advisors regarding the advisability of making such
an election.
 
SALE OR EXCHANGE OF REGULAR CERTIFICATES
 
     If a Regular Certificateholder sells or exchanges a Regular Certificate,
the Regular Certificateholder will recognize gain or loss equal to the
difference, if any, between the amount received and its adjusted basis in the
Regular Certificate. The adjusted basis of a Regular Certificate generally will
equal the cost of the Regular Certificate to the seller, increased by any
original issue discount or market discount previously included in the seller's
gross income with respect to the Regular Certificate and reduced by amounts
included in the stated redemption price at maturity of the Regular Certificate
that were previously received by the seller and by any amortized premium.
 
     Except as described above with respect to market discount, and except as
provided in this paragraph, any gain or loss on the sale or exchange of a
Regular Certificate realized by an investor who holds the Regular Certificate as
a capital asset will be capital gain or loss and will be long-term or short-term
depending on whether the Regular Certificate has been held for the long-term
capital gain holding period (currently more than one year). Such gain will be
treated as ordinary income (i) if a Regular Certificate is held as part of a
'conversion transaction' as defined in Code Section 1258(c), up to the amount of
interest that would have accrued on the Regular Certificateholder's net
investment in the conversion transaction at 120% of the appropriate applicable
Federal rate under Code Section 1274(d) in effect at the time the taxpayer
entered into the transaction minus any amount previously treated as ordinary
income with respect to any prior distribution of property that was held as a
part of such transaction, (ii) in the case of a non-corporate taxpayer, to the
extent such taxpayer has made an election under Code Section 163(d)(4) to have
net capital gains taxed as investment income at ordinary rates, or (iii) to the
extent that such gain does not exceed the excess, if any, of (a) the amount that
would have been includible in the gross income of the holder if its yield on
such Regular Certificate were 110% of the applicable Federal rate as of the date
of purchase, over (b) the amount of income actually includible in the gross
income of such holder with respect to the Regular Certificate. In addition, gain
or loss recognized from the sale of a Regular Certificate by certain banks or
thrift institutions will be treated as ordinary income or loss pursuant to Code
Section 582(c). Capital gains of certain non-corporate taxpayers are subject to
a lower maximum tax rate than ordinary income of such taxpayers. The Taxpayer
Relief Act of 1997 (the '1997 Act') has reduced the maximum capital gains tax
rate to 20% for non-corporate taxpayers with respect to sales or exchanges of
certain capital assets held for more than 18 months. Non-corporate investors
should consult their tax advisors
 
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regarding the consequences to them of the 1997 Act. The maximum tax rate for
corporations is the same with respect to both ordinary income and capital gains.
 
TREATMENT OF LOSSES
 
     Holders of Regular Certificates will be required to report income with

respect to Regular Certificates on the accrual method of accounting, without
giving effect to delays or reductions in distributions attributable to defaults
or delinquencies on the Mortgage Loans allocable to a particular class of
Regular Certificates, except to the extent it can be established that such
losses are uncollectible. Accordingly, the holder of a Regular Certificate may
have income, or may incur a diminution in cash flow as a result of a default or
delinquency, but may not be able to take a deduction (subject to the discussion
below) for the corresponding loss until a subsequent taxable year. To the extent
the rules of Code Section 166 regarding bad debts are applicable, it appears
that holders of Regular Certificates that are corporations or that otherwise
hold the Regular Certificates in connection with a trade or business should in
general be allowed to deduct as an ordinary loss any such loss sustained during
the taxable year on account of any such Regular Certificates becoming wholly or
partially worthless, and that, in general, holders of Regular Certificates that
are not corporations and do not hold the Regular Certificates in connection with
a trade or business will be allowed to deduct as a short-term capital loss any
loss with respect to principal sustained during the taxable year on account of a
portion of any class or subclass of such Regular Certificates becoming wholly
worthless. Although the matter is not free from doubt, non-corporate holders of
Regular Certificates should be allowed a bad debt deduction at such time as the
principal balance of any class or subclass of such Regular Certificates is
reduced to reflect losses resulting from any liquidated Mortgage Loans. The
Service, however, could take the position that non-corporate holders will be
allowed a bad debt deduction to reflect such losses only after all Mortgage
Loans remaining in the Trust Fund have been liquidated or such class of Regular
Certificates has been otherwise retired. The Service could also assert that
losses on the Regular Certificates are deductible based on some other method
that may defer such deductions for all holders, such as reducing future cash
flow for purposes of computing original issue discount. This may have the effect
of creating 'negative' original issue discount which would be deductible only
against future positive original issue discount or otherwise upon termination of
the Class. Holders of Regular Certificates are urged to consult their own tax
advisors regarding the appropriate timing, amount and character of any loss
sustained with respect to such Regular Certificates. While losses attributable
to interest previously reported as income should be deductible as ordinary
losses by both corporate and non-corporate holders the Service may take the
position that losses attributable to accrued original issue discount may only be
deducted as capital losses in the case of non-corporate holders who do not hold
Regular Certificates in connection with a trade or business. Special loss rules
are applicable to banks and thrift institutions, including rules regarding
reserves for bad debts. Such taxpayers are advised to consult their tax advisors
regarding the treatment of losses on Regular Certificates.
 
TAXATION OF RESIDUAL CERTIFICATES
 
  TAXATION OF REMIC INCOME
 
     Generally, the 'daily portions' of REMIC taxable income or net loss will be
includible as ordinary income or loss in determining the federal taxable income
of holders of Residual Certificates ('Residual Certificateholders'), and will
not be taxed separately to the REMIC Pool. The daily portions of REMIC taxable
income or net loss of a Residual Certificateholder are determined by allocating
the REMIC Pool's taxable income or net loss for each calendar quarter ratably to
each day in such quarter and by allocating such daily portion among the Residual

Certificateholders in proportion to their respective holdings of Residual
Certificates in the REMIC Pool on such day. REMIC taxable income is generally
determined in the same manner as the taxable income of an individual using the
accrual method of accounting, except that (i) the limitations on deductibility
of investment interest expense and expenses for the production of income do not
apply, (ii) all bad loans will be deductible as business bad debts and (iii) the
limitation on the deductibility of interest and expenses related to tax-exempt
income will apply. The REMIC Pool's gross income, includes interest, original
issue discount income and market discount income, if any, on the Mortgage Loans,
reduced by amortization of any premium on the Mortgage Loans plus income on
reinvestment of cash flows and reserve assets, plus any cancellation of
indebtedness income upon allocation of realized losses to the Regular
Certificates. The REMIC Pool's deductions include interest and original issue
discount expense on the Regular Certificates, servicing fees on the Mortgage
Loans, other administrative expenses of the REMIC Pool and realized losses on
the Mortgage Loans. The requirement that Residual Certificateholders report
their pro rata share of taxable income or net loss of the REMIC Pool will
continue until there are no Certificates of any class of the related series
outstanding.
 
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     The taxable income recognized by a Residual Certificateholder in any
taxable year will be affected by, among other factors, the relationship between
the timing of recognition of interest and original issue discount or market
discount income or amortization of premium with respect to the Mortgage Loans,
on the one hand, and the timing of deductions for interest (including original
issue discount) on the Regular Certificates, on the other hand. In the event
that an interest in the Mortgage Loans is acquired by the REMIC Pool at a
discount, and one or more of such Mortgage Loans is prepaid, the Residual
Certificateholder may recognize taxable income without being entitled to receive
a corresponding amount of cash because (i) the prepayment may be used in whole
or in part to make distributions in reduction of principal on the Regular
Certificates and (ii) the discount on the Mortgage Loans which is includible in
income may exceed the deduction allowed upon such distributions on those Regular
Certificates on account of any unaccrued original issue discount relating to
those Regular Certificates. When there is more than one class of Regular
Certificates that distribute principal sequentially, this mismatching of income
and deductions is particularly likely to occur in the early years following
issuance of the Regular Certificates when distributions in reduction of
principal are being made in respect of earlier classes of Regular Certificates
to the extent that such classes are not issued with substantial discount. If
taxable income attributable to such a mismatching is realized, in general,
losses would be allowed in later years as distributions on the later classes of
Regular Certificates are made. Taxable income may also be greater in earlier
years than in later years as a result of the fact that interest expense
deductions, expressed as a percentage of the outstanding principal amount of
such a series of Regular Certificates, may increase over time as distributions
in reduction of principal are made on the lower yielding classes of Regular
Certificates, whereas to the extent that the REMIC Pool includes fixed rate
Mortgage Loans, interest income with respect to any given Mortgage Loan will
remain constant over time as a percentage of the outstanding principal amount of
that loan. Consequently, Residual Certificateholders must have sufficient other
sources of cash to pay any federal, state or local income taxes due as a result

of such mismatching or unrelated deductions against which to offset such income,
subject to the discussion of 'excess inclusions' below under 'Limitations on
Offset or Exemption of REMIC Income'. The timing of such mismatching of income
and deductions described in this paragraph, if present with respect to a series
of Certificates, may have a significant adverse effect upon the Residual
Certificateholder's after-tax rate of return. In addition, a Residual
Certificateholder's taxable income during certain periods may exceed the income
reflected by such Residual Certificateholder for such periods in accordance with
generally accepted accounting principles. Investors should consult their own
accountants concerning the accounting treatment of their investment in Residual
Certificates.
 
BASIS AND LOSSES
 
     The amount of any net loss of the REMIC Pool that may be taken into account
by the Residual Certificateholder is limited to the adjusted basis of the
Residual Certificate as of the close of the quarter (or time of disposition of
the Residual Certificate if earlier), determined without taking into account the
net loss for the quarter. The initial adjusted basis of a purchaser of a
Residual Certificate is the amount paid for such Residual Certificate. Such
adjusted basis will be increased by the amount of taxable income of the REMIC
Pool reportable by the Residual Certificateholder and will be decreased (but not
below zero), first, by a cash distribution from the REMIC Pool and, second, by
the amount of loss of the REMIC Pool reportable by the Residual
Certificateholder. Any loss that is disallowed on account of this limitation may
be carried over indefinitely with respect to the Residual Certificateholder as
to whom such loss was disallowed and may be used by such Residual
Certificateholder only to offset any income generated by the same REMIC Pool.
 
     A Residual Certificateholder will not be permitted to amortize directly the
cost of its Residual Certificate as an offset to its share of the taxable income
of the related REMIC Pool. However, that taxable income will not include cash
received by the REMIC Pool that represents a recovery of the REMIC Pool's basis
in its assets. Such recovery of basis by the REMIC Pool will have the effect of
amortization of the issue price of the Residual Certificates over their life.
However, in view of the possible acceleration of the income of Residual
Certificateholders described above under 'Taxation of REMIC Income', the period
of time over which such issue price is effectively amortized may be longer than
the economic life of the Residual Certificates.
 
     A Residual Certificate may have a negative value if the net present value
of anticipated tax liabilities exceeds the present value of anticipated cash
flows. The REMIC Regulations appear to treat the issue price of such a residual
interest as zero rather than such negative amount for purposes of determining
the REMIC Pool's basis in its assets. The preamble to the REMIC Regulations
states that the Service may provide future guidance on the proper tax treatment
of payments made by a transferor of such a residual interest to induce the
transferee to acquire the interest, and Residual Certificateholders should
consult their own tax advisors in this regard.
 
     Further, to the extent that the initial adjusted basis of a Residual
Certificateholder (other than an original holder) in the Residual Certificate is
greater that the corresponding portion of the REMIC Pool's basis in the Mortgage
Loans, the Residual Certificateholder will not recover a portion of such basis

until termination of the REMIC Pool unless future Treasury regulations
 
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<PAGE>
provide for periodic adjustments to the REMIC income otherwise reportable by
such holder. The REMIC Regulations currently in effect do not so provide. See
'Treatment of Certain Items of REMIC Income and Expense --Market Discount' below
regarding the basis of Mortgage Loans to the REMIC Pool and 'Sale or Exchange of
a Residual Certificate' below regarding possible treatment of a loss upon
termination of the REMIC Pool as a capital loss.
 
TREATMENT OF CERTAIN ITEMS OF REMIC INCOME AND EXPENSE
 
     Although the Depositor intends to compute REMIC income and expense in
accordance with the Code and applicable regulations, the authorities regarding
the determination of specific items of income and expense are subject to
differing interpretations. The Depositor makes no representation as to the
specific method that it will use for reporting income with respect to the
Mortgage Loans and expenses with respect to the Regular Certificates, and
different methods could result in different timing of reporting of taxable
income or net loss to Residual Certificateholders or differences in capital gain
versus ordinary income.
 
     Original Issue Discount.  Generally, the REMIC Pool's deductions for
original issue discount will be determined in the same manner as original issue
discount income on Regular Certificates as described above under 'Taxation of
Regular Certificates-- Original Issue Discount' and '-- Variable Rate Regular
Certificates', without regard to the de minimis rule described therein.
 
     Deferred Interest.  Any Deferred Interest that accrues with respect to any
adjustable rate Mortgage Loans held by the REMIC Pool will constitute income to
the REMIC Pool and will be treated in a manner similar to the Deferred Interest
that accrues with respect to Regular Certificates as described above under
'Taxation of Regular Certificates--Deferred Interest'.
 
     Market Discount.  The REMIC Pool will have market discount income in
respect of Mortgage Loans if, in general, the basis of the REMIC Pool allocable
to such Mortgage Loans is exceeded by their unpaid principal balances. The REMIC
Pool's basis in such Mortgage Loans is generally the fair market value of the
Mortgage Loans immediately after the transfer thereof to the REMIC Pool. The
REMIC Regulations provide that such basis is equal in the aggregate to the issue
prices of all regular and residual interests in the REMIC Pool (or the fair
market value thereof at the Closing Date, in the case of a retained Class). In
respect of Mortgage Loans that have market discount to which Code Section 1276
applies, the accrued portion of such market discount would be recognized
currently as an item of ordinary income in a manner similar to original issue
discount. Market discount income generally should accrue in the manner described
above under 'Taxation of Regular Certificates--Market Discount'.
 
     Premium.  Generally, if the basis of the REMIC Pool in the Mortgage Loans
exceeds the unpaid principal balances thereof, the REMIC Pool will be considered
to have acquired such Mortgage Loans at a premium equal to the amount of such
excess. As stated above, the REMIC Pool's basis in Mortgage Loans is the fair
market value of the Mortgage Loans, based on the aggregate of the issue prices

(or the fair market value of retained Classes) of the regular and residual
interests in the REMIC Pool immediately after the transfer thereof to the REMIC
Pool. In a manner analogous to the discussion above under 'Taxation of Regular
Certificates--Premium', a REMIC Pool that holds a Mortgage Loan as a capital
asset under Code Section 1221 may elect under Code Section 171 to amortize
premium on whole mortgage loans or mortgage loans underlying MBS that were
originated after September 27, 1985 or on Agency Securities, or Private
Mortgage-Backed Securities that are REMIC regular interests under the constant
yield method. Amortizable bond premium will be treated as an offset to interest
income on the Mortgage Loans, rather than as a separate deduction item. To the
extent that the mortgagors with respect to the Mortgage Loans are individuals,
Code Section 171 will not be available for premium on Mortgage Loans (including
underlying mortgage loans) originated on or prior to September 27, 1985. Premium
with respect to such Mortgage Loans may be deductible in accordance with a
reasonable method regularly employed by the holder thereof. The allocation of
such premium pro rata among principal payments should be considered a reasonable
method; however, the Service may argue that such premium should be allocated in
a different manner, such as allocating such premium entirely to the final
payment of principal.
 
LIMITATIONS ON OFFSET OR EXEMPTION OF REMIC INCOME
 
     A portion or all of the REMIC taxable income includible in determining the
federal income tax liability of a Residual Certificateholder will be subject to
special treatment. That portion, referred to as the 'excess inclusion', is equal
to the excess of REMIC taxable income for the calendar quarter allocable to a
Residual Certificate over the daily accruals for such quarterly period of (i)
120% of the long-term applicable Federal rate that would have applied to the
Residual Certificate (if it were a debt instrument) on the Startup Day under
Code Section 1274(d), multiplied by (ii) the adjusted issue price of such
Residual Certificate at the beginning of such quarterly period. For this
purpose, the adjusted issue price of a Residual Certificate at the beginning of
a quarter is the issue price of the Residual Certificate, plus the amount of
such daily accruals of REMIC income described in this paragraph for all prior
quarters, decreased by any distributions made with respect to such Residual
Certificate prior to the beginning
 
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<PAGE>
of such quarterly period. Accordingly, the portion of the REMIC Pool's taxable
income that will be treated as excess inclusions will be a larger portion of
such income as the adjusted issue price of the Residual Certificates diminishes.
 
     The portion of a Residual Certificateholder's REMIC taxable income
consisting of the excess inclusions generally may not be offset by other
deductions, including net operating loss carryforwards, on such Residual
Certificateholder's return. However, net operating loss carryovers are
determined without regard to excess inclusion income. Further, if the Residual
Certificateholder is an organization subject to the tax on unrelated business
income imposed by Code Section 511, the Residual Certificateholder's excess
inclusions will be treated as unrelated business taxable income of such Residual
Certificateholder for purposes of Code Section 511. In addition, REMIC taxable
income is subject to 30% withholding tax with respect to certain persons who are
not U.S. Persons (as defined below under 'Tax-Related Restrictions on Transfer

of Residual Certificates--Foreign Investors'), and the portion thereof
attributable to excess inclusions is not eligible for any reduction in the rate
of withholding tax (by treaty or otherwise). See 'Taxation of Certain Foreign
Investors--Residual Certificates' below. Finally, if a real estate investment
trust or a regulated investment company owns a Residual Certificate, a portion
(allocated under Treasury regulations yet to be issued) of dividends paid by the
real estate investment trust or a regulated investment company could not be
offset by net operating losses of its shareholders, would constitute unrelated
business taxable income for tax-exempt shareholders, and would be ineligible for
reduction of withholding to certain persons who are not U.S. Persons. The SBJPA
of 1996 has eliminated the special rule permitting Section 593 institutions
('thrift institutions') to use net operating losses and other allowable
deductions to offset their excess inclusion income from Residual Certificates
that have 'significant value' within the meaning of the REMIC Regulations,
effective for taxable years beginning after December 31, 1995, except with
respect to Residual Certificates continuously held by thrift institutions since
November 1, 1995.
 
     In addition, the SBJPA of 1996 provides three rules for determining the
effect of excess inclusions on the alternative minimum taxable income of a
Residual Holder. First, alternative minimum taxable income for a Residual Holder
is determined without regard to the special rule, discussed above, that taxable
income cannot be less than excess inclusions. Second, a Residual Holder's
alternative minimum taxable income for a taxable year cannot be less than the
excess inclusions for the year. Third, the amount of any alternative minimum tax
net operating loss deduction must be computed without regard to any excess
inclusions. These rules are effective for taxable years beginning after December
31, 1986, unless a Residual Holder elects to have such rules apply only to
taxable years beginning after August 20, 1996.
 
TAX-RELATED RESTRICTIONS ON TRANSFER OF RESIDUAL CERTIFICATES
 
     Disqualified Organizations.  If any legal or beneficial interest in a
Residual Certificate is transferred to a Disqualified Organization (as defined
below), a tax would be imposed in an amount equal to the product of (i) the
present value of the total anticipated excess inclusions with respect to such
Residual Certificate for periods after the transfer and (ii) the highest
marginal federal income tax rate applicable to corporations. The REMIC
Regulations provide that the anticipated excess inclusions are based on actual
prepayment experience to the date of the transfer and projected payments based
on the Prepayment Assumption. The present value rate equals the applicable
Federal rate under Code Section 1274(d) as of the date of the transfer for a
term ending with the last calendar quarter in which excess inclusions are
expected to accrue. Such a tax generally would be imposed on the transferor of
the Residual Certificate, except that where such transfer is through an agent
(including a broker, nominee or other middleman) for a Disqualified
Organization, the tax would instead be imposed on such agent. However, a
transferor of a Residual Certificate would in no event be liable for such tax
with respect to a transfer if the transferee furnishes to the transferor an
affidavit that the transferee is not a Disqualified Organization and, as of the
time of the transfer, the transferor does not have actual knowledge that such
affidavit is false. The tax also may be waived by the Treasury Department if the
Disqualified Organization promptly disposes of the residual interest and the
transferor pays income tax at the highest corporate rate on the excess

inclusions for the period the Residual Certificate is actually held by the
Disqualified Organization.
 
     In addition, if a 'Pass-Through Entity' (as defined below) has excess
inclusion income with respect to a Residual Certificate during a taxable year
and a Disqualified Organization is the record holder of an equity interest in
such entity, then a tax is imposed on such entity equal to the product of (i)
the amount of excess inclusions on the Residual Certificate that are allocable
to the interest in the Pass-Through Entity during the period such interest is
held by such Disqualified Organization, and (ii) the highest marginal federal
corporate income tax rate. Such tax would be deductible from the ordinary gross
income of the Pass-Through Entity for the taxable year. The Pass-Through Entity
would not be liable for such tax if it has received an affidavit from such
record holder that it is not a Disqualified Organization or stating such
holder's taxpayer identification number and, during the period such person is
the record holder of the Residual Certificate, the Pass-Through Entity does not
have actual knowledge that such affidavit is false.
 
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     For these purposes, (i) 'Disqualified Organization' means the United
States, any state or political subdivision thereof, any foreign government, any
international organization, any agency or instrumentality of any of the
foregoing (provided, that such term does not include an instrumentality if all
of its activities are subject to tax and a majority of its board of directors is
not selected by any such governmental entity), any cooperative organization
furnishing electric energy or providing telephone service to persons in rural
areas as described in Code Section 1381(a)(2)(C), and any organization (other
than a farmers' cooperative described in Code Section 521) that is exempt from
taxation under the Code unless such organization is subject to the tax on
unrelated business income imposed by Code Section 511, and (ii) 'Pass-Through
Entity' means any regulated investment company, real estate investment trust,
common trust fund, partnership, trust or estate and certain corporations
operating on a cooperative basis. Except as may be provided in Treasury
regulations, any person holding an interest in a Pass-Through Entity as a
nominee for another will, with respect to such interest, be treated as a
Pass-Through Entity.
 
     The Agreement with respect to a series of Certificates will provide that no
legal or beneficial interest in a Residual Certificate may be transferred unless
(i) the proposed transferee provides to the transferor and the Trustee an
affidavit providing its taxpayer identification number and stating that such
transferee is the beneficial owner of the Residual Certificate, is not a
Disqualified Organization and is not purchasing such Residual Certificates on
behalf of a Disqualified Organization (i.e., as a broker, nominee or middleman
thereof), and (ii) the transferor provides a statement in writing to the
Depositor and the Trustee that it has no actual knowledge that such affidavit is
false. Moreover, the Agreement will provide that any attempted or purported
transfer in violation of these transfer restrictions will be null and void and
will vest no rights in any purported transferee. Each Residual Certificate with
respect to a series will bear a legend referring to such restrictions on
transfer, and each Residual Certificateholder will be deemed to have agreed, as
a condition of ownership thereof, to any amendments to the related Agreement
required under the Code or applicable Treasury regulations to effectuate the

foregoing restrictions. Information necessary to compute an applicable excise
tax must be furnished to the Service and to the requesting party within 60 days
of the request, and the Depositor or the Trustee may charge a fee for computing
and providing such information.
 
     Noneconomic Residual Interests.  The REMIC Regulations would disregard
certain transfers of Residual Certificates, in which case the transferor would
continue to be treated as the owner of the Residual Certificates and thus would
continue to be subject to tax on its allocable portion of the net income of the
REMIC Pool. Under the REMIC Regulations, a transfer of a 'noneconomic residual
interest' (as defined below) to a Residual Certificateholder (other than a
Residual Certificateholder who is not a U.S. Person, as defined below under
'Foreign Investors') is disregarded for all federal income tax purposes if a
significant purpose of the transferor is to impede the assessment or collection
of tax. A residual interest in a REMIC (including a residual interest with a
positive value at issuance) is a 'noneconomic residual interest' unless, at the
time of the transfer, (i) the present value of the expected future distributions
on the residual interest at least equals the product of the present value of the
anticipated excess inclusions and the highest corporate income tax rate in
effect for the year in which the transfer occurs, and (ii) the transferor
reasonably expects that the transferee will receive distributions from the REMIC
at or after the time at which taxes accrue on the anticipated excess inclusions
in an amount sufficient to satisfy the accrued taxes. The anticipated excess
inclusions and the present value rate are determined in the same manner as set
forth above under 'Disqualified Organizations'. The REMIC Regulations explain
that a significant purpose to impede the assessment or collection of tax exists
if the transferor, at the time of the transfer, either knew or should have known
that the transferee would be unwilling or unable to pay taxes due on its share
of the taxable income of the REMIC. A safe harbor is provided if (i) the
transferor conducted, at the time of the transfer, a reasonable investigation of
the financial condition of the transferee and found that the transferee
historically had paid its debts as they came due and found no significant
evidence to indicate that the transferee would not continue to pay its debts as
they came due in the future, and (ii) the transferee represents to the
transferor that it understands that, as the holder of the noneconomic residual
interest, the transferee may incur tax liabilities in excess of cash flows
generated by the interest and that the transferee intends to pay taxes
associated with holding the residual interest as they become due. The Agreement
with respect to each series of Certificates will require the transferee of a
Residual Certificate to certify to the matters in the preceding sentence as part
of the affidavit described above under the heading 'Disqualified Organizations'.
The transferor must have no actual knowledge or reason to know that such
statements are false.
 
     Foreign Investors.  The REMIC Regulations provide that the transfer of a
Residual Certificate that has 'tax avoidance potential' to a 'foreign person'
will be disregarded for all federal tax purposes. This rule appears intended to
apply to a transferee who is not a 'U.S. Person' (as defined below), unless such
transferee's income is effectively connected with the conduct of a trade or
business within the United States. A Residual Certificate is deemed to have tax
avoidance potential unless, at the time of the transfer, (i) the future value of
expected distributions equals at least 30% of the anticipated excess inclusions
after the transfer, and (ii) the transferor reasonably expects that the
transferee will receive sufficient distributions from the REMIC Pool at or after

the time at which the excess inclusions accrue and prior to the end of the next
succeeding taxable year for the accumulated withholding
 
                                       68
<PAGE>
tax liability to be paid. If the non-U.S. Person transfers the Residual
Certificate back to a U.S. Person, the transfer will be disregarded and the
foreign transferor will continue to be treated as the owner unless arrangements
are made so that the transfer does not have the effect of allowing the
transferor to avoid tax on accrued excess inclusions.
 
     The Prospectus Supplement relating to a series of Certificates may provide
that a Residual Certificate may not be purchased by or transferred to any person
that is not a U.S. Person or may describe the circumstances and restrictions
pursuant to which such a transfer may be made. The term 'U.S. Person' means a
citizen or 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 that is subject to U.S. federal income
tax regardless of the source of its income or a trust if (A) for taxable years
beginning after December 31, 1996 (or for taxable years ending after August 20,
1996, if the trustee has made an applicable election), a court within the United
States is able to exercise primary supervision over the administration of such
trust, and one or more United States fiduciaries have the authority to control
all substantial decisions of such trust, or (B) for all other taxable years,
such trust is subject to United States federal income tax regardless of the
source of its income.
 
SALE OR EXCHANGE OF A RESIDUAL CERTIFICATE
 
     Upon the sale or exchange of a Residual Certificate, the Residual
Certificateholder will recognize gain or loss equal to the excess, if any, of
the amount realized over the adjusted basis (as described above under 'Taxation
of Residual Certificates--Basis and Losses') of such Residual Certificateholder
in such Residual Certificate at the time of the sale or exchange. In addition to
reporting the taxable income of the REMIC Pool, a Residual Certificateholder
will have taxable income to the extent that any cash distribution to it from the
REMIC Pool exceeds such adjusted basis on that Distribution Date. Such income
will be treated as gain from the sale or exchange of the Residual Certificate.
It is possible that the termination of the REMIC Pool may be treated as a sale
or exchange of a Residual Certificateholder's Residual Certificate, in which
case, if the Residual Certificateholder has an adjusted basis in such Residual
Certificateholder's Residual Certificate remaining when its interest in the
REMIC Pool terminates, and if such Residual Certificateholder holds such
Residual Certificate as a capital asset under Code Section 1221, then such
Residual Certificateholder will recognize a capital loss at that time in the
amount of such remaining adjusted basis.
 
     Any gain on the sale of a Residual Certificate will be treated as ordinary
income (i) if a Residual Certificate is held as part of a 'conversion
transaction' as defined in Code Section 1258(c), up to the amount of interest
that would have accrued on the Residual Certificateholder's net investment in
the conversion transaction at 120% of the appropriate applicable Federal rate in
effect at the time the taxpayer entered into the transaction minus any amount
previously treated as ordinary income with respect to any prior disposition of

property that was held as a part of such transaction or (ii) in the case of a
non-corporate taxpayer, to the extent such taxpayer has made an election under
Code Section 163(d)(4) to have net capital gains taxed as investment income at
ordinary income rates. In addition, gain or loss recognized from the sale of a
Residual Certificate by certain banks or thrift institutions will be treated as
ordinary income or loss pursuant to Code Section 582(c).
 
     The Conference Committee Report to the 1986 Act provides that, except as
provided in Treasury regulations yet to be issued, the wash sale rules of Code
Section 1091 will apply to dispositions of Residual Certificates where the
seller of the Residual Certificate, during the period beginning six months
before the sale or disposition of the Residual Certificate and ending six months
after such sale or disposition, acquires (or enters into any other transaction
that results in the application of Section 1091) any residual interest in any
REMIC or any interest in a 'taxable mortgage pool' (such as a non-REMIC owner
trust) that is economically comparable to a Residual Certificate.
 
MARK TO MARKET REGULATIONS
 
     Prospective purchasers of the Residual Certificates should also be aware
that on January 3, 1995, the Service released proposed regulations (the
'Proposed Mark to Market Regulations') under Code Section 475 relating to the
requirement that a securities dealer mark to market securities held for sale to
customers. This mark-to-market requirement applies to all securities of a
dealer, except to the extent that the dealer has specifically identified a
security as held for investment. The Proposed Mark to Market Regulations provide
that, for purposes of this mark-to-market requirement, a Residual Certificate is
not treated as a security and thus may not be marked to market. The Proposed
Mark to Market Regulations would apply to all Residual Certificates acquired on
or after January 4, 1995.
 
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<PAGE>
TAXES THAT MAY BE IMPOSED ON THE REMIC POOL
 
  PROHIBITED TRANSACTIONS
 
     Income from certain transactions by the REMIC Pool, called prohibited
transactions, will not be part of the calculation of income or loss includible
in the federal income tax returns of Residual Certificateholders, but rather
will be taxed directly to the REMIC Pool at a 100% rate. Prohibited transactions
generally include (i) the disposition of a qualified mortgage other than for (a)
substitution within two years of the Startup Day for a defective (including a
defaulted) obligation (or repurchase in lieu of substitution of a defective
(including a defaulted) obligation at any time) or for any qualified mortgage
within three months of the Startup Day, (b) foreclosure, default or imminent
default of a qualified mortgage, (c) bankruptcy or insolvency of the REMIC Pool
or (d) a qualified (complete) liquidation, (ii) the receipt of income from
assets that are not the type of mortgages or investments that the REMIC Pool is
permitted to hold, (iii) the receipt of compensation for services or (iv) the
receipt of gain from disposition of cash flow investments other than pursuant to
a qualified liquidation. Notwithstanding (i) and (iv), it is not a prohibited
transaction to sell REMIC Pool property to prevent a default on Regular
Certificates as a result of a default on qualified mortgages or to facilitate a

clean-up call (generally, an optional termination to save administrative costs
when no more than a small percentage of the Certificates is outstanding). The
REMIC Regulations indicate that the modification of a Mortgage Loan generally
will not be treated as a disposition if it is occasioned by a default or
reasonably foreseeable default, an assumption of the Mortgage Loan, the waiver
of a due-on-sale or due-on-encumbrance clause or the conversion of an interest
rate by a mortgagor pursuant to the terms of a convertible adjustable rate
Mortgage Loan.
 
CONTRIBUTIONS TO THE REMIC POOL AFTER THE STARTUP DAY
 
     In general, the REMIC Pool will be subject to a tax at a 100% rate on the
value of any property contributed to the REMIC Pool after the Startup Day.
Exceptions are provided for cash contributions to the REMIC Pool (i) during the
three months following the Startup Day, (ii) made to a qualified reserve fund by
a Residual Certificateholder, (iii) in the nature of a guarantee, (iv) made to
facilitate a qualified liquidation or clean-up call and (v) as otherwise
permitted in Treasury regulations yet to be issued.
 
NET INCOME FROM FORECLOSURE PROPERTY
 
     The REMIC Pool will be subject to federal income tax at the highest
corporate rate on 'net income from foreclosure property', determined by
reference to the rules applicable to real estate investment trusts. Generally,
property acquired by deed in lieu of foreclosure would be treated as
'foreclosure property' for a period of two years, with possible extensions. Net
income from foreclosure property generally means gain from the sale of a
foreclosure property that is inventory property and gross income from
foreclosure property other than qualifying rents and other qualifying income for
a real estate investment trust.
 
     It is not anticipated that the REMIC Pool will receive income or
contributions subject to tax under the preceding three paragraphs, except as
described in the applicable Prospectus Supplement with respect to net income
from foreclosure property on a commercial or multifamily residential property
that secured a Mortgage Loan. In addition, unless otherwise disclosed in the
applicable Prospectus Supplement, it is not anticipated that any material state
income or franchise tax will be imposed on a REMIC Pool.
 
LIQUIDATION OF THE REMIC POOL
 
     If a REMIC Pool adopts a plan of complete liquidation, within the meaning
of Code Section 860F(a)(4)(A)(i), which may be accomplished by designating in
the REMIC Pool's final tax return a date on which such adoption is deemed to
occur, and sells all of its assets (other than cash) within a 90-day period
beginning on the date of the adoption of the plan of liquidation, the REMIC Pool
will not be subject to the prohibited transaction rules on the sale of its
assets, provided that the REMIC Pool credits or distributes in liquidation all
of the sale proceeds plus its cash (other than amounts retained to meet claims)
to holders of Regular Certificates and Residual Certificateholders within the
90-day period.
 
ADMINISTRATIVE MATTERS
 

     The REMIC Pool will be required to maintain its books on a calendar year
basis and to file federal income tax returns for federal income tax purposes in
a manner similar to a partnership. The form for such income tax return is Form
1066, U.S. Real Estate Mortgage Investment Conduit Income Tax Return. The
Trustee will be required to sign the REMIC Pool's returns. Treasury regulations
provide that, except where there is a single Residual Certificateholder for an
entire taxable year, the REMIC Pool will be subject to the procedural and
administrative rules of the Code applicable to partnerships, including the
determination by the
 
                                       70
<PAGE>
Service of any adjustments to, among other things, items of REMIC income, gain,
loss, deduction or credit in a unified administrative proceeding. The Residual
Certificateholder owning the largest percentage interest in the Residual
Certificates will be obligated to act as 'tax matters person', as defined in
applicable Treasury regulations, with respect to the REMIC Pool. Each Residual
Certificateholder will be deemed, by acceptance of such Residual Certificates,
to have agreed (i) to the appointment of the tax matters person as provided in
the preceding sentence and (ii) to the irrevocable designation of the Master
Servicer as agent for performing the functions of the tax matters person.
 
LIMITATIONS ON DEDUCTION OF CERTAIN EXPENSES
 
     An investor who is an individual, estate or trust will be subject to
limitation with respect to certain itemized deductions described in Code Section
67, to the extent that such itemized deductions, in the aggregate, do not exceed
2% of the investor's adjusted gross income. In addition, Code Section 68
provides that itemized deductions otherwise allowable for a taxable year of an
individual taxpayer will be reduced by the lesser of (i) 3% of the excess, if
any, of adjusted gross income over $100,000 ($50,000 in the case of a married
individual filing a separate return) (subject to adjustments for inflation) or
(ii) 80% of the amount of itemized deductions otherwise allowable for such year.
In the case of a REMIC Pool, such deductions may include deductions under Code
Section 212 for the Servicer Fee and all administrative and other expenses
relating to the REMIC Pool, any similar fees paid to the issuer or guarantor of
the Agency Certificates or the Private Mortgage-Backed Securities or Contracts,
or any similar expenses allocated to the REMIC Pool with respect to a regular
interest it holds in another REMIC. Such investors who hold REMIC Certificates
either directly or indirectly through certain pass-through entities may have
their pro rata share of such expenses allocated to them as additional gross
income, but may be subject to such limitation on deductions. In addition, such
expenses are not deductible at all for purposes of computing the alternative
minimum tax, and may cause such investors to be subject to significant
additional tax liability. Temporary Treasury regulations provide that the
additional gross income and corresponding amount of expenses generally are to be
allocated entirely to the holders of Residual Certificates in the case of a
REMIC Pool that would not qualify as a fixed investment trust in the absence of
a REMIC election. However, such additional gross income and limitation on
deductions will apply to the allocable portion of such expenses to holders of
Regular Certificates, as well as holders of Residual Certificates, where such
Regular Certificates are issued in a manner that is similar to pass-through
certificates in a fixed investment trust. In general, such allocable portion
will be determined based on the ratio that a REMIC Certificateholder's income,

determined on a daily basis, bears to the income of all holders of Regular
Certificates and Residual Certificates with respect to a REMIC Pool. As a
result, individuals, estates or trusts holding REMIC Certificates (either
directly or indirectly through a grantor trust, partnership, S corporation,
REMIC, or certain other pass-through entities described in the foregoing
temporary Treasury regulations) may have taxable income in excess of the
interest income at the pass-through rate on Regular Certificates that are issued
in a single Class or otherwise consistently with fixed investment trust status
or in excess of cash distributions for the related period on Residual
Certificates. Unless otherwise indicated in the applicable Prospectus
Supplement, all such expenses will be allocable to the Residual Certificates.
 
TAXATION OF CERTAIN FOREIGN INVESTORS
 
  REGULAR CERTIFICATES
 
     Interest, including original issue discount, distributable to Regular
Certificateholders who are non-resident aliens, foreign corporations, or other
Non-U.S Persons (as defined below), will be considered 'portfolio interest' and,
therefore, generally will not be subject to 30% United States withholding tax,
provided that such Non-U.S. Person (i) is not a '10-percent shareholder' within
the meaning of Code Section 871(h)(3)(B) or a controlled foreign corporation
described in Code Section 881(c)(3)(C) and (ii) provides the Trustee, or the
person who would otherwise be required to withhold tax from such distributions
under Code Section 1441 or 1442, with an appropriate statement, signed under
penalties of perjury, identifying the beneficial owner and stating, among other
things, that the beneficial owner of the Regular Certificate is a Non-U.S.
Person. If such statement, or any other required statement, is not provided, 30%
withholding will apply unless reduced or eliminated pursuant to an applicable
tax treaty or unless the interest on the Regular Certificate is effectively
connected with the conduct of a trade or business within the United States by
such Non-U.S. Person. In the latter case, such Non-U.S. Person will be subject
to United States federal income tax at regular rates. Prepayment Premiums
distributable to Regular Certificateholders who are Non-U.S. Persons may be
subject to 30% United States withholding tax. Investors who are Non-U.S. Persons
should consult their own tax advisors regarding the specific tax consequences to
them of owning a Regular Certificate. The term 'Non-U.S. Person' means any
person who is not a U.S. Person.
 
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<PAGE>
RESIDUAL CERTIFICATES
 
     The Conference Committee Report to the 1986 Act indicates that amounts paid
to Residual Certificateholders who are Non-U.S. Persons are treated as interest
for purposes of the 30% (or lower treaty rate) United States withholding tax.
Treasury regulations provide that amounts distributed to Residual
Certificateholders may qualify as 'portfolio interest', subject to the
conditions described in 'Regular Certificates' above, but only to the extent
that (i) the Mortgage Loans (including mortgage loans underlying MBS) were
issued after July 18, 1984 and (ii) the Trust Fund or segregated pool of assets
therein (as to which a separate REMIC election will be made), to which the
Residual Certificate relates, consists of obligations issued in 'registered
form' within the meaning of Code Section 163(f)(1). Generally, whole mortgage

loans will not be, but MBS and regular interests in another REMIC Pool will be,
considered obligations issued in registered form. Furthermore, a Residual
Certificateholder will not be entitled to any exemption from the 30% withholding
tax (or lower treaty rate) to the extent of that portion of REMIC taxable income
that constitutes an 'excess inclusion'. See 'Taxation of Residual
Certificates--Limitations on Offset or Exemption of REMIC Income'. If the
amounts paid to Residual Certificateholders who are Non-U.S. Persons are
effectively connected with the conduct of a trade or business within the United
States by such Non-U.S. Persons, 30% (or lower treaty rate) withholding will not
apply. Instead, the amounts paid to such Non-U.S. Persons will be subject to
United States federal income tax at regular rates. If 30% (or lower treaty rate)
withholding is applicable, such amounts generally will be taken into account for
purposes of withholding only when paid or otherwise distributed (or when the
Residual Certificate is disposed of) under rules similar to withholding upon
disposition of debt instruments that have original issue discount. See
'Tax-Related Restrictions on Transfer of Residual Certificates--Foreign
Investors' above concerning the disregard of certain transfers having 'tax
avoidance potential'. Investors who are Non-U.S. Persons should consult their
own tax advisors regarding the specific tax consequences to them of owning
Residual Certificates.
 
BACKUP WITHHOLDING
 
     Distributions made on the Regular Certificates, and proceeds from the sale
of the Regular Certificates to or through certain brokers, may be subject to a
'backup' withholding tax under Code Section 3406 of 31% on 'reportable payments'
(including interest distributions, original issue discount, and, under certain
circumstances, principal distributions) unless the Regular Certificateholder
complies with certain reporting and/or certification procedures, including the
provision of its taxpayer identification number to the Trustee, its agent or the
broker who effected the sale of the Regular Certificate, or such
Certificateholder is otherwise an exempt recipient under applicable provisions
of the Code. Any amounts to be withheld from distribution on the Regular
Certificates would be refunded by the Service or allowed as a credit against the
Regular Certificateholder's federal income tax liability.
 
REPORTING REQUIREMENTS
 
     Reports of accrued interest, original issue discount and information
necessary to compute the accrual of any market discount on the Regular
Certificates will be made annually to the Service and to individuals, estates,
non-exempt and non-charitable trusts, and partnerships who are either holders of
record of Regular Certificates or beneficial owners who own Regular Certificates
through a broker or middleman as nominee. All brokers, nominees and all other
non-exempt holders of record of Regular Certificates (including corporations,
non-calendar year taxpayers, securities or commodities dealers, real estate
investment trusts, investment companies, common trust funds, thrift institutions
and charitable trusts) may request such information for any calendar quarter by
telephone or in writing by contacting the person designated in Service
Publication 938 with respect to a particular series of Regular Certificates.
Holders through nominees must request such information from the nominee.
 
     The Service's Form 1066 has an accompanying Schedule Q, Quarterly Notice to
Residual Interest Holders of REMIC Taxable Income or Net Loss Allocation.

Treasury regulations require that Schedule Q be furnished by the REMIC Pool to
each Residual Certificateholder by the end of the month following the close of
each calendar quarter (41 days after the end of a quarter under proposed
Treasury regulations) in which the REMIC Pool is in existence.
 
     Treasury regulations require that, in addition to the foregoing
requirements, information must be furnished quarterly to Residual
Certificateholders, furnished annually, if applicable, to holders of Regular
Certificates, and filed annually with the Service concerning Code Section 67
expenses (see 'Limitations on Deduction of Certain Expenses' above) allocable to
such holders. Furthermore, under such regulations, information must be furnished
quarterly to Residual Certificateholders, furnished annually to holders of
Regular Certificates, and filed annually with the Service concerning the
percentage of the REMIC Pool's assets meeting the qualified asset tests
described above under 'Status of REMIC Certificates'.
 
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<PAGE>
                FEDERAL INCOME TAX CONSEQUENCES FOR CERTIFICATES
                     AS TO WHICH NO REMIC ELECTION IS MADE
 
STANDARD CERTIFICATES
 
  GENERAL
 
     In the event that no election is made to treat a Trust Fund (or a
segregated pool of assets therein) with respect to a series of Certificates that
are not designated as 'Stripped Certificates', as described below, as a REMIC
(Certificates of such a series hereinafter referred to as 'Standard
Certificates'), in the opinion of Cadwalader, Wickersham & Taft, tax counsel to
the Depositor, the Trust Fund will be classified as a grantor trust under
subpart E, Part 1 of subchapter J of the Code and not as an association taxable
as a corporation or a 'taxable mortgage pool' within the meaning of Code Section
7701(i). Where there is no fixed retained yield with respect to the Mortgage
Loans underlying the Standard Certificates, the holder of each such Standard
Certificate (a 'Standard Certificateholder') in such series will be treated as
the owner of a pro rata undivided interest in the ordinary income and corpus
portions of the Trust Fund represented by its Standard Certificate and will be
considered the beneficial owner of a pro rata undivided interest in each of the
Mortgage Loans, subject to the discussion below under 'Recharacterization of
Servicing Fees'. Accordingly, the holder of a Standard Certificate of a
particular series will be required to report on its federal income tax return
its pro rata share of the entire income from the Mortgage Loans represented by
its Standard Certificate, including interest at the coupon rate on such Mortgage
Loans, original issue discount (if any), prepayment fees, assumption fees, and
late payment charges received by the Master Servicer, in accordance with such
Standard Certificateholder's method of accounting. A Standard Certificateholder
generally will be able to deduct its share of the Servicing Fee and all
administrative and other expenses of the Trust Fund in accordance with its
method of accounting, provided that such amounts are reasonable compensation for
services rendered to that Trust Fund. However, investors who are individuals,
estates or trusts who own Standard Certificates, either directly or indirectly
through certain pass-through entities, will be subject to limitation with
respect to certain itemized deductions described in Code Section 67, including

deductions under Code Section 212 for the Servicing Fee and all such
administrative and other expenses of the Trust Fund, to the extent that such
deductions, in the aggregate, do not exceed two percent of an investor's
adjusted gross income. In addition, Code Section 68 provides that itemized
deductions otherwise allowable for a taxable year of an individual taxpayer will
be reduced by the lesser of (i) 3% of the excess, if any, of adjusted gross
income over $100,000 ($50,000 in the case of a married individual filing a
separate return) (subject to adjustments for inflation), or (ii) 80% of the
amount of itemized deductions otherwise allowable for such year. As a result,
such investors holding Standard Certificates, directly or indirectly through a
pass-through entity, may have aggregate taxable income in excess of the
aggregate amount of cash received on such Standard Certificates with respect to
interest at the pass-through rate on such Standard Certificates. In addition,
such expenses are not deductible at all for purposes of computing the
alternative minimum tax, and may cause such investors to be subject to
significant additional tax liability. Moreover, where there is fixed retained
yield with respect to the Mortgage Loans underlying a series of Standard
Certificates or where the Servicing Fee is in excess of reasonable servicing
compensation, the transaction will be subject to the application of the
'stripped bond' and 'stripped coupon' rules of the Code, as described below
under 'Stripped Certificates' and 'Recharacterization of Servicing Fees',
respectively.
 
TAX STATUS
 
     In the opinion of Cadwalader, Wickersham & Taft, tax counsel to the
Depositor, Standard Certificates will have the following status for federal
income tax purposes:
 
          1. A Standard Certificate owned by a 'domestic building and loan
     association' within the meaning of Code Section 7701(a)(19) will be
     considered to represent 'loans secured by an interest in real property'
     within the meaning of Code Section 7701(a)(19)(C)(v), provided that the
     real property securing the Mortgage Loans represented by that Standard
     Certificate is of the type described in such section of the Code.
 
          2. A Standard Certificate owned by a real estate investment trust will
     be considered to represent 'real estate assets' within the meaning of Code
     Section 856(c)(5)(A) to the extent that the assets of the related Trust
     Fund consist of qualified assets, and interest income on such assets will
     be considered 'interest on obligations secured by mortgages on real
     property' to such extent within the meaning of Code Section 856(c)(3)(B).
 
          3. A Standard Certificate owned by a REMIC will be considered to
     represent an 'obligation. . . which is principally secured by an interest
     in real property' within the meaning of Code Section 860G(a)(3)(A) to the
     extent that the assets of the related Trust Fund consist of 'qualified
     mortgages' within the meaning of Code Section 860G(a)(3).
 
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<PAGE>
PREMIUM AND DISCOUNT
 
     Standard Certificateholders are advised to consult with their tax advisors

as to the federal income tax treatment of premium and discount arising either
upon initial acquisition of Standard Certificates or thereafter.
 
     Premium.  The treatment of premium incurred upon the purchase of a Standard
Certificate will be determined generally as described above under 'Federal
Income Tax Consequences for REMIC Certificates--Taxation of Residual
Certificates-- Premium'.
 
     Original Issue Discount.  The original issue discount rules will be
applicable to a Standard Certificateholder's interest in those Mortgage Loans as
to which the conditions for the application of those sections are met. Rules
regarding periodic inclusion of original issue discount income are applicable to
mortgages of corporations originated after May 27, 1969, mortgages of
noncorporate mortgagors (other than individuals) originated after July 1, 1982,
and mortgages of individuals originated after March 2, 1984. Under the OID
Regulations, such original issue discount could arise by the charging of points
by the originator of the mortgages in an amount greater than a statutory de
minimis exception, including a payment of points currently deductible by the
borrower under applicable Code provisions or, under certain circumstances, by
the presence of 'teaser rates' on the Mortgage Loans.
 
     Original issue discount must generally be reported as ordinary gross income
as it accrues under a constant interest method that takes into account the
compounding of interest, in advance of the cash attributable to such income.
Unless indicated otherwise in the applicable Prospectus Supplement, no
prepayment assumption will be assumed for purposes of such accrual. However,
Code Section 1272 provides for a reduction in the amount of original issue
discount includible in the income of a holder of an obligation that acquires the
obligation after its initial issuance at a price greater than the sum of the
original issue price and the previously accrued original issue discount, less
prior payments of principal. Accordingly, if such Mortgage Loans acquired by a
Standard Certificateholder are purchased at a price equal to the then unpaid
principal amount of such Mortgage Loans, no original issue discount attributable
to the difference between the issue price and the original principal amount of
such Mortgage Loans (i.e., points) will be includible by such holder.
 
     Market Discount.  Standard Certificateholders also will be subject to the
market discount rules to the extent that the conditions for application of those
sections are met. Market discount on the Mortgage Loans will be determined and
will be reported as ordinary income generally in the manner described above
under 'Federal Income Tax Consequences for REMIC Certificates--Taxation of
Regular Certificates--Market Discount', except that the ratable accrual methods
described therein will not apply. Rather, the holder will accrue market discount
pro rata over the life of the Mortgage Loans, unless the constant yield method
is elected. Unless indicated otherwise in the applicable Prospectus Supplement,
no prepayment assumption will be assumed for purposes of such accrual.
 
RECHARACTERIZATION OF SERVICING FEES
 
     If the Servicing Fee paid to the Master Servicer were deemed to exceed
reasonable servicing compensation, the amount of such excess would represent
neither income nor a deduction to Certificateholders. In this regard, there are
no authoritative guidelines for federal income tax purposes as to either the
maximum amount of servicing compensation that may be considered reasonable in

the context of this or similar transactions or whether, in the case of the
Standard Certificate, the reasonableness of servicing compensation should be
determined on a weighted average or loan-by-loan basis. If a loan-by-loan basis
is appropriate, the likelihood that such amount would exceed reasonable
servicing compensation as to some of the Mortgage Loans would be increased.
Service guidance indicates that a servicing fee in excess of reasonable
compensation ('excess servicing') will cause the Mortgage Loans to be treated
under the 'stripped bond' rules. Such guidance provides safe harbors for
servicing deemed to be reasonable and requires taxpayers to demonstrate that the
value of servicing fees in excess of such amounts is not greater than the value
of the services provided.
 
     Accordingly, if the Service's approach is upheld, a servicer who receives a
servicing fee in excess of such amounts would be viewed as retaining an
ownership interest in a portion of the interest payments on the Mortgage Loans.
Under the rules of Code Section 1286, the separation of ownership of the right
to receive some or all of the interest payments on an obligation from the right
to receive some or all of the principal payments on the obligation would result
in treatment of such Mortgage Loans as 'stripped coupons' and 'stripped bonds'.
Subject to the de minimis rule discussed below under '--Stripped Certificates',
each stripped bond or stripped coupon could be considered for this purpose as a
non-interest bearing obligation issued on the date of issue of the Standard
Certificates, and the original issue discount rules of the Code would apply to
the holder thereof. While Standard Certificateholders would still be treated as
owners of beneficial interests in a grantor trust for federal income tax
purposes, the
 
                                       74
<PAGE>
corpus of such trust could be viewed as excluding the portion of the Mortgage
Loans the ownership of which is attributed to the Master Servicer, or as
including such portion as a second class of equitable interest. Applicable
Treasury regulations treat such an arrangement as a fixed investment trust,
since the multiple classes of trust interests should be treated as merely
facilitating direct investments in the trust assets and the existence of
multiple classes of ownership interests is incidental to that purpose. In
general, such a recharacterization should not have any significant effect upon
the timing or amount of income reported by a Standard Certificateholder, except
that the income reported by a cash method holder may be slightly accelerated.
See 'Stripped Certificates' below for a further description of the federal
income tax treatment of stripped bonds and stripped coupons.
 
SALE OR EXCHANGE OF STANDARD CERTIFICATES
 
     Upon sale or exchange of a Standard Certificate, a Standard
Certificateholder will recognize gain or loss equal to the difference between
the amount realized on the sale and its aggregate adjusted basis in the Mortgage
Loans and the other assets represented by the Standard Certificate. In general,
the aggregate adjusted basis will equal the Standard Certificateholder's cost
for the Standard Certificate, increased by the amount of any income previously
reported with respect to the Standard Certificate and decreased by the amount of
any losses previously reported with respect to the Standard Certificate and the
amount of any distributions received thereon. Except as provided above with
respect to market discount on any Mortgage Loans, and except for certain

financial institutions subject to the provisions of Code Section 582(c), any
such gain or loss would be capital gain or loss if the Standard Certificate was
held as a capital asset. However, gain on the sale of a Standard Certificate
will be treated as ordinary income (i) if a Standard Certificate is held as part
of a 'conversion transaction' as defined in Code Section 1258(c), up to the
amount of interest that would have accrued on the Standard Certificateholder's
net investment in the conversion transaction at 120% of the appropriate
applicable Federal rate in effect at the time the taxpayer entered into the
transaction minus any amount previously treated as ordinary income with respect
to any prior disposition of property that was held as a part of such transaction
or (ii) in the case of a non-corporate taxpayer, to the extent such taxpayer has
made an election under Code Section 163(d)(4) to have net capital gains taxed as
investment income at ordinary income rates. Capital gains of certain
non-corporate taxpayers are subject to a lower maximum tax rate than ordinary
income of such taxpayers. The Taxpayer Relief Act of 1997 (the '1997 Act') has
reduced the maximum capital gains tax rate to 20% for non-corporate taxpayers
with respect to sales or exchanges of certain capital assets held for more than
18 months. Non-corporate investors should consult their tax advisors regarding
the consequences to them of the 1997 Act. The maximum tax rate for corporations
is the same with respect to both ordinary income and capital gains.
 
STRIPPED CERTIFICATES
 
  GENERAL
 
     Pursuant to Code Section 1286, the separation of ownership of the right to
receive some or all of the principal payments on an obligation from ownership of
the right to receive some or all of the interest payments results in the
creation of 'stripped bonds' with respect to principal payments and 'stripped
coupons' with respect to interest payments. For purposes of this discussion,
Certificates that are subject to those rules will be referred to as 'Stripped
Certificates'.
 
     The Certificates will be subject to those rules if (i) the Depositor or any
of its affiliates retains (for its own account or for purposes of resale), in
the form of fixed retained yield or otherwise, an ownership interest in a
portion of the payments on the Mortgage Loans, (ii) the Master Servicer is
treated as having an ownership interest in the Mortgage Loans to the extent it
is paid (or retains) servicing compensation in an amount greater than reasonable
consideration for servicing the Mortgage Loans (see 'Standard
Certificates--Recharacterization of Servicing Fees' above) and (iii)
Certificates are issued in two or more classes or subclasses representing the
right to non-pro-rata percentages of the interest and principal payments on the
Mortgage Loans.
 
     In general, a holder of a Stripped Certificate will be considered to own
'stripped bonds' with respect to its pro rata share of all or a portion of the
principal payments on each Mortgage Loan and/or 'stripped coupons' with respect
to its pro rata share of all or a portion of the interest payments on each
Mortgage Loan, including the Stripped Certificate's allocable share of the
servicing fees paid to the Master Servicer, to the extent that such fees
represent reasonable compensation for services rendered. See discussion above
under 'Standard Certificates--Recharacterization of Servicing Fees'. Although
not free from doubt, for purposes of reporting to Stripped Certificateholders,

the servicing fees will be allocated to the Stripped Certificates in proportion
to the respective entitlements to distributions of each class (or subclass) of
Stripped Certificates for the related period or periods. The holder of a
Stripped Certificate generally will be entitled to a deduction each year in
respect of the servicing fees, as described above under 'Standard
Certificates--General', subject to the limitation described therein.
 
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     Code Section 1286 treats a stripped bond or a stripped coupon as an
obligation issued at an original issue discount on the date that such stripped
interest is purchased. Although the treatment of Stripped Certificates for
federal income tax purposes is not clear in certain respects at this time,
particularly where such Stripped Certificates are issued with respect to a
Mortgage Pool containing variable-rate Mortgage Loans, in the opinion of
Cadwalader, Wickersham & Taft, tax counsel to the Depositor, (i) the Trust Fund
will be treated as a grantor trust under subpart E, Part 1 of subchapter J of
the Code and not as an association taxable as a corporation or a 'taxable
mortgage pool' within the meaning of Code Section 7701(i), and (ii) each
Stripped Certificate should be treated as a single installment obligation for
purposes of calculating original issue discount and gain or loss on disposition.
This treatment is based on the interrelationship of Code Section 1286, Code
Sections 1272 through 1275, and the OID Regulations. While under Code Section
1286 computations with respect to Stripped Certificates arguably should be made
in one of the ways described below under 'Taxation of Stripped
Certificates--Possible Alternative Characterizations,' the OID Regulations
state, in general, that two or more debt instruments issued by a single issuer
to a single investor in a single transaction should be treated as a single debt
instrument for original issue discount purposes. The Agreement requires that the
Trustee make and report all computations described below using this aggregate
approach, unless substantial legal authority requires otherwise.
 
     Furthermore, Treasury regulations issued December 28, 1992 provide for the
treatment of a Stripped Certificate as a single debt instrument issued on the
date it is purchased for purposes of calculating any original issue discount. In
addition, under these regulations, a Stripped Certificate that represents a
right to payments of both interest and principal may be viewed either as issued
with original issue discount or market discount (as described below), at a de
minimis original issue discount, or, presumably, at a premium. This treatment
suggests that the interest component of such a Stripped Certificate would be
treated as qualified stated interest under the OID Regulations. Further, these
final regulations provide that the purchaser of such a Stripped Certificate will
be required to account for any discount as market discount rather than original
issue discount if either (i) the initial discount with respect to the Stripped
Certificate was treated as zero under the de minimis rule, or (ii) no more than
100 basis points in excess of reasonable servicing is stripped off the related
Mortgage Loans. Any such market discount would be reportable as described under
'Federal Income Tax Consequences for REMIC Certificates--Taxation of Regular
Certificates--Market Discount,' without regard to the de minimis rule therein,
assuming that a prepayment assumption is employed in such computation.
 
STATUS OF STRIPPED CERTIFICATES
 
     No specific legal authority exists as to whether the character of the

Stripped Certificates, for federal income tax purposes, will be the same as that
of the Mortgage Loans. Although the issue is not free from doubt, in the opinion
of Cadwalader, Wickersham & Taft, tax counsel to the Depositor, Stripped
Certificates owned by applicable holders should be considered to represent 'real
estate assets' within the meaning of Code Section 856(c)(5)(A), 'obligation[s]
principally secured by an interest in real property' within the meaning of Code
Section 860G(a)(3)(A), and 'loans secured by an interest in real property'
within the meaning of Code Section 7701(a)(19)(C)(v), and interest (including
original issue discount) income attributable to Stripped Certificates should be
considered to represent 'interest on obligations secured by mortgages on real
property' within the meaning of Code Section 856(c)(3)(B), provided that in each
case the Mortgage Loans and interest on such Mortgage Loans qualify for such
treatment. The application of such Code provisions to Buy-Down Mortgage Loans is
uncertain. See 'Standard Certificates--Tax Status' above.
 
TAXATION OF STRIPPED CERTIFICATES
 
     Original Issue Discount.  Except as described above under 'General', each
Stripped Certificate will be considered to have been issued at an original issue
discount for federal income tax purposes. Original issue discount with respect
to a Stripped Certificate must be included in ordinary income as it accrues, in
accordance with a constant interest method that takes into account the
compounding of interest, which may be prior to the receipt of the cash
attributable to such income. Based in part on the OID Regulations and the
amendments to the original issue discount sections of the Code made by the 1986
Act, the amount of original issue discount required to be included in the income
of a holder of a Stripped Certificate (referred to in this discussion as a
'Stripped Certificateholder') in any taxable year likely will be computed
generally as described above under 'Federal Income Tax Consequences for REMIC
Certificates--Taxation of Regular Certificates--Original Issue Discount' and
'--Variable Rate Regular Certificates'. However, with the apparent exception of
a Stripped Certificate issued with de minimis original issue discount as
described above under 'General', the issue price of a Stripped Certificate will
be the purchase price paid by each holder thereof, and the stated redemption
price at maturity will include the aggregate amount of the payments to be made
on the Stripped Certificate to such Stripped Certificateholder, presumably under
the Prepayment Assumption.
 
     If the Mortgage Loans prepay at a rate either faster or slower than that
under the Prepayment Assumption, a Stripped Certificateholder's recognition of
original issue discount will be either accelerated or decelerated and the amount
of such original
 
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issue discount will be either increased or decreased depending on the relative
interests in principal and interest on each Mortgage Loan represented by such
Stripped Certificateholder's Stripped Certificate. While the matter is not free
from doubt, the holder of a Stripped Certificate should be entitled in the year
that it becomes certain (assuming no further prepayments) that the holder will
not recover a portion of its adjusted basis in such Stripped Certificate to
recognize an ordinary loss equal to such portion of unrecoverable basis.
 
     As an alternative to the method described above, the fact that some or all

of the interest payments with respect to the Stripped Certificates will not be
made if the Mortgage Loans are prepaid could lead to the interpretation that
such interest payments are 'contingent' within the meaning of the OID
Regulations. The OID Regulations, as they relate to the treatment of contingent
interest, are by their terms not applicable to prepayable securities such as the
Stripped Certificates. However, if final regulations dealing with contingent
interest with respect to the Stripped Certificates apply the same principles as
the OID Regulations, such regulations may lead to different timing of income
inclusion that would be the case under the OID Regulations. Furthermore,
application of such principles could lead to the characterization of gain on the
sale of contingent interest Stripped Certificates as ordinary income. Investors
should consult their tax advisors regarding the appropriate tax treatment of
Stripped Certificates.
 
     Sale or Exchange of Stripped Certificates.  Sale or exchange of a Stripped
Certificate prior to its maturity will result in gain or loss equal to the
difference, if any, between the amount received and the Stripped
Certificateholder's adjusted basis in such Stripped Certificate, as described
above under 'Federal Income Tax Consequences for REMIC Certificates--Taxation of
Regular Certificates--Sale or Exchange of Regular Certificates'. To the extent
that a subsequent purchaser's purchase price is exceeded by the remaining
payments on the Stripped Certificates, such subsequent purchaser will be
required for federal income tax purposes to accrue and report such excess as if
it were original issue discount in the manner described above. It is not clear
for this purpose whether the assumed prepayment rate that is to be used in the
case of a Stripped Certificateholder other than an original Stripped
Certificateholder should be the Prepayment Assumption or a new rate based on the
circumstances at the date of subsequent purchase.
 
     Purchase of More Than One Class of Stripped Certificates.  Where an
investor purchases more than one class of Stripped Certificates, it is currently
unclear whether for federal income tax purposes such classes of Stripped
Certificates should be treated separately or aggregated for purposes of the
rules described above.
 
     Possible Alternative Characterizations.  The characterizations of the
Stripped Certificates discussed above are not the only possible interpretations
of the applicable Code provisions. For example, the Stripped Certificateholder
may be treated as the owner of (i) one installment obligation consisting of such
Stripped Certificate's pro rata share of the payments attributable to principal
on each Mortgage Loan and a second installment obligation consisting of such
Stripped Certificate's pro rata share of the payments attributable to interest
on each Mortgage Loan, (ii) as many stripped bonds or stripped coupons as there
are scheduled payments of principal and/or interest on each Mortgage Loan or
(iii) a separate installment obligation for each Mortgage Loan, representing the
Stripped Certificate's pro rata share of payments of principal and/or interest
to be made with respect thereto. Alternatively, the holder of one or more
classes of Stripped Certificates may be treated as the owner of a pro rata
fractional undivided interest in each Mortgage Loan to the extent that such
Stripped Certificate, or classes of Stripped Certificates in the aggregate,
represent the same pro rata portion of principal and interest on each such
Mortgage Loan, and a stripped bond or stripped coupon (as the case may be),
treated as an installment obligation or contingent payment obligation, as to the
remainder. Final regulations issued on December 28, 1992 regarding original

issue discount on stripped obligations make the foregoing interpretations less
likely to be applicable. The preamble to those regulations states that they are
premised on the assumption that an aggregation approach is appropriate for
determining whether original issue discount on a stripped bond or stripped
coupon is de minimis, and solicits comments on appropriate rules for aggregating
stripped bonds and stripped coupons under Code Section 1286.
 
     Because of these possible varying characterizations of Stripped
Certificates and the resultant differing treatment of income recognition,
Stripped Certificateholders are urged to consult their own tax advisors
regarding the proper treatment of Stripped Certificates for federal income tax
purposes.
 
REPORTING REQUIREMENTS AND BACKUP WITHHOLDING
 
     The Trustee will furnish, within a reasonable time after the end of each
calendar year, to each Standard Certificateholder or Stripped Certificateholder
at any time during such year, such information (prepared on the basis described
above) as the Trustee deems to be necessary or desirable to enable such
Certificateholders to prepare their federal income tax returns. Such information
will include the amount of original issue discount accrued on Certificates held
by persons other than Certificateholders exempted from the reporting
requirements. The amounts required to be reported by the Trustee may not be
equal to the proper amount of original issue discount required to be reported as
taxable income by a Certificateholder, other than an original Certificateholder
that
 
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<PAGE>
purchased at the issue price. In particular, in the case of Stripped
Certificates, unless provided otherwise in the applicable Prospectus Supplement,
such reporting will be based upon a representative initial offering price of
each class of Stripped Certificates. The Trustee will also file such original
issue discount information with the Service. If a Certificateholder fails to
supply an accurate taxpayer identification number or if the Secretary of the
Treasury determines that a Certificateholder has not reported all interest and
dividend income required to be shown on his federal income tax return, 31%
backup withholding may be required in respect of any reportable payments, as
described above under 'Federal Income Tax Consequences for REMIC
Certificates--Backup Withholding'.
 
TAXATION OF CERTAIN FOREIGN INVESTORS
 
     To the extent that a Certificate evidences ownership in Mortgage Loans that
are issued on or before July 18, 1984, interest or original issue discount paid
by the person required to withhold tax under Code Section 1441 or 1442 to
nonresident aliens, foreign corporations, or other Non-U.S. Persons generally
will be subject to 30% United States withholding tax, or such lower rate as may
be provided for interest by an applicable tax treaty. Accrued original issue
discount recognized by the Standard Certificateholder or Stripped
Certificateholder on original issue discount recognized by the Standard
Certificateholder or Stripped Certificateholders on the sale or exchange of such
a Certificate also will be subject to federal income tax at the same rate.
 

     Treasury regulations provide that interest or original issue discount paid
by the Trustee or other withholding agent to a Non-U.S. Person evidencing
ownership interest in Mortgage Loans issued after July 18, 1984 will be
'portfolio interest' and will be treated in the manner, and such persons will be
subject to the same certification requirements, described above under 'Federal
Income Tax Consequences for REMIC Certificates--Taxation of Certain Foreign
Investors--Regular Certificates'.
 
                              ERISA CONSIDERATIONS
 
GENERAL
 
     The Employee Retirement Income Security Act of 1974, as amended ('ERISA'),
and Section 4975 of the Code impose certain requirements on employee benefit
plans and on certain other retirement plans and arrangements, including
individual retirement accounts, Keogh plans, collective investment funds,
insurance company separate accounts, and some insurance company general accounts
in which such plans, accounts or arrangements are invested, which are subject to
ERISA and the Code (all of which are hereinafter referred to for purposes of
this discussion as 'Plans') and on persons who are fiduciaries with respect to
such Plans. The following is a general discussion of such requirements, and
certain applicable exceptions to and administrative exemptions from such
requirements.
 
     Before purchasing any Offered Certificates, a Plan fiduciary should consult
with its counsel and determine whether there exists any prohibition to such
purchase under the requirements of ERISA, whether any prohibited transaction
class-exemption or any individual administrative prohibited transaction
exemption (as described below) applies, including whether the appropriate
conditions set forth therein would be met, or whether any statutory prohibited
transaction exemption is applicable, and further should consult the applicable
Prospectus Supplement relating to such Series of Certificates.
 
CERTAIN REQUIREMENTS UNDER ERISA
 
  GENERAL
 
     In accordance with ERISA's general fiduciary standards, before investing in
a Certificate a Plan fiduciary should determine whether to do so is permitted
under the governing Plan instruments and is appropriate for the Plan in view of
its overall investment policy and the composition and diversification of its
portfolio. A Plan fiduciary should especially consider the ERISA requirement of
investment prudence and the sensitivity of the return on the Certificates to the
rate of principal repayments (including voluntary prepayments by the mortgagors
and involuntary liquidations) on the Mortgage Loans, as discussed in 'Yield
Considerations' herein.
 
PARTIES IN INTEREST/DISQUALIFIED PERSONS
 
     Other provisions of ERISA (and corresponding provisions of the Code)
prohibit certain transactions involving the assets of a Plan and persons who
have certain specified relationships to the Plan (so-called 'parties in
interest' within the meaning of ERISA or 'disqualified persons' within the
meaning of the Code, including, in both cases, Plan fiduciaries). The Depositor,

Master
 
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Servicer or the Trustee or certain affiliates thereof, might be considered or
might become 'parties in interest' or 'disqualified persons' with respect to a
Plan. If so, the acquisition or holding 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 administrative exemption described below
or some other exemption is available. Special caution should be exercised before
the assets of a Plan are used to purchase a Certificate if, with respect to such
assets, the Depositor, the Master Servicer or the Trustee or an affiliate
thereof, either: (a) has investment discretion with respect to the investment of
such assets of such Plan; or (b) has authority or responsibility to give, or
regularly gives investment advice with respect to such assets for a fee and
pursuant to an agreement or understanding that such advice will serve as a
primary basis for investment decisions with respect to such assets and that such
advice will be based on the particular investment needs of the Plan.
 
DELEGATION OF FIDUCIARY DUTY
 
     Further, if the assets included in a Trust Fund were deemed to constitute
Plan assets, it is possible that a Plan's investment in the Certificates might
be deemed to constitute a delegation, under ERISA, of the duty to manage Plan
assets by the fiduciary deciding to invest in the Certificates, and certain
transactions involved in the operation of the Trust Fund might be deemed to
constitute prohibited transactions under ERISA and the Code. Neither ERISA nor
the Code define the term 'plan assets.'
 
     The U.S. Department of Labor (the 'Department') has published final
regulations (the 'Regulations') concerning whether or not a Plan's assets would
be deemed to include an interest in the underlying assets of an entity (such as
a Trust Fund) for purposes of the reporting and disclosure and general fiduciary
responsibility provisions of ERISA, as well as for the prohibited transaction
provisions of ERISA and the Code, if the Plan acquires an 'equity interest'
(such as a Certificate) in such an entity.
 
     Certain exceptions are provided in the Regulations whereby an investing
Plan's assets would be deemed merely to include its interest in the Certificates
instead of being deemed to include an interest in the assets of a Trust Fund.
However, the Depositor cannot predict in advance, nor can there be any
continuing assurance, whether such exceptions may be met, because of the factual
nature of certain of the rules set forth in the Regulations. For example, one of
the exceptions in the Regulations states that the underlying assets of an entity
will not be considered 'plan assets' if less than 25% of the value of all
classes of equity interests are held by 'benefit plan investors,' which are
defined as Plans, IRAs, and employee benefit plans not subject to ERISA (for
example, governmental plans). However, this exception is tested immediately
after each acquisition of an equity interest in the entity whether upon initial
issuance or in the secondary market.
 
ADMINISTRATIVE EXEMPTIONS
 
     Several underwriters of mortgage-backed securities have applied for and

obtained individual administrative ERISA prohibited transaction exemptions which
can only apply to the purchase and holding of mortgage-backed securities which,
among other conditions, are sold in an offering with respect to which such
underwriter serves as the sole or a managing underwriter, or as a selling or
placement agent. If such an exemption might be applicable to a Series of
Certificates, the related Prospectus Supplement will refer to such possibility,
as well as provide a summary of the conditions to the applicability.
 
GOVERNMENTAL PLANS
 
     A governmental plan as defined in Section 3(32) of ERISA is not subject to
ERISA, or Code Section 4975. However, such a governmental plan may be subject to
a federal, state, or local law, which is, to a material extent, similar to the
provisions of ERISA or Code Section 4975 ('Similar Law'). A fiduciary of a
governmental plan should make its own determination as to the need for and the
availability of any exemptive relief under Similar Law.
 
UNRELATED BUSINESS TAXABLE INCOME; RESIDUAL CERTIFICATES
 
     The purchase of a Residual Certificate by any employee benefit plan
qualified under Code Section 401(a) and exempt from taxation under Code Section
501(a), including most varieties of ERISA Plans, may give rise to 'unrelated
business taxable income' as described in Code Sections 511-515 and 860E.
Further, prior to the purchase of Residual Certificates, a prospective
transferee may be required to provide an affidavit to a transferor that it is
not, nor is it purchasing a Residual Certificate on behalf of, a 'Disqualified
Organization,' which term as defined above includes certain tax-exempt entities
not subject to Code Section 511 including certain governmental plans, as
discussed above under the caption 'Federal Income Tax Consequences-- Federal
Income Tax Consequences for REMIC Certificates--Taxation of Residual
Certificates--Tax-Related Restrictions on Transfer of Residual
Certificates--Disqualified Organizations.'
 
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<PAGE>
     Due to the complexity of these rules and the penalties imposed upon persons
involved in prohibited transactions, it is particularly important that potential
investors who are Plan fiduciaries consult with their counsel regarding the
consequences under ERISA of their acquisition and ownership of Certificates.
 
     The sale of Certificates to an employee benefit plan is in no respect a
representation by the Depositor or the Underwriter that this investment meets
all relevant legal requirements with respect to investments by plans generally
or by any particular plan, or that this investment is appropriate for plans
generally or for any particular plan.
 
                                LEGAL INVESTMENT
 
     The Prospectus Supplement for each Series of Certificates will specify
which, if any, of the Classes of Certificates offered thereby will constitute
'mortgage related securities' for purposes of the Secondary Mortgage Market
Enhancement Act of 1984 ('SMMEA'). The appropriate characterization of those
Certificates not qualifying as 'mortgage related securities' ('Non-SMMEA
Certificates') under various legal investment restrictions, and thus the ability

of investors subject to these restrictions to purchase such Certificates, may be
subject to significant interpretive uncertainties. Accordingly, investors whose
investment authority is subject to legal restrictions should consult their own
legal advisors to determine whether and to what extent the Non-SMMEA
Certificates constitute legal investments for them.
 
     Effective December 31, 1996 (but not until then), Classes of Certificates
that (i) are rated in one of the two highest rating categories by one or more
Rating Agencies and (ii) are part of a Series evidencing interests in a Trust
Fund consisting of loans originated by certain types of Originators as specified
in SMMEA, will be 'mortgage related securities' for purposes of SMMEA. As
'mortgage related securities,' such Classes will constitute legal investments
for persons, trusts, corporations, partnerships, associations, business trusts
and business entities (including, but not limited to, state-chartered savings
banks, commercial banks, savings and loan associations and insurance companies,
as well as trustees and state government employee retirement systems) 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. Pursuant to SMMEA, a number of states enacted
legislation, on or before the October 3, 1991 cutoff for such enactments,
limiting to varying extents the ability of certain entities (in particular,
insurance companies) to invest in 'mortgage related securities' secured by liens
on residential, or mixed residential and commercial properties, in most cases by
requiring the affected investors to rely solely upon existing state law, and not
SMMEA. Pursuant to Section 347 of the Riegle Community Development and
Regulatory Improvement Act of 1994, which amended the definition of 'mortgage
related security' (effective December 31, 1996) to include, in relevant part,
Certificates satisfying the rating and qualified Originator requirements for
'mortgage related securities,' but evidencing interests in a Trust Fund
consisting, in whole or in part, of first liens on one or more parcels of real
estate upon which are located one or more commercial structures, states were
authorized to enact legislation, on or before September 23, 2001, specifically
referring to Section 347 and prohibiting or restricting the purchase, holding or
investment by state-regulated entities in such types of Certificates.
Accordingly, the investors affected by such legislation will be authorized to
invest in Certificates qualifying as 'mortgage related securities' only to the
extent provided in such legislation.
 
     SMMEA also amended the legal investment authority of federally-chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal in mortgage related
securities without limitation as to the percentage of their assets represented
thereby, federal credit unions may invest in such securities, and national banks
may purchase such securities for their own account without regard to the
limitations generally applicable to investment securities set forth in 12 U.S.C.
Section 24 (Seventh), subject in each case to such regulations as the applicable
federal regulatory authority may prescribe. In this connection, effective
December 31, 1996, the Office of the Comptroller of the Currency (the 'OCC') has
amended 12 C.F.R. Part 1 to authorize national banks to purchase and sell for
their own account, without limitation as to a percentage of the bank's capital
and surplus (but subject to compliance with certain general standards concerning

'safety and soundness' and retention of credit information in 12 C.F.R. Section
1.5), certain 'Type IV securities,' defined in 12 C.F.R. Section 1.2(l) to
include certain 'commercial mortgage-related securities' and 'residential
mortgage-related securities.' As so defined, 'commercial mortgage-related
security' and 'residential mortgage-related security' mean, in relevant part,
'mortgage related security' within the meaning of SMMEA, provided that, in the
case of a 'commercial mortgage-related security,' it 'represents ownership of a
promissory note or certificate of interest or participation that is directly
secured by a first lien on one or more parcels of real estate upon which one or
more commercial structures are located and that is fully secured by interests in
a pool of loans to numerous obligors.' In the absence of any rule or
administrative interpretation by the OCC defining the term 'numerous obligors,'
no representation is made as to whether any Class of Certificates will qualify
as 'commercial mortgage-
 
                                       80
<PAGE>
related securities,' and thus as 'Type IV securities,' for investment by
national banks. Federal credit unions should review NCUA Letter to Credit Unions
No. 96, as modified by Letter to Credit Unions No. 108, which includes
guidelines to assist federal credit unions in making investment decisions for
mortgage related securities. The NCUA has adopted rules, codified as 12 C.F.R.
SectionSection 703.5(f)-(k), which prohibit federal credit unions from investing
in certain mortgage related securities (including securities such as certain
Series, Classes or subclasses of Certificates), except under limited
circumstances.
 
     All depository institutions considering an investment in the Certificates
should review the 'Supervisory Policy Statement on Securities Activities' dated
January 28, 1992, as revised April 15, 1994 (the 'Policy Statement') of the
Federal Financial Institutions Examination Council. The Policy Statement, which
has been adopted by the Board of Governors of the Federal Reserve System, the
Federal Deposit Insurance Corporation, the OCC and the Office of Thrift
Supervision, and by the NCUA (with certain modifications), prohibits depository
institutions from investing in certain 'high-risk mortgage securities'
(including securities such as certain Series, Classes or subclasses of the
Certificates), except under limited circumstances, and sets forth certain
investment practices deemed to be unsuitable for regulated institutions.
 
     Institutions whose investment activities are subject to regulation by
federal or state authorities should review rules, policies and guidelines
adopted from time to time by such authorities before purchasing any
Certificates, as certain Series, Classes or subclasses may be deemed unsuitable
investments, or may otherwise be restricted, under such rules, policies or
guidelines (in certain instances irrespective of SMMEA).
 
     The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not limited
to, 'prudent investor' provisions, percentage-of-assets limits, provisions which
may restrict or prohibit investment in securities which are not 'interest
bearing' or 'income paying,' and, with regard to any Certificates issued in
book-entry form, provisions which may restrict or prohibit investments in
securities which are issued in book-entry form.

 
     Except as to the status of certain Classes of Certificates as 'mortgage
related securities,' no representation is made as to the proper characterization
of the Certificates for legal investment purposes, financial institution
regulatory purposes, or other purposes, or as to the ability of particular
investors to purchase Certificates under applicable legal investment
restrictions. The uncertainties described above (and any unfavorable future
determinations concerning legal investment or financial institution regulatory
characteristics of the Certificates) may adversely affect the liquidity of the
Certificates.
 
     Investors should consult their own legal advisors in determining whether
and to what extent the Certificates constitute legal investments for such
investors.
 
                             METHOD OF DISTRIBUTION
 
     The Certificates offered hereby and by the Prospectus Supplement will be
offered in Series through one or more of the various methods described below.
The Prospectus Supplement for each Series of Certificates will describe the
method of offering being utilized for that Series, the public offering or
purchase price of the Certificates and the net proceeds to the Depositor from
such sale. If so specified in the Prospectus Supplement, one or more Classes of
Certificates may be offered for sale only outside of the United States and only
to non-U.S. persons and foreign branches of U.S. banks (or in such other manner
and to such other persons as may be specified therein) and will not be offered
hereby.
 
     The Certificates will be offered through the following methods from time to
time and that offerings may be made concurrently through more than one of these
methods or that an offering of a particular Series of Certificates may be made
through any combination of these methods:
 
          1. Negotiated firm commitment underwriting and public reoffering by
     underwriters;
 
          2. Placements by the Depositor to institutional investors through
     affiliated or unaffiliated dealers or agents; and
 
          3. Direct placements by the Depositor to institutional investors.
 
     If underwriters are used in a sale of any Certificates, such Certificates
will be acquired by the underwriters for their own account and may be resold.
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 Nomura Securities
International, Inc. ('Nomura') acting as underwriter with other underwriters, if
any, named therein. Nomura Asset Securities Corporation, the
 
                                       81
<PAGE>

Depositor, is a wholly-owned subsidiary of Nomura Asset Capital Corporation
('Nomura Capital'). Nomura and Nomura Capital are both wholly-owned subsidiaries
of Nomura Holding America Inc. See 'The Depositor' herein.
 
     In connection with the sale of the Certificates, underwriters, dealers or
placement agents may receive compensation from the Depositor or from purchasers
of the Certificates in the form of discounts, concessions or commissions.
Underwriters, agents and dealers participating in the distributions of the
Certificates may be deemed to be underwriters in connection with such
Certificates, and any discounts or commissions received by them from the Issuer
and any profit on the resale of the Certificates by them may be deemed to be
underwriting discounts and commissions under the Securities Act of 1933, as
amended (the '1933 Act').
 
     Any sales by the Depositor directly to investors, whether using an
affiliated or other placement agent or otherwise, may be made from time to time
in one or more transactions, including negotiated transactions, at a fixed
offering price or at varying prices to be determined at the time of sale or the
time of commitment therefor. The Prospectus Supplement with respect to any
Series of Certificates offered other than through underwriters will contain
information regarding the nature of such offering and any agreements to be
entered into between the Depositor and dealers or purchasers of the Certificates
for such Series.
 
     The underwriting agreement pertaining to a sale of a series of Certificates
will provide that the obligations of Nomura and any underwriters will be subject
to certain conditions precedent, that the underwriters will be obligated to
purchase all such Certificates if any are purchased, and that the Depositor will
indemnify Nomura and any underwriters against certain civil liabilities,
including liabilities under the 1933 Act, or will contribute to payments Nomura
and any underwriters may be required to make in respect thereof.
 
     In the ordinary course of business, Nomura and the Depositor may engage in
various securities and financing transactions, including repurchase agreements
to provide interim financing of the Depositor's mortgage loans pending the sale
of such mortgage loans or interests therein, including the Certificates.
 
     All or part of any Class of Certificates may be reacquired by the Depositor
or acquired by an affiliate of the Depositor in a secondary market transaction
or from an affiliate (including Nomura). Such Certificates may then be included
in a trust fund, the beneficial ownership of which will be evidenced by one or
more classes of mortgage-backed certificates, including subsequent series of
Certificates offered pursuant to this Prospectus and a Prospectus Supplement.
 
     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.
 
     If and to the extent required by applicable law or regulation, this
Prospectus will be used by Nomura in connection with offers and sales related to
market-making transactions in Certificates previously offered hereunder in
transactions in which Nomura acts as principal. Nomura may also act as agent in

such transactions. Sales may be made at negotiated prices determined at the time
of sale.
 
                                 LEGAL MATTERS
 
     The legality of the Certificates of each Series, including certain federal
income tax consequences with respect thereto, will be passed upon for the
Depositor by Cadwalader, Wickersham & Taft, New York, New York.
 
                             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 any class of Offered Certificates that
they shall have been rated not lower than investment grade, that is, in one of
the four highest categories, by a Rating Agency.
 
     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 interest certificates in extreme cases might fail to recoup their
initial 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.
 
                                       82
<PAGE>
                         INDEX OF PRINCIPAL DEFINITIONS
 
<TABLE>
<CAPTION>
                                                       PAGE(S) ON WHICH TERM IS
TERM                                                   DEFINED IN THE PROSPECTUS
- ------------------------------------------------------ -------------------------
<S>                                                    <C>
1933 Act..............................................               82
1986 Act..............................................               59
Accrual Certificates..................................                9
Accrued Certificate Interest..........................               28

ADA...................................................               56
ARM Loans.............................................               20
Bankruptcy Code.......................................               51
BIF...................................................               34
Book-Entry Certificates...............................               27
Cash Flow Agreement...................................                1
Cede..................................................                2
CERCLA................................................               16
Certificate Balance...................................                8
Certificateholders....................................                2
Certificates..........................................                7
Code..................................................               10
Collection Account....................................                8
Collection Period.....................................               27
Commercial Loans......................................               18
Commercial Properties.................................                7
Commission............................................                2
Cooperatives..........................................               18
Covered Trust.........................................               15
CPR...................................................               24
Credit Support........................................                1
Crime Control Act.....................................               55
Cut-off Date..........................................                9
Debt Service Coverage Ratio...........................               18
Definitive Certificates...............................               27
Department............................................               79
Determination Date....................................               27
Disqualified Organization.............................               68
Distribution Date.....................................                9
DTC...................................................                2
EDGAR.................................................                2
Equity Participations.................................               21
ERISA.................................................               10
Exchange Act..........................................                2
FDIC..................................................               34
FHA...................................................               20
HUD...................................................               20
Indirect Participants.................................               31
Installment Contracts.................................                7
Insurance Proceeds....................................               35
</TABLE>
 
                                       83
<PAGE>
<TABLE>
<CAPTION>
                                                       PAGE(S) ON WHICH TERM IS
TERM                                                   DEFINED IN THE PROSPECTUS
- ------------------------------------------------------ -------------------------
<S>                                                    <C>
L/C Bank..............................................               43
Liquidation Proceeds..................................               35
Loan-to-Value Ratio...................................               19
Lock-out Date.........................................               21

Lock-out Period.......................................               21
Master Servicer.......................................                7
MBS...................................................                1
MBS Agreement.........................................               21
MBS Issuer............................................               21
MBS Servicer..........................................               21
MBS Trustee...........................................               21
Mortgage Asset Seller.................................               18
Mortgage Assets.......................................                1
Mortgage Loans........................................                1
Mortgage Notes........................................               18
Mortgage Rate.........................................                7
Mortgaged Properties..................................                7
Mortgages.............................................               18
Multifamily Loans.....................................               18
Multifamily Properties................................                7
NCUA..................................................               55
Net Leases............................................               19
Net Operating Income..................................               18
Nomura................................................               81
Nomura Capital........................................               82
Nonrecoverable Advance................................               29
Non-SMMEA Certificates................................               80
Offered Certificates..................................                1
OID Regulations.......................................               59
Originator............................................               18
Participants..........................................               31
Pass-Through Entity...................................               68
Pass-Through Rate.....................................                8
Permitted Investments.................................               34
Plans.................................................               10
Policy Statement......................................               81
Prepayment Assumption.................................               60
Prepayment Premium....................................               21
Random Lot Certificates...............................               59
Rating Agency.........................................               10
Record Date...........................................               27
Regular Certificateholder.............................               59
Regular Certificates..................................               56
Regulations...........................................               79
Related Proceeds......................................               29
Relief Act............................................               55
</TABLE>
 
                                       84
<PAGE>
<TABLE>
<CAPTION>
                                                       PAGE(S) ON WHICH TERM IS
TERM                                                   DEFINED IN THE PROSPECTUS
- ------------------------------------------------------ -------------------------
<S>                                                    <C>
REMIC.................................................               10
REMIC Certificates....................................               56

REMIC Pool............................................               56
REMIC Regulations.....................................               56
REO Account...........................................               35
Residual Certificateholders...........................               64
Residual Certificates.................................               56
RICO..................................................               55
SAIF..................................................               34
Senior Certificates...................................                9
Service...............................................               58
Similar Law...........................................               79
SMMEA.................................................               80
SPA...................................................               24
Special Servicer......................................                7
Standard Certificateholder............................               73
Standard Certificates.................................               73
Stripped Certificateholder............................               76
Stripped Certificates.................................               73
Stripped Interest Certificates........................                9
Stripped Principal Certificates.......................                9
Subordinate Certificates..............................                9
Sub-Servicer..........................................               36
Sub-Servicing Agreement...............................               36
Title V...............................................               54
Title VIII............................................               55
Treasury..............................................               56
Trust Assets..........................................                2
Trust Fund............................................                1
Trustee...............................................                7
UCC...................................................               45
U.S. Person...........................................               69
Value.................................................               19
Voting Rights.........................................               17
Warranting Party......................................               33
Web...................................................                2
</TABLE>
 
                                       85
<PAGE>
                 CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
 
     [Attach Mortgage Loan Schedule that details relevant and available
information regarding the Mortgage Loans, such as the information included under
the following headings:
 
 1. Loan ID number
 2. Original balance
 3. Current balance
 4. Current rate
 5. Current payment
 6. Note date
 7. Original term
 8. Remaining term
 9. Maturity date
10. Amortization

11. Origination appraisal
12. Borrowing entity
13. Property name
14. Street
15. City
16. State
17. Zip Code
 
18. Rate index
19. First rate change
20. Next rate change
21. First payment change
22. Next payment change
23. Rate adjustment frequency
24. Payment adjustment frequency
25. Period payment cap
26. Life rate cap
27. Life rate floor
28. Negative amortization cap percent
29. Negative amortization cap amount
30. Annualized recent net operating income
31. Most recent net operating income year
32. Most recent debt service coverage ratio
33. LTV and current balances based upon the Appraised Value]
 
                                      A-1
<PAGE>
- ------------------------------------------------------
                          ------------------------------------------------------
- ------------------------------------------------------
                          ------------------------------------------------------
 
     NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
SECURITIES OFFERED HEREBY NOR AN OFFER OF SUCH SECURITIES TO ANY PERSON IN ANY
STATE OR OTHER JURISDICTION IN WHICH SUCH AN OFFER WOULD BE UNLAWFUL. THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS AT ANY TIME DOES NOT
IMPLY THAT INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE;
HOWEVER, IF ANY MATERIAL CHANGE OCCURS WHILE THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS ARE REQUIRED BY LAW TO BE DELIVERED, THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS WILL BE AMENDED OR SUPPLEMENTED ACCORDINGLY.
                            ------------------------
 
                               TABLE OF CONTENTS
 
   
<TABLE>
<CAPTION>
                           PROSPECTUS SUPPLEMENT                            PAGE
                                                                            ----
<S>                                                                         <C>

Summary of Prospectus Supplement...........................................  S-4
Risk Factors............................................................... S-11
Description of the Mortgage Pool........................................... S-13
Description of the Certificates............................................ S-23
Prepayment and Yield Considerations........................................ S-30
Pooling and Servicing Agreement............................................ S-33
Use of Proceeds............................................................ S-36
Certain Federal Income Tax Consequences.................................... S-36
ERISA Considerations....................................................... S-37
Legal Investment........................................................... S-38
Method of Distribution..................................................... S-39
Legal Matters.............................................................. S-39
Rating..................................................................... S-39
Index of Principal Definitions............................................. S-40
                                PROSPECTUS
Prospectus Supplement......................................................    2
Available Information......................................................    2
Incorporation of Certain Information by Reference..........................    2
Table of Contents..........................................................    3
Summary of Prospectus......................................................    7
Risk Factors...............................................................   11
Description of the Trust Funds.............................................   18
Use of Proceeds............................................................   22
Yield Considerations.......................................................   22
The Depositor..............................................................   25
Description of the Certificates............................................   25
Description of the Agreements..............................................   32
Description of Credit Support..............................................   42
Certain Legal Aspects of the Mortgage Loans................................   45
Federal Income Tax Consequences............................................   56
ERISA Considerations.......................................................   78
Legal Investment...........................................................   80
Method of Distribution.....................................................   81
Legal Matters..............................................................   82
Financial Information......................................................   82
Rating.....................................................................   82
Index of Principal Definitions.............................................   83
Certain Characteristics of the
  Mortgage Loans...........................................................  A-1
</TABLE>
    
 
                           $
                                 (APPROXIMATE)
                            NOMURA ASSET SECURITIES
                                  CORPORATION,
                                   DEPOSITOR
 
                                CLASS A MORTGAGE
                           PASS-THROUGH CERTIFICATES,
                                  SERIES 199 -
 
                       ----------------------------------
                             PROSPECTUS SUPPLEMENT

                       ----------------------------------
 
                               NOMURA SECURITIES
                              INTERNATIONAL, INC.
 
                                     , 199
 
                          ------------------------------------------------------
                          ------------------------------------------------------
<PAGE>
                                    PART II
                     INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*
 
     The following table sets forth the estimated expenses in connection with
the issuance and distribution of the Certificates, other than underwriting
discounts and commissions:
 
<TABLE>
<S>                                <C>
SEC Registration Fee............   $303.03
                                   -------
Blue Sky Fees and Expenses......      *
Printing and Engraving Fees.....      *
Legal Fees and Expenses.........      *
Accounting Fees and Expenses....      *
Trustee Fees and Expenses.......      *
Rating Agency Fees..............      *
Miscellaneous...................      *
                                   -------
     Total......................      *
                                   -------
                                   -------
</TABLE>
 
- ------------------
 
* To be provided by amendment.
 
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
     Under the form of Underwriting Agreement included in the Registration
Statement, the Underwriters are obligated under certain circumstances to
indemnify certain controlling persons of the Depositor against certain
liabilities, including liabilities under the Securities Act of 1933.
 
     The Depositor's By-laws and Certificate of Incorporation provide for
indemnification of directors and officers of the Depositor to the full extent
permitted by Delaware law and the power to purchase and maintain insurance on
behalf of directors and officers against any liability asserted against them and
incurred by them in such capacities. The Certificate of Incorporation further

provides that no director of the Depositor shall be personally liable to the
Depositor or to its stockholders for monetary damages for any breach of such
director's fiduciary duty as a director of the Depositor, provided that such
limitation on a director's liability shall not eliminate or limit the liability
of a director (i) for any breach of the director's duty of loyalty to the
Depositor or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of Delaware, or (iv) for any
transaction from which the director derived an improper personal benefit.
 
     Section 145 of the Delaware General Corporation Law provides, in substance,
that Delaware corporations shall have the power, under specified circumstances,
to indemnify their directors, officers, employees and agents in connection with
actions, suits or proceedings brought against them by a third party or in the
right of the corporation, by reason of the fact that they are or were such
directors, officers, employees or agents, against expenses incurred in any such
action, suit or proceeding.
 
     The Pooling and Servicing Agreements will provide that no director,
officer, employee or agent of the Depositor is liable to the Trust Fund or the
Certificateholders, except for such person's own willful misfeasance, bad faith
or gross negligence in the performance of duties or reckless disregard of
obligations and duties. The Pooling and Servicing Agreements will provide
further that, with the exceptions stated above, a director, officer, employee or
agent of the Depositor is entitled to be indemnified against any loss, liability
or expenses incurred in connection with legal actions relating to such Pooling
and Servicing Agreements and the related Certificates, other than such expenses
relating to particular Mortgage Loans.
 
                                      II-1
<PAGE>
ITEM 16. EXHIBITS
 
<TABLE>
<S>  <C>
 1.1 * Form of Underwriting Agreement.
 3.1 * Certificate of Incorporation of Depositor.
 3.2 * By-laws of Depositor.
 4.1 * Form of Pooling and Servicing Agreement.
 5.1
       Opinion of Cadwalader, Wickersham & Taft as to legality of the
       Certificates.
 8.1
       Opinion of Cadwalader, Wickersham & Taft as to certain tax matters
       (included in Exhibit 5.1).
23.1
       Consent of Cadwalader, Wickersham & Taft (included in Exhibit 5.1).
24.1 ** Powers of Attorney.
</TABLE>
 
- ------------------
 * Previously filed with Registration Statement No.33-65944 and incorporated by
   reference herein.
** Previously filed.

 
ITEM 17. UNDERTAKINGS
 
  A. Undertaking in respect of indemnification
 
     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the 'Act') may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described in Item 15 above,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted against the Registrant by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
 
  B. Undertaking pursuant to Rule 415
 
     The Registrant hereby undertakes:
 
     (1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
 
          (i) to include any prospectus required by Section 10(a)(3) of the
     Securities Act of 1933;
 
          (ii) to reflect in the Prospectus any facts or events arising after
     the effective date of the Registration Statement (or the most recent
     post-effective amendment thereof) which, individually or in the aggregate,
     represent a fundamental change in the information set forth in the
     Registration Statement; notwithstanding the foregoing, any increase or
     decrease in volume of securities offered (if the total dollar value of
     securities offered would not exceed that which was registered) and any
     deviation from the low or high end of the estimated maximum offering range
     may be reflected in the form of prospectus filed with the Commission
     pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
     price represent no more than a 20% change in the maximum aggregate offering
     price set forth in the 'Calculation of Registration Fee' table in the
     effective Registration Statement; and
 
          (iii) to include any material information with respect to the plan of
     distribution not previously disclosed in the Registration Statement or any
     material change of such information in the Registration Statement;
 
provided, however, that paragraphs (i) and (ii) do not apply if the information
required to be included in the post-effective amendment is contained in periodic
reports filed by the Issuer pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the

Registration Statement.
 
                                      II-2
<PAGE>
     (2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
 
     (3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
 
  C. Undertaking pursuant to Item 512(b)
 
     The Registrant hereby undertakes:
 
     That, for purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
 
                                      II-3
<PAGE>
                                   SIGNATURES
 
   
     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS PRE-EFFECTIVE
AMENDMENT NO. 3 TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK, NEW YORK ON THE
21ST DAY OF JANUARY 1998.
    
 
                                           NOMURA ASSET SECURITIES CORPORATION
                                          By: /s/ ETHAN PENNER
                                              --------------------------------
                                                  Ethan Penner
                                                  Principal Executive Officer 
                                                  and Director
 
   
     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
PRE-EFFECTIVE AMENDMENT NO. 3 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED
BELOW ON JANUARY 21, 1998 BY THE FOLLOWING PERSONS IN THEIR CAPACITIES AS
DIRECTORS AND OFFICERS OF NOMURA ASSET SECURITIES CORPORATION (THE CAPACITIES
FOR EACH SUCH PERSON BEING INDICATED BELOW).
    

 
   
<TABLE>
<CAPTION>
        SIGNATURE                          TITLE
- -------------------------  -------------------------------------
 
<S>                        <C>
    /s/ ETHAN PENNER       Principal Executive Officer and
- --------------------
      Ethan Penner         Director
 
            *              Chief Financial Officer and Treasurer
- --------------------
     Robert Rottmann       (Principal Accounting Officer)
 
            *              Director
- --------------------
     William Wraith
 
            *              Director
- --------------------
      Richard Ader
 
                           Director
- ---------------------
    Atsushi Yoshikawa
 
            *              Chairman and Director
- ----------------------
   Max C. Chapman, Jr.
 
            *              Director
- ----------------------
    Mark W. McGauley
 
  *By: /s/ ETHAN PENNER
       -------------------
   Name:  Ethan Penner
         Attorney-in-Fact
</TABLE>
    
 
                                      II-4
<PAGE>
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
                                                                                                      LOCATION OF
                                                                                                        EXHIBIT
EXHIBIT                                                                                              IN SEQUENTIAL
NUMBER   DESCRIPTION OF DOCUMENT                                                                   NUMBERING SYSTEM
- ------   ---------------------------------------------------------------------------------------   -----------------
<S>      <C>   
  1.1*    --   Form of Underwriting Agreement.
  3.1*    --   Certificate of Incorporation of Depositor.
  3.2*    --   By-laws of Depositor.
  4.1*    --   Form of Pooling and Servicing Agreement.
  5.1     --   Opinion of Cadwalader, Wickersham & Taft as to legality of the Certificates.
  8.1     --   Opinion of Cadwalader, Wickersham & Taft as to certain tax matters (included in
               Exhibit 5.1).

 23.1     --   Consent of Cadwalader, Wickersham & Taft (included in Exhibit 5.1).
 24.1**   --   Powers of Attorney.
</TABLE>
 
- ------------------
  * Previously filed with Registration Statement No. 33-65944 and incorporated
by reference herein.
 ** Previously filed.


<PAGE>
 
                 [LETTERHEAD OF CADWALADER, WICKERSHAM & TAFT]
 
                                                                January 21, 1998
 
Nomura Asset Securities Corporation
Two World Financial Center
Building B, 21st Floor
New York, New York 10281-1198
 
                    Re:  Mortgage Pass-Through Certificates
 
Ladies and Gentlemen:
 
     We have acted as special counsel to Nomura Asset Securities Corporation
('NASC') in connection with the Registration Statement on Form S-3 (No.
333-22133) (the 'Registration Statement') filed with the Securities and Exchange
Commission (the 'Commission') on February 20, 1997, as amended by Pre-Effective
Amendment No. 1, being filed with the Commission on September 5, 1997, and by
Pre-Effective Amendment No. 2, being filed with the Commission on even date
herewith and to which this opinion is an exhibit, pursuant to the Securities Act
of 1933, as amended (the 'Act'). The Registration Statement covers mortgage
pass-through certificates ('Certificates') to be sold by NASC in one or more
series (each, a 'Series'). Each Series of Certificates will be issued under a
separate pooling and servicing agreement (each, a 'Pooling and Servicing
Agreement') among NASC, a master servicer (a 'Servicer') and a trustee (a
'Trustee') to be identified in the Prospectus Supplement for such Series. A form
of Pooling and Servicing Agreement was previously filed as an exhibit to
registration statement No. 33-65944 and incorporated by reference as an exhibit
to the Registration Statement. Capitalized terms used and not otherwise defined
herein have the respective meanings ascribed to such terms in the Registration
Statement.
 
     In rendering the opinions set forth below, we have examined and relied upon
the following: (1) the Registration Statement, the Prospectus and the form of
Prospectus Supplement constituting a part thereof, each substantially in the
form filed or being filed with the Commission; (2) the form of the Pooling and
Servicing Agreement previously filed as an exhibit to registration statement No.
33-65944, and incorporated by reference as an exhibit to the Registration
Statement; and (3) such other documents, materials and authorities as we have
deemed necessary in order to enable us to render our opinion set forth below.
 
     We express no opinion with respect to any Series of Certificates for which
we do not act as counsel to NASC.
 
     Based on the foregoing, we are of the opinion that:
 
     1. When a Pooling and Servicing Agreement for a Series of Certificates has
        been duly and validly authorized, executed and delivered by NASC, a
        Servicer and a Trustee, such Pooling and Servicing Agreement will
        constitute a valid and legally binding agreement to NASC, enforceable
        against NASC in accordance with its terms, subject to applicable
        bankruptcy, reorganization, insolvency, moratorium and other laws
        affecting the enforcement of rights of creditors generally and to
        general principles of equity and the discretion of the court (regardless
        of whether enforceability is considered in a proceeding in equity or at
        law).
 
     2. When a Pooling and Servicing Agreement for a Series of Certificates has
        been duly and validly authorized, executed and delivered by NASC, a
        Servicer and a Trustee, and the Certificates of such Series have been
        duly executed, authenticated, delivered and sold as contemplated in the
        Registration Statement, such Certificates will be legally and validly
        issued, fully paid and nonassessable, and the holders of such
        Certificates will be entitled to the benefits of such Pooling and
        Servicing Agreement.
 
     As your special counsel, we have considered certain federal income tax
aspects of the proposed issuance of Certificates of each Series. In particular,
we have considered the material federal income tax consequences for holders of
Certificates and have reviewed the description of the material federal income
tax consequences for holders of Certificates that appears under the heading
'Federal Income Tax Consequences' in the Prospectus and under the heading
'Certain Federal Income Tax Consequences' in the form of Prospectus Supplement.
Such descriptions do not purport to discuss all possible federal income tax
ramifications of the proposed issuance of

<PAGE>
   
the Certificates, but, with respect to those federal income tax consequences
that are discussed, in our opinion, the description is accurate in all material
respects. We hereby confirm that the matters discussed under the heading
'Federal Income Tax Consequences' in the Prospectus represent the opinion of
Cadwalader, Wickersham & Taft as to the matters discussed therein.
    
 
     The opinion expressed in the preceding paragraph is based on the facts and
circumstances set forth in the Prospectus and the form of Prospectus Supplement
and in the other documents reviewed by us. Such opinion could change with
respect to a particular Series of Certificates as a result of changes in facts
and circumstances, changes in the terms of the documents reviewed by us, or
changes in the law subsequent to the date hereof. As the Registration Statement
contemplates Series of Certificates with numerous different characteristics, the
particular characteristics of each Series of Certificates must be considered in
determining the applicability of such opinion to a particular Series of
Certificates. Furthermore, we express no opinion with respect to any Series of
Certificates for which we do not act as counsel to NASC.
 
     We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to the reference to this firm under the headings
'Legal Matters' and 'Federal Income Tax Consequences' in the Prospectus forming
a part of the Registration Statement and under the headings 'Legal Matters' and
'Certain Federal Income Tax Consequences' in the form of Prospectus Supplement
forming a part of the Registration Statement. This consent is not to be
construed as an admission that we are a person whose consent is required to be
filed with the Registration Statement under the provisions of the Act.
 
                                          Very truly yours,




                                          
                                          /s/ CADWALADER, WICKERSHAM & TAFT


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