<PAGE>
Rule 424 (b)(5)
Registration No. 33-50527
PROSPECTUS SUPPLEMENT
- ---------------------
(TO PROSPECTUS DATED MAY 3, 1994)
$197,004,761 (APPROXIMATE)
GREEN TREE FINANCIAL CORPORATION, SELLER AND SERVICER
MANUFACTURED HOUSING CONTRACT
SENIOR/SUBORDINATE PASS-THROUGH CERTIFICATES,
SERIES 1994-3
<TABLE>
<S> <C>
$59,000,000 (APPROXIMATE) 6.60% CLASS A-1 $27,000,000 (APPROXIMATE) 8.05% CLASS A-4
$31,000,000 (APPROXIMATE) 7.45% CLASS A-2 $38,334,000 (APPROXIMATE) 8.40% CLASS A-5
$20,000,000 (APPROXIMATE) 7.80% CLASS A-3 $ 8,865,000 (APPROXIMATE) 8.30% CLASS B-1
$12,805,761 (APPROXIMATE) 8.65% CLASS B-2
</TABLE>
(PRINCIPAL AND INTEREST PAYABLE ON THE 15TH DAY OF EACH MONTH BEGINNING JULY,
1994)
-----------------
The Manufactured Housing Contract Senior/Subordinate Pass-Through
Certificates, Series 1994-3 (the "Certificates") will represent interests in a
trust (the "Trust") consisting of a pool (the "Contract Pool") of actuarial
manufactured housing installment sale contracts and installment loan
agreements (collectively, the "Contracts") and certain related property
conveyed by Green Tree Financial Corporation (in such capacity referred to
herein as the "Company"). The Company will also act as servicer of the
Contracts (in such capacity referred to herein as the "Servicer"). The
Contracts were originated or purchased by the Company in the ordinary course
of its business. The term "Approximate," with respect to the aggregate
principal amount of the Certificates, means subject to a permitted variance of
plus or minus 5%. Terms used and not otherwise defined herein shall have the
respective meanings ascribed to such terms in the Prospectus dated May 3,
1994, attached hereto (the "Prospectus").
The Certificates will consist of five classes of Senior Certificates (the
Class A-1 Certificates, the Class A-2 Certificates, the Class A-3
Certificates, the Class A-4 Certificates and the Class A-5 Certificates
(collectively, the "Class A Certificates"), and three classes of Subordinated
Certificates (the Class B-1 Certificates, the Class B-2 Certificates and the
Class C Certificates) (the Class B-1 Certificates and the Class B-2
Certificates are collectively referred to herein as the "Class B
Certificates"). Only the Class A Certificates, Class B-1 Certificates and
Class B-2 Certificates are being offered hereby (together, the "Offered
Certificates"). The Class A Certificates will evidence in the aggregate an
initial 89% (approximate) undivided interest in the Trust. The Class B-1
Certificates will evidence an initial 4.5% (approximate) undivided interest in
the Trust, the Class B-2 Certificates will evidence an initial 6.5%
(approximate) undivided interest in the Trust, and the Class C Certificates
will evidence an interest in a portion of the interest payments on the
Contracts. The Trust will be created in 1994, pursuant to a Pooling and
Servicing Agreement between the Company, as Seller and Servicer of the
Contracts, and First Bank National Association, as trustee (the "Trustee").
The Trust property will include all rights to receive payments due on each
Contract on or after June 1, 1994 (the "Cut-off Date"), security interests in
the manufactured homes securing the Contracts, all rights under certain hazard
insurance policies with respect to the manufactured homes and rights to
amounts in the Certificate Account.
Principal and interest are payable on the 15th day of each month (or, if the
15th day is not a business day, the next business day thereafter) (a
"Remittance Date") beginning in July 1994. On each Remittance Date, holders of
Class A Certificates, Class B-1 Certificates and Class B-2 Certificates will
be entitled to receive, from and to the extent of funds available in the
Certificate Account, the Class A Distribution Amount, the Class B-1
Distribution Amount or the Class B-2 Distribution Amount, as appropriate,
calculated as set forth herein. The rights of the holders of the Class B-2
Certificates and Class C Certificates to receive distributions with respect to
the Contracts will be subordinated to the rights of the Class B-1
Certificates, and the rights of the holders of the Class B Certificates and
the Class C Certificates to receive distributions with respect to the
Contracts will be subordinated to the rights of the Class A Certificates, all
as described herein.
The Class B-2 Certificateholders will have the benefit of a limited
guarantee (the "Limited Guarantee") of the Company to protect against losses
that would otherwise be absorbed by the Class B-2 Certificateholders. To the
extent that funds in the Certificate Account are insufficient to distribute to
the holders of the Class B-2 Certificates the Class B-2 Formula Distribution
Amount (as described herein), the Company will be obligated to pay the
Guarantee Payment (as defined herein). See "Description of the Certificates--
Limited Guarantee of the Company" herein.
An election will be made to treat the Trust as a real estate mortgage
investment conduit ("REMIC") for federal income tax purposes. As described
more fully herein, the Offered Certificates will constitute "regular
interests" in the REMIC and the Class C Certificates will constitute "residual
interests" in the REMIC. See "Certain Federal Income Tax Consequences" in the
Prospectus.
The obligations of the Servicer with respect to the Certificates are limited
to its contractual servicing obligations. The Company, as Seller of the
Contracts, however, will make certain representations and warranties relating
to the Contracts. In the event of an uncured breach of any representation or
warranty that materially adversely affects the Trust's interest in a Contract,
the Company will be obligated to repurchase such Contract or substitute
another contract therefor.
The interests of the owners of the Offered Certificates (the "Certificate
Owners") will be represented by book-entries on the records of The Depository
Trust Company and participating members thereof. See "Description of the
Certificates--Registration of the Offered Certificates" herein.
Merrill Lynch, Pierce, Fenner & Smith Incorporated, CS First Boston
Corporation and Lehman Brothers Inc. (the "Underwriters") intend to make a
secondary market in the Offered Certificates, but have no obligation to do so.
There can be no assurance that a secondary market for the Offered Certificates
will develop, or if it does develop, that it will continue.
The Offered Certificates will not be insured or guaranteed by any
governmental agency or instrumentality, the Underwriters or any of their
affiliates or the Company, and will be payable only from amounts held in the
Trust. See "Special Considerations" herein and in the Prospectus.
-----------------
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.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO PUBLIC(1) DISCOUNT COMPANY(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Class A-1 Certificate...... 99.9375% .4% 99.5375%
- --------------------------------------------------------------------------------
Per Class A-2 Certificate...... 99.890625% .6% 99.290625%
- --------------------------------------------------------------------------------
Per Class A-3 Certificate...... 99.796875% .675% 99.121875%
- --------------------------------------------------------------------------------
Per Class A-4 Certificate...... 99.765625% .775% 98.990625%
- --------------------------------------------------------------------------------
Per Class A-5 Certificate...... 99.71875% .875% 98.84375%
- --------------------------------------------------------------------------------
Per Class B-1 Certificate...... 99.78125% .875% 98.90625%
- --------------------------------------------------------------------------------
Per Class B-2 Certificate...... 99.8125% 1.0% 98.8125%
- --------------------------------------------------------------------------------
Total.......................... $196,678,856.14 $1,307,298.86 $195,371,557.28
- --------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(1)Plus accrued interest, if any, at the applicable rate from May 23, 1994.
(2)Before deducting expenses, estimated to be $300,000.
-----------------
The Offered Certificates are offered subject to prior sale, when, as and if
issued by the Trust and accepted by the Underwriters and subject to their
right to reject orders in whole or in part. It is expected that delivery of
the Offered Certificates will be made in book-entry form only through the Same
Day Funds Settlement system of The Depository Trust Company on or about May
23, 1994.
-----------------
MERRILL LYNCH & CO.
CS FIRST BOSTON
LEHMAN BROTHERS
-----------------
The date of this Prospectus Supplement is May 16, 1994
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE CERTIFICATES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
This Prospectus Supplement does not contain complete information about the
offering of the Offered Certificates. Additional information is contained in
the Prospectus and purchasers are urged to read both this Prospectus Supplement
and the Prospectus in full. Sales of the Offered Certificates may not be
consummated unless the purchaser has received both this Prospectus Supplement
and the Prospectus. To the extent that any statements in this Prospectus
Supplement conflict with statements contained in the Prospectus, the statements
in this Prospectus Supplement shall control.
Until August 14, 1994, all dealers effecting transactions in the Offered
Certificates, whether or not participating in this distribution, may be
required to deliver a Prospectus Supplement and Prospectus. This is in addition
to the obligation of dealers to deliver a Prospectus Supplement and Prospectus
when acting as underwriters and with respect to their unsold allotments or
subscriptions.
----------------
S-2
<PAGE>
SUMMARY OF TERMS OF THE OFFERED CERTIFICATES
This summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and in the
accompanying Prospectus. Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings assigned them elsewhere in
this Prospectus Supplement and in the Prospectus.
Securities Offered........... The Class A-1 Certificates, Class A-2 Certifi-
cates, Class A-3 Certificates, Class A-4 Cer-
tificates and Class A-5 Certificates (collec-
tively, the "Class A Certificates"), the Class
B-1 Certificates (the "Class B-1 Certifi-
cates"), and the Class B-2 Certificates (the
"Class B-2 Certificates") (the Class A, Class
B-1 and Class B-2 Certificates are collectively
referred to herein as the "Offered Certifi-
cates") of the Manufactured Housing Contract
Senior/Subordinate Pass-Through Certificates,
Series 1994-3 (the "Certificates"). The Certif-
icates also include the Class C Certificates,
which are not being offered hereby. The Class
B-1 Certificates and the Class B-2 Certificates
are collectively referred to herein as the
"Class B Certificates."
Seller....................... Green Tree Financial Corporation (in such capac-
ity referred to herein as the "Company").
Servicer..................... Green Tree Financial Corporation (in such capac-
ity referred to herein as the "Servicer").
Trustee...................... First Bank National Association, Minneapolis,
Minnesota (referred to herein as the "Trust-
ee").
Cut-off Date Pool Principal
Balance..................... $197,004,761 (Approximate. Subject to permitted
variance of plus or minus 5%).
Original Class A Principal
Balance..................... $175,334,000 (Approximate. Subject to a permit-
ted variance of plus or minus 5%).
Original Class A-1
Principal Balance.......... $59,000,000 (Approximate. Subject to permitted
variance of plus or minus 5%).
Original Class A-2
Principal Balance.......... $31,000,000 (Approximate. Subject to permitted
variance of plus or minus 5%).
Original Class A-3
Principal Balance.......... $20,000,000 (Approximate. Subject to permitted
variance of plus or minus 5%).
Original Class A-4
Principal Balance.......... $27,000,000 (Approximate. Subject to permitted
variance of plus or minus 5%).
Original Class A-5
Principal Balance.......... $38,334,000 (Approximate. Subject to permitted
variance of plus or minus 5%).
Original Class B Principal
Balance..................... $21,670,761 (Approximate. Subject to permitted
variance of plus or minus 5%).
Original Class B-1
Principal Balance.......... $8,865,000 (Approximate. Subject to permitted
variance of plus or minus 5%).
S-3
<PAGE>
Original Class B-2
Principal Balance.......... $12,805,761 (Approximate. Subject to permitted
variance of plus or minus 5%).
Class A-1 Remittance Rate.... 6.60% per annum, computed on the basis of a 360-
day year of twelve 30-day months.
Class A-2 Remittance Rate.... 7.45% per annum, computed on the basis of a 360-
day year of twelve 30-day months.
Class A-3 Remittance Rate.... 7.80% per annum, computed on the basis of a 360-
day year of twelve 30-day months.
Class A-4 Remittance Rate.... 8.05% per annum, computed on the basis of a 360-
day year of twelve 30-day months.
Class A-5 Remittance Rate.... 8.40% per annum, subject to a maximum rate equal
to the weighted average of the Contract Rates
on each Contract in the Contract Pool, computed
on the basis of a 360-day year of twelve 30-day
months.
Class B-1 Remittance Rate.... 8.30% per annum, subject to a maximum rate equal
to the weighted average of the Contract Rates
on each Contract in the Contract Pool, computed
on the basis of a 360-day year of twelve 30-day
months.
Class B-2 Remittance Rate.... 8.65% per annum, subject to a maximum rate equal
to the weighted average of the Contract Rates
on each Contract in the Contract Pool, computed
on the basis of a 360-day year of twelve 30-day
months.
Remittance Date.............. The 15th day of each month (or if such 15th day
is not a business day, the next succeeding
business day), commencing on July 15, 1994.
Record Date.................. The business day immediately preceding the re-
lated Remittance Date.
Cut-off Date................. June 1, 1994.
Agreement.................... The Pooling and Servicing Agreement, dated as of
June 1, 1994 (the "Agreement"), between the
Company, as Seller and Servicer, and the Trust-
ee.
Description of Certificates.. The Class A-1 Certificates, Class A-2 Certifi-
cates, Class A-3 Certificates, Class A-4 Cer-
tificates and Class A-5 Certificates are Senior
Certificates and the Class B-1 Certificates,
Class B-2 Certificates and Class C Certificates
are Subordinated Certificates, all as described
herein. The Class C Certificates are not being
offered hereby. The undivided percentage inter-
est of any Class A Certificate or Class B Cer-
tificate in the distributions to the holder of
such Certificate (the "Percentage Interest")
will be equal to the percentage obtained from
dividing the denomination specified on such
Certificate by the Original Class A-1 Principal
Balance, the Original Class A-2 Principal Bal-
ance, the Original Class A-3 Principal Balance,
the Original Class A-4 Principal Balance, the
Original Class A-5 Principal Balance, the Orig-
inal Class B-1 Principal Balance or the Origi-
nal Class B-2 Principal Balance, as appropri-
ate. The Offered Certificates will be offered
in registered form, in denominations of $1,000
and integral multiples of $1,000 in excess
S-4
<PAGE>
thereof, except for one Class B-2 Certificate
with a denomination representing the remainder
of the Original Class B-2 Principal Balance.
Distributions................ On each Remittance Date, distributions on the
Offered Certificates will be made first to the
holders of the Class A Certificates and then to
the holders of the Class B Certificates, in the
manner described below.
Distributions of interest and principal to the
holders of a Class of Class A Certificates will
be made in an amount equal to the sum of (i)
their respective Percentage Interests of the
amount of interest calculated as described be-
low under "A. Class A Interest" and (ii) their
respective Percentage Interests of the Class A
Percentage of the Formula Principal Distribu-
tion Amount (each as defined below) for the re-
lated Remittance Date, in the order of priority
described below under "B. Class A Principal."
Distributions of interest and principal to the
Class B-1 Certificateholders will be made in an
amount equal to their respective Percentage In-
terests multiplied by the Class B-1 Distribu-
tion Amount (as described below). Distributions
of interest and, to the extent specified below,
principal to the Class B-2 Certificateholders
will be made in an amount equal to their re-
spective Percentage Interests of the Class B-2
Distribution Amount (as described below). The
rights of the Class B and Class C
Certificateholders to receive distributions are
subordinated to the rights of the Class A
Certificateholders, the rights of the Class B-2
and Class C Certificateholders to receive dis-
tributions are subordinated to the rights of
the Class B-1 Certificateholders, and the
rights of the Class C Certificateholders to re-
ceive distributions are subordinated to the
rights of the Class B-2 Certificateholders.
Distributions will be made on each Remittance
Date commencing in July 1994 to holders of rec-
ord on the preceding Record Date, except that
the final distribution in respect of the Of-
fered Certificates will only be made upon pre-
sentation and surrender of the Offered Certifi-
cates at the office or agency appointed by the
Trustee for that purpose in Minneapolis or St.
Paul, Minnesota.
Distributions on a Class of Class A Certificates
will be applied first to the payment of inter-
est and then to the payment of principal on
such Class. Distributions in respect of princi-
pal of the Class A Certificates will be allo-
cated to the Class then entitled to such dis-
tributions and will be applied in the amounts
and the order of priority set forth below. When
the Principal Balance of a Class of Class A
Certificates is reduced to zero, no further
distributions will be made to the holders of
such Class.
The "Class B-1 Distribution Amount" for any Re-
mittance Date is intended to be equal to the
"Class B-1 Formula Distribution Amount," which
equals the sum of (i) the amount of interest
S-5
<PAGE>
calculated as described under "C. Class B-1 In-
terest" below and (ii) an amount of principal
calculated as described under "D. Class B-1
Principal" below. The "Class B-1 Distribution
Amount" for any Remittance Date will equal the
lesser of (i) the Class B-1 Formula Distribu-
tion Amount for such Remittance Date or (ii)
the Amount Available in the Certificate Account
available for distribution to the Class B-1
Certificateholders (after giving effect to the
distribution made to Class A
Certificateholders) on such Remittance Date
(the "Class B-1 Remaining Amount Available").
The "Class B-2 Distribution Amount" for any Re-
mittance Date is intended to be equal to the
"Class B-2 Formula Distribution Amount," which
equals the sum of (i) the amount of interest
calculated as described below under "E. Class
B-2 Interest," and (ii) the amount of principal
calculated as described below under "F. Class
B-2 Principal." The "Class B-2 Distribution
Amount" for any Remittance Date will equal the
lesser of (i) the Class B-2 Formula Distribu-
tion Amount for such Remittance Date or (ii)
the Amount Available in the Certificate Account
available for distribution to the Class B-2
Certificateholders (after giving effect to the
distribution made to Class A and Class B-1
Certificateholders) on such Remittance Date
(the "Class B-2 Remaining Amount Available")
(described below). Distributions on the Class
B-2 Certificates will be applied first to the
payment of interest, then to the payment of
principal.
See "Description of the Certificates" for a de-
tailed description of the amounts on deposit in
the Certificate Account that will constitute
the Amount Available on each Remittance Date.
The Amount Available will include amounts oth-
erwise payable to holders of the Class B Cer-
tificates and the Class C Certificates. The
Class B-1 Remaining Amount Available will in-
clude amounts otherwise payable to the Class B-
2 Certificateholders, to the Company as the
Monthly Servicing Fee and to the Class C
Certificateholders. The Class B-2 Remaining
Amount Available will include amounts otherwise
payable to Class C Certificateholders.
The "Principal Balance" of a Class of Certifi-
cates as of any Remittance Date is the Original
Principal Balance of such Class of Certificates
less all amounts previously distributed to such
Class on account of principal. The Class A
Principal Balance as of any Remittance Date is
the sum of the Class A-1 Principal Balance,
Class A-2 Principal Balance, Class A-3 Princi-
pal Balance, Class A-4 Principal Balance and
the Class A-5 Principal Balance. The Class B
Principal Balance as of any Remittance Date is
the sum of the Class B-1 Principal Balance and
the Class B-2 Principal Balance.
A. Class A Interest.......... Interest on the outstanding Principal Balance of
each Class of Class A Certificates will accrue
from May 23, 1994, or from
S-6
<PAGE>
the most recent Remittance Date on which inter-
est has been paid to but excluding the follow-
ing Remittance Date.
Interest will be paid concurrently on each Class
of Class A Certificates on each Remittance
Date, to the extent of the Amount Available for
such date in the Certificate Account, at the
related Remittance Rate on the then outstanding
Class A-1 Principal Balance, Class A-2 Princi-
pal Balance, Class A-3 Principal Balance, Class
A-4 Principal Balance and Class A-5 Principal
Balance.
In the event that, on a particular Remittance
Date, the Amount Available in the Certificate
Account is not sufficient to make a full dis-
tribution of interest to the holders of out-
standing Class A Certificates, the amount of
the shortfall will be carried forward and added
to the amount such holders will be entitled to
receive on the next Remittance Date. Any such
amount so carried forward will bear interest at
the related Remittance Rate, to the extent le-
gally permissible. See "Description of the Cer-
tificates."
B. Class A Principal......... Holders of a Class of Class A Certificates will
be entitled to receive on each Remittance Date
as payments of principal, in the order of pri-
ority set forth below and to the extent of the
Amount Available in the Certificate Account af-
ter payment of all interest payable on each
Class of Class A Certificates, the Class A Per-
centage of the sum (such sum being hereinafter
referred to as the "Formula Principal Distribu-
tion Amount") of (i) all scheduled payments of
principal due on each outstanding Contract dur-
ing the month preceding the month in which the
Remittance Date occurs, (ii) the Scheduled
Principal Balance (as defined below) of each
Contract which, during the month preceding the
month of such Remittance Date, was purchased by
the Company pursuant to the Agreement on ac-
count of certain breaches of its representa-
tions and warranties, (iii) all Partial Princi-
pal Prepayments applied and all Principal Pre-
payments in Full received during such preceding
month and (iv) the Scheduled Principal Balance
of each Contract that became a Liquidated Con-
tract (as defined below) during such preceding
month.
The Class A Percentage for any Remittance Date
prior to the Class B Cross-over Date (described
below), and for any Remittance Date on or after
the Class B Cross-over Date on which each Class
B Principal Distribution Test (described below)
has not been satisfied, will equal 100%. On
each Remittance Date on or after the Class B
Cross-over Date, if each Class B Principal Dis-
tribution Test has been satisfied on such Re-
mittance Date, the Class A Percentage will
equal a fraction, expressed as a percentage,
the numerator of which is the Class A Principal
Balance for such Remittance Date and the denom-
inator of which is the Pool Scheduled Principal
Balance for the immediately preceding Remit-
tance Date. The Class A Princi-
S-7
<PAGE>
pal Balance as of any Remittance Date is the
sum of the Class A-1 Principal Balance, the
Class A-2 Principal Balance, the Class A-3
Principal Balance, the Class A-4 Principal Bal-
ance and the Class A-5 Principal Balance.
The Scheduled Principal Balance of a Contract
for any month is its principal balance as spec-
ified in its amortization schedule, after giv-
ing effect to any previous Partial Principal
Prepayments and to the scheduled payment due on
its scheduled payment date (the "Due Date") in
that month, but without giving effect to any
adjustments due to bankruptcy or similar pro-
ceedings. The Pool Scheduled Principal Balance
is the aggregate of the Scheduled Principal
Balances of Contracts outstanding at the end of
a month. A Liquidated Contract is a defaulted
Contract as to which all amounts that the
Servicer expects to recover through the date of
disposition of the manufactured home securing
such Contract (the "Manufactured Home") have
been received.
The Class A Percentage of the Formula Principal
Distribution Amount will be distributed, to the
extent of the Amount Available after payment of
interest on each Class of Class A Certificates,
first, to the Class A-1 Certificateholders un-
til the Class A-1 Principal Balance has been
reduced to zero, then to the Class A-2
Certificateholders until the Class A-2 Princi-
pal Balance has been reduced to zero, then to
the Class A-3 Certificateholders until the
Class A-3 Principal Balance has been reduced to
zero, then to the Class A-4 Certificateholders
until the Class A-4 Principal Balance has been
reduced to zero and then to the Class A-5
Certificateholders until the Class A-5 Princi-
pal Balance has been reduced to zero.
C. Class B-1 Interest........ Interest on the outstanding Class B-1 Principal
Balance will accrue from May 23, 1994, or from
the most recent Remittance Date on which inter-
est has been paid to but excluding the follow-
ing Remittance Date.
To the extent of the Class B-1 Remaining Amount
Available, if any, for a Remittance Date after
payment of the Class A Distribution Amount for
such date, interest will be paid to the Class
B-1 Certificateholders on such Remittance Date
at the Class B-1 Remittance Rate on the then
outstanding Class B-1 Principal Balance. The
Class B-1 Principal Balance is the Original
Class B-1 Principal Balance less all amounts
previously distributed to the Class B-1
Certificateholders on account of principal.
In the event that, on a particular Remittance
Date, the Class B-1 Remaining Amount Available
is not sufficient to make a full distribution
of interest to the Class B-1
Certificateholders, the amount of the defi-
ciency will be carried forward as an amount
that the Class B-1 Certificateholders are enti-
tled to receive on the next Remittance Date.
Any amount so carried forward
S-8
<PAGE>
will, to the extent legally permissible, bear
interest at the Class B-1 Remittance Rate. See
"Description of the Certificates."
D. Class B-1 Principal....... Payments of principal on the Class B-1 Certifi-
cates will not commence until the Class B
Cross-over Date, and will be made on that Re-
mittance Date and each Remittance Date thereaf-
ter only if each Class B Principal Distribution
Test is satisfied on such Remittance Date (un-
less the Class A Principal Balance has been re-
duced to zero). The Class B Cross-over Date
will be the later of (A) the Remittance Date in
July 1999, and (B) the first Remittance Date on
which the Class B Principal Balance represents
22% or more of the Pool Scheduled Principal
Balance. The Class B Principal Distribution
Tests on each Remittance Date relate to losses
and delinquencies on the Contracts, and are de-
scribed under "Description of the Certifi-
cates--Class B Principal" herein.
On each Remittance Date on or after the Class B
Cross-over Date on which each Class B Principal
Distribution Test is satisfied, the Class B
Percentage of the Formula Principal Distribu-
tion Amount will be paid to the Class B-1
Certificateholders to the extent of the Class
B-1 Remaining Amount Available after payment of
interest on the Class B-1 Certificates.
The Class B Percentage for any Remittance Date
on or after the Class B Cross-over Date on
which each Class B Principal Distribution Test
has been satisfied will be equal to 100% minus
the Class A Percentage. The Class B Percentage
for each Remittance Date, if any, after the
Class A Principal Balance has been reduced to
zero will be equal to 100%.
E. Class B-2 Interest........ Interest on the outstanding Class B-2 Principal
Balance will accrue from May 23, 1994, or from
the most recent Remittance Date on which inter-
est has been paid to but excluding the follow-
ing Remittance Date.
To the extent of (i) the Class B-2 Remaining
Amount Available, if any, for a Remittance Date
after payment of the Class A Distribution
Amount and the Class B-1 Distribution Amount
for such date, and (ii) the Guarantee Payment,
if any, for such date, interest will be paid to
the Class B-2 Certificateholders on such Remit-
tance Date at the Class B-2 Remittance Rate on
the then outstanding Class B-2 Principal Bal-
ance. The Class B-2 Principal Balance is the
Original Class B-2 Principal Balance less all
amounts previously distributed to the Class B-2
Certificateholders on account of principal.
In the event that, on a particular Remittance
Date, the Class B-2 Remaining Amount Available
in the Certificate Account plus any amounts ac-
tually paid under the Limited Guarantee are not
sufficient to make a full distribution of in-
terest to the Class B-2 Certificateholders, the
amount of the deficiency will be carried for-
ward as an amount that the Class B-2
Certificateholders are entitled to receive on
the next Remit-
S-9
<PAGE>
tance Date. Any amount so carried forward will,
to the extent legally permissible, bear inter-
est at the Class B-2 Remittance Rate. See "De-
scription of the Certificates."
F. Class B-2 Principal....... Except for payments of the Class B-2 Principal
Liquidation Loss Amount (described below), pay-
ments of principal on the Class B-2 Certifi-
cates will not commence until the Remittance
Date on which the Class B-1 Principal Balance
has been reduced to zero (the "Sixth Cross-over
Date"), and will be made on that Remittance
Date and each Remittance Date thereafter only
if each Class B Principal Distribution Test is
satisfied on such Remittance Date (unless the
Class A Principal Balance has been reduced to
zero). See "Description of the Certificates--
Principal" herein.
On each Remittance Date on or after the Sixth
Cross-over Date on which each Class B Principal
Distribution Test is satisfied, the Class B
Percentage of the Formula Principal Distribu-
tion Amount will be distributed, to the extent
of the Class B-2 Remaining Amount Available, to
the Class B-2 Certificate-holders until the
Class B-2 Principal Balance has been reduced to
zero.
The Class B Percentage for any Remittance Date
on or after the Class B Cross-over Date on
which each Class B Principal Distribution Test
has been satisfied will be equal to 100% minus
the Class A Percentage. The Class B Percentage
for each Remittance Date, if any, after the
Class A Principal Balance has been reduced to
zero will be equal to 100%.
On each Remittance Date prior to the Sixth
Cross-over Date, the Class B-2
Certificateholders will be entitled to receive,
pursuant to the Limited Guarantee, any Class B-
2 Principal Liquidation Loss Amount for such
Remittance Date. The "Class B-2 Principal Liq-
uidation Loss Amount" for any Remittance Date
will equal the amount, if any, by which the sum
of the Class A Principal Balance, the Class B-1
Principal Balance and the Class B-2 Principal
Balance for such Remittance Date exceeds the
Pool Scheduled Principal Balance for such Re-
mittance Date (after giving effect to all dis-
tributions of principal on such Remittance
Date). The Class B-2 Principal Liquidation Loss
Amount represents future principal payments on
the Contracts that, because of the subordina-
tion of the Class B-2 Certificates and liquida-
tion losses on the Contracts, will not be paid
to the Class B-2 Certificateholders.
Subordination of Class B and
Class C Certificates........ The rights of holders of the Class B-1 Certifi-
cates, Class B-2 Certificates and Class C Cer-
tificates to receive distributions with respect
to the Contracts in the Trust will be subordi-
nated, to the extent described herein, to such
rights of the holders of the Class A Certifi-
cates. This subordination is intended to en-
hance the likelihood of regular receipt by the
holders of the
S-10
<PAGE>
Class A Certificates of the full amount of
their scheduled monthly payments of principal
and interest and to afford such holders protec-
tion against losses on Liquidated Contracts.
The protection afforded to the holders of Class
A Certificates by means of the subordination of
the Class B and Class C Certificates will be
accomplished by the preferential right of the
Class A Certificateholders to receive, prior to
any distribution being made on a Remittance
Date in respect of the Class B-1, Class B-2 and
Class C Certificates, the amounts of principal
and interest due them on each Remittance Date
out of the Amount Available on such date in the
Certificate Account and, if necessary, by the
right of such Class A Certificateholders to re-
ceive future distributions of Amounts Available
that would otherwise be payable to the holders
of the Class B-1, Class B-2 and Class C Certif-
icates.
In addition, the rights of the holders of the
Class B-2 and Class C Certificates to receive
distributions with respect to the Contracts in
the Trust will be subordinated, to the extent
described herein, to such rights of the holders
of the Class B-1 Certificates. This subordina-
tion is intended to enhance the likelihood of
regular receipt by the holders of the Class B-1
Certificates of the full amount of their sched-
uled monthly payments of principal and interest
and to afford such holders protection against
losses on Liquidated Contracts.
The protection afforded to the holders of Class
B-1 Certificates by means of the subordination
of the Class B-2 and Class C Certificates will
be accomplished by the preferential right of
the Class B-1 Certificateholders to receive,
prior to any distribution being made on a Re-
mittance Date in respect of the Class B-2 and
Class C Certificates, the amounts of principal
and interest due them on each Remittance Date
out of the Class B-1 Remaining Amount Available
on such date in the Certificate Account and, if
necessary, by the right of such Class B-1
Certificateholders to receive future distribu-
tions of Class B-1 Remaining Amounts Available
that would otherwise be payable to the holders
of the Class B-2 and Class C Certificates. If a
Class B-2 Principal Liquidation Loss Amount is
realized for any Remittance Date and the Com-
pany fails to pay such amount pursuant to its
Limited Guarantee, the Class B-2
Certificateholders may incur losses on their
investment in the Class B-2 Certificates to the
extent such losses are not made up from future
payments on the Contracts.
The rights of the holders of the Class C Certif-
icates to receive distributions with respect to
the Contracts on each Remittance Date will be
subordinated to the rights of the holders of
the Class A Certificates, Class B-1 Certifi-
cates and Class B-2 Certificates. See "Descrip-
tion of the Certificates--Subordination of
Class B Certificates and Class C Certificates."
S-11
<PAGE>
Guarantee Payments to Class
B-2 Certificateholders
under the Limited Guarantee
of the Company.............. In order to mitigate the effect of the subordi-
nation of the Class B-2 Certificates and liqui-
dation losses and delinquencies on the Con-
tracts, the Class B-2 Certificateholders are
entitled to receive on each Remittance Date the
amount equal to the Guarantee Payment, if any,
under the Limited Guarantee of the Company.
Prior to the Sixth Cross-over Date, and on any
Remittance Date on or after the Sixth Cross-
over Date on which any Class B Principal Dis-
tribution Test is not satisfied (unless the
Class A Principal Balance has been reduced to
zero), the Guarantee Payment will equal the
amount, if any, by which (a) the sum of (i) the
Class B-2 Formula Distribution Amount (which
will be equal to one month's interest on the
Class B-2 Principal Balance) for such Remit-
tance Date and (ii) the Class B-2 Principal
Liquidation Loss Amount, if any, exceeds (b)
the Class B-2 Distribution Amount for such Re-
mittance Date. On each Remittance Date on or
after the Sixth Cross-over Date on which each
Class B Principal Distribution Test is satis-
fied, the Guarantee Payment will equal the
amount, if any, by which the Class B-2 Formula
Distribution Amount (which will include both
interest and principal) exceeds the Class B-2
Remaining Amount Available for such Remittance
Date.
The Limited Guarantee will be an unsecured gen-
eral obligation of the Company and will not be
supported by any letter of credit or other en-
hancement arrangement.
Losses on Liquidated
Contracts................... As described above, the distribution of princi-
pal to the Class A and Class B-1
Certificateholders is intended to include the
Class A Percentage and the Class B Percentage,
respectively, of the Scheduled Principal Bal-
ance of each Contract that became a Liquidated
Contract during the month preceding the month
of such distribution. If the Net Liquidation
Proceeds from such Liquidated Contract are less
than the Scheduled Principal Balance of such
Liquidated Contract, the deficiency will, in
effect, be absorbed by the Class C
Certificateholders, then the Monthly Servicing
Fee (so long as Green Tree is the Servicer),
then the Class B-2 Certificateholders and then
the Class B-1 Certificateholders since a por-
tion of the Amount Available equal to such de-
ficiency and otherwise distributable to them
will be paid to the Class A Certificateholders.
If the Amount Available is not sufficient to
cover the entire amount distributable to the
Class A Certificateholders on a particular Re-
mittance Date, then the Class A Percentage on
future Remittance Dates will be increased and
the Class B Percentage on future Remittance
Dates will be reduced as a result of such defi-
ciency. If the Amount Available is sufficient
S-12
<PAGE>
to cover the entire amount distributable to the
Class A Certificateholders on a particular Re-
mittance Date but is not sufficient to cover
the entire amount distributable to the Class B-
1 Certificateholders, the amount of the defi-
ciency will be carried forward as an amount
that the Class B-1 Certificateholders are enti-
tled to receive on the next Remittance Date.
Any amount so carried forward will, to the ex-
tent legally permissible, bear interest at the
Class B-1 Remittance Rate.
But for the effect of the subordination of the
Class B-2 and Class C Certificates or the
Monthly Servicing Fee otherwise payable to the
Company in its capacity as Servicer, the Class
B-1 Certificateholders would absorb (i) all
losses on each Liquidated Contract in the
amount by which its Net Liquidation Proceeds
are less than its unpaid principal balance plus
accrued and unpaid interest thereon less the
related Monthly Servicing Fee and (ii) all de-
linquent payments on the Contracts. See "De-
scription of the Certificates--Subordination of
Class B Certificates and Class C Certificates"
and "Yield and Prepayment Considerations."
But for the payments under the Limited Guarantee
described above and the subordination of the
Class C Certificates and the Monthly Servicing
Fee otherwise payable to the Company, the Class
B-2 Certificateholders would absorb (i) all
losses on each Liquidated Contract in the
amount by which its Net Liquidation Proceeds
are less than its unpaid principal balance plus
accrued and unpaid interest thereon less the
related Monthly Servicing Fee and (ii) all de-
linquent payments on the Contracts. See "De-
scription of the Certificates--Subordination of
Class B Certificates and Class C Certificates"
and "Yield, Prepayment and Maturity Considera-
tions."
Capitalized Interest
Account..................... Because the amount distributable on the Certifi-
cates on July 15, 1994 will include interest
accrued from May 23, 1994, an account (the
"Capitalized Interest Account") will be estab-
lished on the Closing Date with a deposit of
$750,000. If collections on the Contracts are
insufficient to make a full distribution of
principal and interest on the Certificates
(other than the Class B-2 Certificates) on July
15, 1994, the Trustee will withdraw the amount
of any such shortfall from the Capitalized In-
terest Account and deposit such amount in the
Certificate Account. Any funds remaining on de-
posit in the Capitalized Interest Account after
the distribution to Certificateholders on July
15, 1994 will be released to a subsidiary of
the Company.
Optional Repurchase of the
Contracts by the Servicer
or the Company.............. At its option either the Servicer or the Company
may repurchase from the Trust all remaining
Contracts, and thereby effect early retirement
of the Offered Certificates, on any Remittance
Date when the Pool Scheduled Principal Balance
is less than 10% of the Cut-off Date Pool Prin-
cipal Balance. See "Description of the Certifi-
cates--Repurchase Option."
S-13
<PAGE>
The Contracts................ Fixed rate manufactured housing installment sale
contracts and installment loan agreements in-
cluding any and all rights to receive payments
due thereunder on and after the Cut-off Date
and either (i) security interests in the Manu-
factured Homes purchased with the proceeds of
such contracts or (ii) with respect to certain
of the Contracts ("Land-and-Home Contracts")
liens on the real estate to which the related
Manufactured Homes are deemed permanently af-
fixed. The Contracts are secured by Manufac-
tured Homes or real estate located in 47 states
and the District of Columbia and have been se-
lected by the Company from its portfolio of
manufactured housing contracts based on the
criteria specified in the Agreement. All but 2,
or .02% by Cut-off Date Pool Principal Balance,
of the Contracts are conventional Contracts
(i.e., not insured or guaranteed by any govern-
mental agency). The annual percentage rate of
interest on the Contracts ranges from 8.25% to
15.00% with a weighted average of approximately
10.67%. The Contracts had a weighted average
term to scheduled maturity, as of origination,
of 211 months, and a weighted average remaining
term to scheduled maturity, as of the Cut-off
Date, of 211 months. The final scheduled pay-
ment date on the Contract with the latest matu-
rity is in May 2019. See "The Contract Pool."
Security Interests and
Certain Other Aspects of
the Contracts; Repurchase
or Substitution
Obligations................. In connection with the transfer of the Contracts
to the Trust, the Company has assigned the se-
curity interests in the Manufactured Homes or
(with respect to the 312 Land-and-Home Con-
tracts) the liens on the underlying real prop-
erty, as appropriate, to the Trust. Under the
laws of most states Manufactured Homes that
have not been affixed to the real estate con-
stitute personal property, and perfection of a
security interest in the Manufactured Home is
obtained, depending on applicable state law,
either by noting the security interest on the
certificate of title for the Manufactured Home
or by filing a financing statement under the
Uniform Commercial Code. If the Manufactured
Home were relocated to another state without
reperfection of the security interest, or if
the Manufactured Home were to become attached
to its site and a determination were made that
the security interest was subject to real es-
tate title and recording laws, or as a result
of fraud or negligence, the Trust could lose
its prior perfected security interest in a Man-
ufactured Home. Subject to the effect of not
amending certificates of title as discussed un-
der "Special Considerations--Security Interests
and Certain Other Aspects of the Contracts" in
the Prospectus, the Servicer will take such
steps as are necessary to maintain perfection
of the security interest in each Manufactured
Home. Because of the expense and administrative
inconvenience involved, the Company has not re-
corded the assignment to the Trustee of the
mortgage or deed
S-14
<PAGE>
of trust securing each Land-and-Home Contract.
Consequently, in some states in the absence of
such recordation the assignment to the Trustee
of the mortgage or deed of trust se-curing a
Land-and-Home Contract may not be effective and
in the absence of such recordation the assign-
ment of the mortgage or deed of trust to the
Trustee may not be effective against creditors
of or purchasers from the Company or a trustee
in bankruptcy of the Company. Federal and state
consumer protection laws impose requirements
upon creditors in connection with extensions of
credit and collections on installment sale or
loan contracts, and certain of these laws make
an assignee of such a contract, such as the
Trust, liable to the obligor thereon for any
violation by the lender. The Company has agreed
to repurchase, or, at its option, to substitute
another contract for, any Contract as to which
it has failed to perfect a security interest in
the Manufactured Home securing such Contract,
or as to which a breach of federal or state
laws exists if such breach materially adversely
affects the Trust's interest in the Contract,
unless such failure or breach has been cured
within 90 days from notice of such breach. See
"Special Considerations--Security Interests and
Certain Other Aspects of the Contracts" in the
Prospectus.
Certain Federal Income Tax
Consequences................ For federal income tax purposes, the Trust will
be treated as a real estate mortgage investment
conduit ("REMIC"). The Class A Certificates and
the Class B Certificates will constitute "regu-
lar interests" in the REMIC and generally will
be treated as debt instruments of the Trust for
federal income tax purposes with payment terms
equivalent to the terms of such Certificates.
The Class C Certificates will constitute "re-
sidual interests" in the REMIC. The holders of
the Offered Certificates will be required to
include in income interest on such Certificates
(including any original issue discount) in
accor- dance with the accrual method of ac-
counting. See "Certain Federal Income Tax Con-
sequences" in the Prospectus.
ERISA Considerations......... Subject to the conditions described herein, the
Class A Certificates may be purchased by em-
ployee benefit plans that are subject to the
Employee Retirement Income Security Act of
1974, as amended ("ERISA"). No transfer of a
Class B Certificate will be permitted to be
made to any employee benefit plan subject to
ERISA or to the Internal Revenue Code of 1986,
as amended (the "Code"), unless the opinion of
counsel described under "ERISA Considerations"
is delivered to the Trustee. See "ERISA Consid-
erations" herein and in the Prospectus.
Legal Investment
Considerations.............. The Class A Certificates offered hereby will
constitute "mortgage related securities" under
the Secondary Mortgage Market Enhancement Act
of 1984 ("SMMEA") and, as such, will be "legal
investments" for certain types of institutional
investors to the extent provided in that Act.
S-15
<PAGE>
Because the Class B Certificates will not be
rated in one of its two highest rating catego-
ries by Moody's Investors Service, Inc.
("Moody's") or Fitch Investors Service, Inc.
("Fitch"), the Class B Certificates will not
constitute "mortgage related securities" for
purposes of SMMEA. Accordingly, many institu-
tions with legal authority to invest in more
highly rated securities based on first mortgage
loans may not be legally authorized to invest
in the Class B Certificates. See "Legal Invest-
ment Considerations" herein and in the Prospec-
tus. No representations are made as to any reg-
ulatory requirements or considerations (includ-
ing without limitation regulatory capital re-
quirements) applicable to the purchase of Class
B Certificates by banks, savings and loan asso-
ciations or other financial institutions, which
institutions should consult their own counsel
as to such matters.
Rating....................... It is a condition to the issuance of the Certif-
icates that each Class of Class A Certificates
be rated at least "Aa2" by Moody's and "AA" by
Fitch. It is a condition to the issuance of the
Class B-1 Certificates that they be rated at
least "Baa1" by Moody's and "A-" by Fitch. It
is a condition to the issuance of the Class B-2
Certificates that they be rated at least "Baa1"
by Moody's and "A-" by Fitch. The rating of
each Class of the Offered Certificates by
Moody's addresses the likelihood of the ulti-
mate payment of principal and interest on such
Class of the Offered Certificates. The rating
of the Certificates by Fitch addresses the
likelihood of the timely payment of interest
and ultimate payment of principal on the Of-
fered Certificates. 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 rating agency. The rating of
the Class B-2 Certificates is based in part on
an assessment of the Company's ability to make
payments under the Limited Guarantee. Any re-
duction in Moody's or Fitch's ratings of the
Company's debt securities may result in a simi-
lar reduction in the rating of the Class B-2
Certificates.
Registration of the Offered
Certificates................ Each Class of the Offered Certificates initially
will be represented by one or more certificates
registered in the name of Cede & Co. ("Cede")
as the nominee of The Depository Trust Company
("DTC"), and will only be available in the form
of book-entries on the records of DTC and par-
ticipating members thereof. Certificates repre-
senting the Offered Certificates will be issued
in definitive form only under the limited cir-
cumstances described herein. All references
herein to "holders" or "Certificateholders"
shall reflect the rights of Certificate Owners
as they may indirectly exercise such rights
through DTC and participating members thereof,
except as otherwise specified herein. See "De-
scription of the Certificates--Registration of
the Offered Certificates" herein and "Descrip-
tion of the Certificates--Global Certificates"
in the Prospectus.
S-16
<PAGE>
SPECIAL CONSIDERATIONS
Prospective Certificateholders should consider, in addition to the factors
described under "Special Considerations" in the Prospectus, the following
factors in connection with the purchase of the Class A or Class B Certificates,
as appropriate:
1. General. An investment in the Class A or Class B Certificates may be
affected by, among other things, a downturn in regional or local
economic conditions. These regional or local economic conditions are
often volatile and historically have affected the delinquency, loan loss
and repossession experience of pools of manufactured housing installment
sale contracts. See "The Trust Fund--The Contract Pools" in the
Prospectus. Moreover, regardless of its location, manufactured housing
generally depreciates in value. Consequently, the market value of
certain Manufactured Homes could be or become lower than the outstanding
principal balances of the Contracts that they secure. Sufficiently high
delinquencies and liquidation losses on the Contracts will have the
effect of reducing, and could eliminate, with respect to the Class A
Certificates, the protection against loss afforded by the subordination
of the Class C and the Class B Certificates. If such protection is
eliminated, the Class A Certificateholders will bear the risk of losses
on the Contracts. See "Description of the Certificates--Subordination of
Class B Certificates and Class C Certificates." With respect to the
Class B-1 Certificates, sufficiently high delinquencies and liquidation
losses on the Contracts will have the effect of reducing, and could
eliminate, the protection against loss afforded by the amounts otherwise
distributable to the Class B-2 and Class C Certificateholders. If such
protection is eliminated, the Class B-1 Certificateholders will bear the
risk of losses on the Contracts. With respect to the Class B-2
Certificates, sufficiently high delinquencies and liquidation losses on
the Contracts will have the effect of reducing, and could eliminate, the
protection against loss afforded by the amounts otherwise distributable
to the Company and the Class C Certificateholders. If such protection is
eliminated and the Company fails to make payments as required under the
Limited Guarantee, the Class B-2 Certificateholders will bear the risk
of losses on the Contracts.
2. Prepayment Considerations. The prepayment experience on the Contracts
may affect the average life of the Offered Certificates. See "Yield and
Prepayment Considerations" herein and "Maturity and Prepayment
Considerations" in the Prospectus.
3. Limited Liquidity. The Class B Certificates will not constitute
"mortgage related securities" for purposes of the Secondary Mortgage
Market Enhancement Act of 1984 ("SMMEA"). Accordingly, many institutions
with legal authority to invest in SMMEA securities will not be able to
invest in the Class B Certificates, limiting the market for such
securities.
4. Distributions of Principal. The yield to maturity on the Class B
Certificates will be affected by the rate at which Contracts become
Liquidated Contracts and the severity of ensuing losses on such
Liquidated Contracts and the timing thereof. Prior to the Class B Cross-
over Date, and on any Remittance Date on or after the Class B Cross-over
Date on which each Class B Principal Distribution Test is not satisfied,
the Class A Certificateholders will receive all payments of principal
that are made on the Contracts. It is not possible to predict the timing
of the occurrence of the Class B Cross-over Date or of the Remittance
Date, if any, on which the Class A Principal Balance is reduced to zero,
which occurrences will be affected by the rate of voluntary principal
prepayments in addition to prepayments due to default and subsequent
liquidation. Prepayments on Contracts may be influenced by a variety of
economic, geographic, social and other factors, including repossessions,
aging, seasonality, market interest rates, changes in housing needs, job
transfers and unemployment. See "Yield and Prepayment Considerations"
herein and "Maturity and Prepayment Considerations" in the Prospectus.
In addition, the timing of distributions of principal on the Class B
Certificates will be dependent on the satisfaction of Class B Principal
Distribution Tests relating to losses and delinquencies on the
Contracts. See "Description of the Certificates--Class B Principal"
herein.
5. Security Interests and Certain Other Aspects of the Contracts. A variety
of factors may limit the ability of the Certificateholders to realize
upon the Manufactured Homes securing the Contracts or may limit the
amount realized to less than the amount due. See "Special
Considerations" in the Prospectus.
6. Bankruptcy. The bankruptcy of the Company could have certain
consequences for the holders of Class A and Class B Certificates. See
"Special Considerations" in the Prospectus.
S-17
<PAGE>
STRUCTURE OF THE TRANSACTION
The Company will establish the Trust and transfer the Contracts and related
rights to the Trust pursuant to the Agreement. The Certificates represent
fractional undivided interests in the Trust, the corpus of which will consist
of the Contracts (including all rights to receive payments due on such
Contracts on and after June 1, 1994 (the "Cut-off Date") and security
interests in the Manufactured Homes securing such Contracts), rights under
certain hazard insurance policies with respect to the Manufactured Homes,
amounts held for the Trust in the Certificate Account (as defined below) and
all proceeds in any way derived from any of the foregoing. The Company will
also service the Contracts for the Trust. Except for the Land-and-Home
Contracts, the Contracts will be held by the Company on behalf of the Trustee.
First Trust National Association will act as custodian to hold, as the
Trustee's agent, the documents relating to all Land-and-Home Contracts.
Payments by Obligors will be deposited in a separate account maintained at
an Eligible Institution in the name of the Trustee (the "Certificate Account")
no later than one Business Day after receipt. Certain payments deposited in
the Certificate Account in respect of each calendar month (a "Due Period")
will be applied on the 15th Day of the next month (or, if such day is not a
Business Day, the next succeeding business day) (a "Remittance Date") to make
the distributions to Certificateholders described under "Description of the
Certificates--Distributions" and to pay certain monthly fees to the Company as
compensation for servicing the Contracts. The Company, in its capacity as
Servicer of the Contracts, and any successor servicer are referred to herein
as the "Servicer."
The Company's conveyance of the Contracts to the Trust is without recourse,
except for certain warranties made by the Company in the Agreement and certain
indemnities by the Servicer described under "Description of the Certificates--
Indemnification" in the Prospectus.
THE CONTRACT POOL
The Contract Pool consists of 7,657 Contracts having an aggregate principal
balance as of the Cut-off Date of $197,004,761.09 (the "Cut-off Date Pool
Principal Balance"). All of the Contracts were originated by a manufactured
housing dealer and purchased by the Company from such dealer, or were
originated by the Company directly. The Contracts were originated between
November 1980 and May 1994. Manufactured housing installment sale contracts
and manufactured housing installment loan agreements are hereinafter
collectively referred to as "manufactured housing contracts" or "contracts."
All but 2, or .02% by Cut-off Date Pool Principal Balance, of the Contracts
are conventional manufactured housing contracts, meaning that they are not
insured or guaranteed by any governmental agency.
Each Contract (a) is secured by a Manufactured Home or, in the case of a
Land-and-Home Contract, is secured by a lien on real estate to which the
Manufactured Home is deemed permanently affixed, (b) is fully amortizing with
a fixed contractual rate of interest (the "Contract Rate") and provides for
level payments over the term of such Contract and (c) is dated on or after
November 1980. The Contracts were originated or acquired by the Company in the
ordinary course of the Company's business. A detailed description of the
Contracts is included in the Agreement. Approximately 79% of the Cut-off Date
Pool Principal Balance is attributable to loans to purchase Manufactured Homes
which were new and approximately 21% is attributable to loans to purchase
Manufactured Homes which were used at the time the related Contract was
originated. All Contracts have a Contract Rate of at least 8.25%. The
Contracts have remaining maturities, as of the Cut-off Date, of at least 25
months but not more than 300 months and original maturities of at least 26
months but not more than 300 months, and a weighted average remaining term to
scheduled maturity, as of the Cut-off Date, of 211 months. The average
remaining principal balance per Contract as of the Cut-off Date was $25,728.71
and the outstanding principal balances of the Contracts as of the Cut-off Date
ranged from $3,951.13 to $111,767.22. All but 550, or 9.82% by Cut-off Date
Pool Principal Balance, of the Contracts had loan-to-value ratios at the time
of origination of 90% or less.
S-18
<PAGE>
"Value" in such calculation is equal to (i) in the case of a new Manufactured
Home, the total cost of such Manufactured Home, including sales and other
taxes, filing and recording fees imposed by law and premiums for related
insurance, (ii) in the case of a used Manufactured Home, either the total
delivered sales price for such Manufactured Home, if available, or else its
appraised market value, plus, in either case, sales and other taxes, filing
and recording fees imposed by law and premiums for related insurance, or (iii)
in the case of real estate securing a Land-Home Contract, the total sales
price of the real estate and the Manufactured Home together. (With respect to
approximately 2.59% of the Contracts by Cut-off Date Pool Principal Balance,
"Value" includes the value of land in respect of which the Obligor has granted
a lien to the Company in lieu of a down payment, which lien is not being
transferred to the Trust. Such Contracts are not Land-and-Home Contracts.)
Appraisals are made by employees of the Company. Manufactured Homes, unlike
site-built homes, generally depreciate in value. Consequently, at any time
after origination it is possible, especially in the case of Contracts with
high loan-to-value ratios at origination, that the market value of a
Manufactured Home may be lower than the principal amount outstanding under the
related Contract. The Contracts are secured by Manufactured Homes located in
47 states and the District of Columbia, of which approximately 10.89% of the
Contracts by remaining principal balance are secured by Manufactured Homes
located in North Carolina, 8.64% in Texas, 7.48% in Florida, 5.80% in Georgia,
5.65% in South Carolina and 5.34% in Alabama. No other state represented more
than 5% of the Contracts.
S-19
<PAGE>
Set forth below is a description of certain additional characteristics of the
Contracts.
GEOGRAPHICAL DISTRIBUTION OF MANUFACTURED HOMES
<TABLE>
<CAPTION>
% OF CONTRACT
NUMBER OF % OF CONTRACT AGGREGATE POOL BY
CONTRACTS POOL BY NUMBER PRINCIPAL OUTSTANDING
AS OF OF CONTRACTS BALANCE PRINCIPAL
CUT-OFF AS OF CUT-OFF OUTSTANDING AS BALANCE AS OF
DATE DATE OF CUT-OFF DATE CUT-OFF DATE
--------- -------------- --------------- -------------
<S> <C> <C> <C> <C>
Alabama.................. 429 5.60% $ 10,512,651.94 5.34%
Arizona.................. 131 1.71 3,884,583.02 1.97
Arkansas................. 184 2.40 4,310,347.87 2.19
California............... 124 1.62 3,815,438.81 1.94
Colorado................. 200 2.61 5,274,087.21 2.68
Connecticut.............. 1 .01 23,935.00 .01
Delaware................. 30 .39 771,030.82 .39
District of Columbia..... 2 .03 56,076.07 .03
Florida.................. 549 7.17 14,735,841.10 7.48
Georgia.................. 444 5.80 11,420,751.07 5.80
Hawaii................... 1 .01 17,488.00 .01
Idaho.................... 61 .80 1,859,347.52 .94
Illinois................. 115 1.50 2,563,246.83 1.30
Indiana.................. 123 1.61 2,588,918.99 1.31
Iowa..................... 122 1.59 3,037,217.03 1.54
Kansas................... 84 1.10 2,269,302.93 1.15
Kentucky................. 209 2.73 4,443,304.86 2.26
Louisiana................ 152 1.98 3,290,387.68 1.67
Maine.................... 38 .50 782,290.50 .40
Maryland................. 46 .60 1,188,163.62 .60
Michigan................. 388 5.07 9,784,685.07 4.97
Minnesota................ 147 1.92 3,317,315.25 1.68
Mississippi.............. 162 2.12 3,824,761.30 1.94
Missouri................. 226 2.95 4,932,850.73 2.50
Montana.................. 45 .59 1,413,949.14 .72
Nebraska................. 36 .47 753,306.83 .38
Nevada................... 68 .89 2,408,604.70 1.22
New Hampshire............ 17 .22 349,779.93 .18
New Jersey............... 1 .01 34,209.25 .02
New Mexico............... 166 2.17 4,686,708.39 2.38
New York................. 139 1.82 3,043,249.64 1.54
North Carolina........... 745 9.73 21,445,841.82 10.89
North Dakota............. 36 .47 864,882.80 .44
Ohio..................... 159 2.08 3,543,846.02 1.80
Oklahoma................. 177 2.31 4,197,477.68 2.13
Oregon................... 99 1.29 3,295,238.43 1.67
Pennsylvania............. 91 1.19 2,071,658.52 1.05
South Carolina........... 408 5.33 11,128,021.50 5.65
South Dakota............. 43 .56 1,184,329.48 .60
Tennessee................ 281 3.67 6,394,814.39 3.25
Texas.................... 629 8.21 17,018,069.02 8.64
Utah..................... 39 .51 1,047,557.56 .53
Vermont.................. 10 .13 245,351.97 .12
Virginia................. 105 1.37 2,404,960.52 1.22
Washington............... 139 1.82 5,032,525.36 2.55
West Virginia............ 125 1.63 2,655,465.31 1.35
Wisconsin................ 104 1.36 2,302,932.33 1.17
Wyoming.................. 27 .35 777,957.28 .40
----- ------- --------------- -------
Total.................... 7,657 100.00% $197,004,761.09 100.00%
===== ======= =============== =======
</TABLE>
S-20
<PAGE>
YEARS OF ORIGINATION OF CONTRACTS
<TABLE>
<CAPTION>
% OF CONTRACT POOL BY
AGGREGATE PRINCIPAL OUTSTANDING PRINCIPAL
NUMBER OF CONTRACTS BALANCE OUTSTANDING BALANCE AS OF
YEAR OF ORIGINATION AS OF CUT-OFF DATE AS OF CUT-OFF DATE CUT-OFF DATE
- ------------------- ------------------- ------------------- ---------------------
<S> <C> <C> <C>
1980.................... 1 $ 14,280.77 .01%
1981.................... 0 .00 .00
1982.................... 0 .00 .00
1983.................... 2 24,438.89 .01
1984.................... 9 137,058.80 .07
1985.................... 22 385,820.72 .20
1986.................... 7 108,439.81 .05
1987.................... 10 214,514.93 .11
1988.................... 17 358,065.88 .18
1989.................... 35 785,484.07 .40
1990.................... 36 795,479.24 .40
1991.................... 16 270,966.22 .14
1992.................... 8 142,947.60 .07
1993.................... 2 50,255.79 .03
1994.................... 7,492 193,717,008.37 98.33
----- --------------- ------
Total................ 7,657 $197,004,761.09 100.00%
===== =============== ======
</TABLE>
DISTRIBUTION OF ORIGINAL CONTRACT AMOUNTS
<TABLE>
<CAPTION>
% OF CONTRACT POOL BY
AGGREGATE PRINCIPAL OUTSTANDING PRINCIPAL
ORIGINAL CONTRACT NUMBER OF CONTRACTS BALANCE OUTSTANDING BALANCE AS OF
AMOUNT (IN DOLLARS)(1) AS OF CUT-OFF DATE AS OF CUT-OFF DATE CUT-OFF DATE
- ---------------------- ------------------- ------------------- ---------------------
<S> <C> <C> <C>
Less than $10,000....... 532 $ 4,307,004.75 2.19%
$10,000-$19,999.99...... 2,403 36,607,938.83 18.58
$20,000-$29,999.99...... 2,427 59,467,467.24 30.19
$30,000-$39,999.99...... 1,203 41,549,911.49 21.09
$40,000-$49,999.99...... 658 29,194,864.88 14.82
$50,000-$59,999.99...... 285 15,526,361.37 7.88
$60,000-$69,999.99...... 93 5,978,470.67 3.04
$70,000-$79,999.99...... 41 3,022,462.23 1.53
$80,000-$89,999.99...... 9 756,784.72 .38
$90,000-$99,999.99...... 4 376,615.67 .19
$100,000-$109,999.99.... 1 105,112.02 .05
$110,000-$119,999.99.... 1 111,767.22 .06
----- --------------- ------
Total................ 7,657 $197,004,761.09 100.00%
===== =============== ======
</TABLE>
- --------
(1) The largest original Contract amount is $111,767.22, which represents .06%
of the Cut-off Date Pool Principal Balance.
DISTRIBUTION OF ORIGINAL LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL % OF CONTRACT POOL BY
NUMBER OF CONTRACTS BALANCE OUTSTANDING OUTSTANDING PRINCIPAL
LOAN-TO-VALUE RATIO(1) AS OF CUT-OFF DATE AS OF CUT-OFF DATE BALANCE AS OF CUT-OFF DATE
- ---------------------- ------------------- ------------------- --------------------------
<S> <C> <C> <C>
Less than 61%........... 334 $ 5,729,179.01 2.91%
61-65%.................. 108 2,258,298.40 1.15
66-70%.................. 160 3,320,463.07 1.68
71-75%.................. 285 6,695,621.54 3.40
76-80%.................. 701 16,554,254.75 8.40
81-85%.................. 1,033 26,007,391.86 13.20
86-90%.................. 4,486 117,091,307.45 59.44
91-95%.................. 491 18,688,910.19 9.49
Over 95%................ 59 659,334.82 .33
----- --------------- ------
Total................ 7,657 $197,004,761.09 100.00%
===== =============== ======
</TABLE>
- --------
(1) Rounded to the nearest 1%. The term "Value" as used in this table is
defined above. The loan-to-value ratios on certain types of Contracts,
particularly Contracts originated by the Company to refinance a loan made
by another lender; Land-and-Home Contracts; and Contracts with respect to
which the Obligor granted the Company a lien on the related real estate in
lieu of a down payment, may vary from the tabular presentation, due
largely to discrepancies in information input by Company personnel and
variances in the methodology used to calculate loan-to-value ratios. The
Contracts in the categories described above represented 14.4% of the Cut-
off Date Pool Principal Balance.
S-21
<PAGE>
CONTRACT RATES
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL % OF CONTRACT POOL BY
RANGE OF CONTRACTS BY NUMBER OF CONTRACTS BALANCE OUTSTANDING OUTSTANDING PRINCIPAL
CONTRACT RATE AS OF CUT-OFF DATE AS OF CUT-OFF DATE BALANCE AS OF CUT-OFF DATE
--------------------- ------------------- ------------------- --------------------------
<S> <C> <C> <C>
8.01%-9.00%............. 274 $ 8,995,828.02 4.57%
9.01%-10.00%............ 983 35,275,776.83 17.90
10.01%-11.00%........... 3,458 100,882,031.92 51.21
11.01%-12.00%........... 1,946 37,533,975.27 19.05
12.01%-13.00%........... 958 13,806,492.58 7.01
13.01%-14.00%........... 37 495,353.12 .25
14.01%-15.00%........... 1 15,303.35 .01
----- --------------- ------
Total............... 7,657 $197,004,761.09 100.00%
===== =============== ======
</TABLE>
REMAINING MONTHS TO MATURITY
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL % OF CONTRACT POOL BY
MONTHS REMAINING NUMBER OF CONTRACTS BALANCE OUTSTANDING OUTSTANDING PRINCIPAL
AS OF CUT-OFF DATE AS OF CUT-OFF DATE AS OF CUT-OFF DATE BALANCE AS OF CUT-OFF DATE
------------------ ------------------- ------------------- --------------------------
<S> <C> <C> <C>
Less than 31............ 1 $ 4,471.10 .00%
31-60................... 172 1,566,892.15 .80
61-90................... 718 10,066,098.95 5.11
91-120.................. 831 12,277,922.09 6.23
121-150................. 376 6,560,534.20 3.33
151-180................. 2,199 47,776,992.27 24.25
181-210................. 28 865,867.82 .44
211-240................. 2,916 96,910,254.27 49.19
Over 240................ 416 20,975,728.24 10.65
----- --------------- ------
Total............... 7,657 $197,004,761.09 100.00%
===== =============== ======
</TABLE>
S-22
<PAGE>
GREEN TREE FINANCIAL CORPORATION
The following information supplements, and to the extent inconsistent
therewith supersedes, the information in the Prospectus under the heading
"Green Tree Financial Corporation."
DELINQUENCY, LOAN LOSS AND REPOSSESSION EXPERIENCE
The following table sets forth the delinquency experience at December 31 for
each of the past five years and at March 31, 1994, of the portfolio of
conventional manufactured housing contracts serviced by the Company (other
than contracts already in repossession). All but 2, or .02% by Cut-off Date
Pool Principal Balance, of the Contracts in the Trust are conventional
Contracts. In 1990, the Company began subservicing manufactured housing
contracts originated by other lenders. These subserviced contracts are not
reflected in the following table.
DELINQUENCY EXPERIENCE
<TABLE>
<CAPTION>
AT DECEMBER 31, AT MARCH 31,
------------------------------------------- ------------
1989 1990 1991 1992 1993 1994
------- ------- ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Number of Contracts Out-
standing (1)........... 122,187 134,867 151,779 175,730 237,566 253,240
Number of Contracts De-
linquent (2):
30-59 Days............ 2,002 1,795 2,161 1,849 2,030 1,553
60-89 Days............ 607 656 705 603 657 580
90 Days or More....... 714 874 1,194 1,110 1,167 1,151
Total Contracts Delin-
quent.................. 3,323 3,325 4,060 3,562 3,854 3,284
Delinquencies as a
Percent of Contracts
Outstanding (3)........ 2.72% 2.47% 2.67% 2.03% 1.62% 1.30%
</TABLE>
- --------
(1) Excludes contracts already in repossession.
(2) The period of delinquency is based on the number of days payments are
contractually past due (assuming 30-day months). Consequently, a contract
due on the first day of a month is not 30 days delinquent until the first
day of the next month.
(3) By number of contracts.
The following table sets forth the loan loss and repossession experience for
the periods indicated of the portfolio of conventional manufactured housing
contracts serviced by the Company. In 1990, the Company began subservicing
manufactured housing contracts originated by other lenders. These subserviced
contracts are not reflected in the following table.
LOAN LOSS/REPOSSESSION EXPERIENCE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------------- ------------
1989 1990 1991 1992 1993 1994
---------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Number of Contracts
Serviced (1)........... 123,425 136,331 153,435 176,925 238,951 254,739
Principal Balance of
Contracts
Serviced (1)........... $2,002,150 $2,200,196 $2,477,595 $2,996,582 $4,630,659 $5,050,063
Contract Liquidations
(2).................... 3.44% 2.79% 2.82% 2.75% 1.77% .40%
Net Losses:
Dollars (3)........... $ 35,614 $ 30,053 $ 34,842 $ 47,817 $ 42,547 $ 9,777
Percentage (4)........ 1.78% 1.37% 1.41% 1.60% .92% .19%
</TABLE>
- --------
(1) As of period end. Includes contracts already in repossession.
(2) As a percentage of the total number of contracts being serviced as of
period end.
(3) The calculation of net loss includes unpaid interest to the date of
repossession and all expenses of repossession and liquidation.
(4) As a percentage of the principal balance of contracts being serviced as of
period end.
S-23
<PAGE>
The data presented in the foregoing tables are for illustrative purposes only
and there is no assurance that the delinquency, loan loss or repossession
experience of the Contracts will be similar to that set forth above. The
delinquency, loan loss and repossession experience of manufactured housing
contracts historically has been sharply affected by a downturn in regional or
local economic conditions. In recent years, such a downturn and higher levels
of delinquency, loan loss and repossession were experienced in areas dependent
on the oil and gas industry, notably certain areas of Texas, Oklahoma and
Louisiana. These regional or local economic conditions are often volatile, and
no predictions can be made regarding future economic conditions in Texas,
Oklahoma or Louisiana or any other particular area. These downturns have tended
to increase the severity of loss on repossession because of the increased
supply of used units, which in turn may affect the supply in other regions. In
order to achieve geographic dispersion and to limit the effect of regional and
local economic conditions on the Contract Pool, Contracts originated in any one
state (except for contracts secured by Manufactured Homes located in North
Carolina) will not exceed 10% of the Cut-off Date Pool Principal Balance.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------ ------------------------
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed
Charges.................... 2.06 2.14 2.83 3.55 4.81 5.65
</TABLE>
For the purposes of compiling these ratios, earnings consist of earnings
before income taxes plus fixed charges. Fixed charges consist of interest
expense and the interest portion of rent expense.
YIELD AND PREPAYMENT CONSIDERATIONS
The following information supplements, and to the extent inconsistent
therewith supersedes, the information in the Prospectus under the heading
"Yield Considerations."
The Contracts have maturities at origination ranging from 26 months to 300
months, but may be prepaid in full or in part at any time. The prepayment
experience of the Contracts (including prepayments due to liquidations of
defaulted Contracts) will affect the average life of the Offered Certificates.
Based on the Company's experience with the portfolio of manufactured housing
contracts serviced by it, the Company anticipates that a number of the
Contracts will be prepaid prior to their maturity. A number of factors,
including homeowner mobility, general and regional economic conditions and
prevailing interest rates, may influence prepayments. Natural disasters, such
as the recent flooding in several Midwestern states, may also influence
prepayments. In addition, repurchases of Contracts on account of certain
breaches of representations and warranties have the effect of prepaying such
Contracts and therefore would affect the average life of the Offered
Certificates. The prepayment experience on manufactured housing contracts
varies greatly. Most of the Contracts contain a "due-on-sale" clause that would
permit the Servicer to accelerate the maturity of a Contract upon the sale of
the related Manufactured Home. In the case of those Contracts that do contain
due-on-sale clauses, the Company will permit assumptions of such Contracts if
the purchaser of the related Manufactured Home satisfies the Company's then-
current underwriting standards. See "Maturity and Prepayment Considerations" in
the Prospectus.
The allocation of distributions to the Class A Certificateholders on each
Remittance Date prior to the Class B Cross-over Date, and on any Remittance
Date on or after the Class B Cross-over Date on which a Class B Principal
Distribution Test is not satisfied, will have the effect of accelerating the
amortization of the Class A Certificates from the amortization that would be
applicable if the principal were distributed pro rata according to the Class A
Principal Balance and the Class B Principal Balance. If a Class of Class A
Certificates is purchased at a discount and the purchaser calculates its
anticipated yield to maturity based on an assumed rate of payment of principal
on such Class of Class A Certificates that is faster than the rate actually
realized, such purchaser's actual yield to maturity will be lower than the
yield so calculated by such purchaser. See "Description of the Certificates--
Class A Principal."
S-24
<PAGE>
Until the Class B Cross-over Date, and on any Remittance Date on or after the
Class B Cross-over Date on which a Class B Principal Distribution Test is not
satisfied, the Class A Certificateholders will receive all payments of
principal which are made on the Contracts. The rate of principal payments on
the Class B Certificates and the aggregate amount of distributions on the Class
B Certificates will be affected by the rate of Obligor defaults resulting in
delinquencies on the Contracts and losses on Liquidated Contracts, by the
severity of those losses and by the timing of those delinquencies and losses.
See "Description of the Certificates--Subordination of Class B Certificates and
Class C Certificates" for a description of the manner in which such losses are
borne by each Class of the Class B Certificates. If a Class of Class B
Certificates is purchased at a discount and the purchaser calculates its
anticipated yield to maturity based on an assumed rate of payment of principal
on the Class B Certificates that is faster than the rate actually realized,
such purchaser's actual yield to maturity will be lower than the yield so
calculated by such purchaser. See "Description of the Certificates--Class B
Principal."
There can be no assurance that the delinquency or repossession experience set
forth under "Green Tree Financial Corporation--Delinquency, Loan Loss and
Repossession Experience" will be representative of the results that may be
experienced with respect to the Contracts.
The Servicer and the Company each have the option to purchase from the Trust
all remaining Contracts, and thereby effect early retirement of the
Certificates, on any Remittance Date when the Pool Scheduled Principal Balance
is less than 10% of the Cut-off Date Pool Principal Balance. See "Description
of the Certificates--Repurchase Option."
Although partial prepayments of principal on Contracts are applied on
scheduled payment dates for such Contracts, Obligors are not required to pay
interest on Contracts after the date of a full prepayment of principal. As a
result, full prepayments on Contracts in advance of the scheduled payment dates
for such Contracts in any Due Period will reduce the amount of interest
received from Obligors during such Due Period. Subject to the availability of
the subordination provided by the Class B and Class C Certificates, such
subordination would apply to the net shortfall of interest received on account
of prepayments in full in any Due Period so that the amount of interest paid on
a Class of Class A Certificates on the following Remittance Date would not be
affected by such shortfall.
The final scheduled payment date on the Contract with the latest maturity is
in May 2019.
Certain statistical information relating to the prepayment behavior of
certain pools of manufactured housing contracts sold and serviced by the
Company is set forth below. The following table relates to the Company's
thirteen sold pools for which prepayment information is available covering a
period of at least 36 months and which pools had an aggregate principal balance
as of the first day of the month of sale of at least $100,000,000. In
evaluating the information contained in this table and its relationship to the
expected prepayment behavior of the Contracts, prospective Certificateholders
should consider the following: the Company has performed no statistical
analysis to determine whether the contracts to which the table relates
constitute a statistically significant sample of manufactured housing contracts
for purposes of determining expected prepayment behavior. Furthermore, the
Contracts in the Contract Pool may have an average age as of the Cut-off Date
substantially different than the average ages (as of the first day of the month
of sale) of the contracts in the sold pool to which the following table relates
and may have other characteristics substantially different than the contracts
in any sold pool. For these reasons, and because of the unpredictable nature of
the factors described under "Weighted Average Life of the Class A and Class B
Certificates" as influencing the amount of prepayments of manufactured housing
contracts, no assurance can be given that the prepayment experience of the
Contracts will exhibit prepayment behavior similar to the behavior summarized
in the following table for the periods covered thereby. In addition to the
foregoing, prospective Class A and Class B Certificateholders should consider
that the table set forth below is limited to the periods covered therein and
thus cannot reflect the effects, if any, of aging on the prepayment behavior of
manufactured housing contracts beyond such periods.
S-25
<PAGE>
The following table sets forth with respect to each sold pool an initial
aggregate principal balance (calculated as of the first day of the month of the
sale), the decline in outstanding aggregate principal balance for each
subsequent month (whether due to liquidations, scheduled principal payments,
principal prepayments or repurchases) and the weighted average Contract Rate
("WAC") of the contracts in each pool as of the first day of the month of the
sale of each pool and as of May 1, 1994. The percentage of the Manufactured
Housing Prepayment Model ("MHP") (as described in "Weighted Average Life of the
Class A and Class B Certificates" below) for the life of each sold pool through
May 1, 1994 (calculated as the annual rate of the decline in the outstanding
aggregate principal balance exhibited over the life of the pool, and using the
WAC as of the first day of the month of the sale of each pool) was the
following: 181% of the MHP for Pool #1; 205% of the MHP for Pool #2; 182% of
the MHP for Pool #3; 189% of the MHP for Pool #4; 204% of the MHP for Pool #5;
232% of the MHP for Pool #6; 207% of the MHP for Pool #7; 216% of the MHP for
Pool #8; 224% of the MHP for Pool #9; 226% of the MHP for Pool #10; 242% of the
MHP for Pool #11; 225% of the MHP for Pool #12; and 212% of the MHP for Pool
#13. In addition, Pool #1 had an estimated average age of 15 months as of the
first day of the month of sale and an original weighted average maturity
("WAM") of 174 months; Pool #2 had an estimated average age of 2 months as of
the first day of the month of sale and an original WAM of 172 months; Pool #3
had an estimated average age of 8 months as of the first day of the month of
sale and an original WAM of 170 months; Pool #4 had an estimated average age of
1 month as of the first day of the month of sale and an original WAM of 176
months; Pool #5 had an estimated average age of 1 month as of the first day of
the month of sale and an original WAM of 172 months; Pool #6 had an estimated
average age of 0 months as of the first day of the month of sale and an
original WAM of 178 months; Pool #7 had an estimated average age of 4 months as
of the first day of the month of sale and an original WAM of 179 months; Pool
#8 had an estimated average age of 1 month as of the first day of the month of
sale and an original WAM of 182 months; Pool #9 had an estimated average age of
1 month as of the first day of the month of sale and an original WAM of 178
months; Pool #10 had an estimated average age of 1 month as of the first day of
the month of sale and an original WAM of 182 months; Pool #11 had an estimated
average age of 2 months as of the first day of the month of sale and an
original WAM of 182 months; Pool #12 had an estimated average age of 14 months
as of the first day of the month of sale and an original WAM of 181 months; and
Pool #13 had an estimated average age of 18 months as of the first day of the
month of sale and an original WAM of 179 months. By comparison, the Contracts
in the Contract Pool have an estimated average age of 0 months as of the Cut-
off Date and an original WAM of 211 months.
S-26
<PAGE>
INFORMATION REGARDING SELECTED POOLS OF MANUFACTURED HOUSING CONTRACTS
<TABLE>
<CAPTION>
POOL #1 POOL #2 POOL #3 POOL #4 POOL #5
------------------ ------------------ ------------------ ------------------ ------------------
AGGREGATE AGGREGATE AGGREGATE AGGREGATE AGGREGATE
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
BALANCE WAC BALANCE WAC BALANCE WAC BALANCE WAC BALANCE WAC
------------ ----- ------------ ----- ------------ ----- ------------ ----- ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
June 1987.......... $150,002,024 14.09%
July 1987.......... 148,570,607
August 1987........ 147,416,832
September 1987..... 146,067,294
October 1987....... 144,462,628
November 1987...... 142,859,082
December 1987...... 141,504,979 $112,294,744 13.68%
January 1988....... 139,909,863 111,564,231
February 1988...... 138,230,608 110,959,130
March 1988......... 137,054,052 110,158,592 $106,739,475 13.56%
April 1988......... 135,321,739 109,301,576 106,223,037
May 1988........... 133,734,529 108,408,172 105,534,716
June 1988.......... 132,186,564 107,509,701 104,702,409
July 1988.......... 130,488,347 106,644,630 103,756,166
August 1988........ 129,307,834 105,806,177 102,846,872
September 1988..... 127,718,336 104,930,189 101,894,145 $132,287,851 13.64%
October 1988....... 126,246,584 103,740,306 101,020,931 131,632,149
November 1988...... 124,511,650 102,784,208 100,161,691 130,957,623
December 1988...... 122,962,573 101,801,837 99,205,495 130,379,138 $105,566,962 13.76%
January 1989....... 121,615,458 100,781,280 98,284,587 129,738,726 105,207,877
February 1989...... 120,513,719 99,900,514 97,210,555 128,858,457 104,682,072
March 1989......... 119,260,068 99,094,959 96,296,636 128,200,908 104,130,477
April 1989......... 117,814,726 97,904,714 95,404,068 127,488,457 103,542,004
May 1989........... 116,364,769 96,684,420 94,564,930 126,889,002 102,653,070
June 1989.......... 115,232,291 95,908,062 93,701,727 125,900,040 102,097,431
July 1989.......... 114,011,414 94,940,842 92,729,644 125,044,160 101,349,305
August 1989........ 112,911,186 93,912,508 91,737,435 124,031,897 100,586,806
September 1989..... 111,216,196 92,713,651 90,837,699 123,165,353 99,698,668
October 1989....... 109,954,911 91,769,472 89,974,610 122,116,060 98,924,607
November 1989...... 108,547,979 90,767,147 88,990,538 121,098,455 98,171,602
December 1989...... 107,236,278 89,884,950 88,113,642 119,857,703 97,434,609
January 1990....... 106,186,096 88,836,423 87,009,120 118,883,983 96,618,000
February 1990...... 105,059,437 87,869,426 86,279,171 118,083,854 95,929,936
March 1990......... 104,001,861 86,861,946 85,374,419 117,365,279 95,143,376
April 1990......... 102,821,481 85,901,514 84,531,680 116,113,249 94,192,288
May 1990........... 101,684,273 84,863,747 83,410,417 114,765,754 93,272,683
June 1990.......... 100,581,335 83,907,938 82,087,398 113,507,435 92,350,000
July 1990.......... 99,200,173 82,778,771 81,088,923 111,918,831 91,332,224
August 1990........ 97,996,005 81,580,222 80,290,213 110,524,701 90,523,030
September 1990..... 96,731,179 80,512,419 79,271,725 109,257,964 89,540,257
October 1990....... 95,723,713 79,377,536 78,435,152 108,356,070 88,577,911
November 1990...... 94,608,622 78,316,168 77,579,778 107,166,109 87,462,010
December 1990...... 93,300,020 77,309,480 76,885,835 106,034,096 86,324,903
January 1991....... 92,383,777 76,329,095 76,161,168 105,132,684 85,666,145
February 1991...... 91,270,191 75,368,267 75,382,761 104,278,161 84,828,593
March 1991......... 90,217,514 74,600,685 74,568,758 103,416,278 83,926,678
April 1991......... 88,903,182 73,533,774 73,763,400 102,375,383 82,871,571
May 1991........... 87,737,009 72,558,959 72,777,745 100,913,362 81,980,444
June 1991.......... 86,755,716 71,537,912 72,065,159 99,702,358 80,799,137
July 1991.......... 85,486,181 70,634,217 71,195,597 98,558,265 79,782,492
August 1991........ 83,985,497 69,667,258 70,212,900 97,424,170 78,496,352
September 1991..... 83,012,816 68,783,320 69,314,080 96,061,529 77,531,890
October 1991....... 81,786,450 67,962,267 68,368,876 94,759,840 76,689,165
November 1991...... 80,696,933 67,031,927 67,523,237 93,697,559 75,646,133
December 1991...... 79,606,603 66,126,209 66,542,668 92,654,711 74,715,672
January 1992....... 78,506,973 65,210,496 65,642,672 91,609,082 73,898,243
February 1992...... 77,341,248 64,101,129 64,776,537 90,383,639 72,994,567
March 1992......... 76,057,478 63,112,555 63,580,748 89,304,664 72,119,199
April 1992......... 74,953,850 62,142,028 62,609,837 87,900,385 70,888,314
May 1992........... 73,563,143 61,218,299 61,454,751 86,485,433 69,700,344
June 1992.......... 72,574,042 60,180,132 60,542,799 85,407,102 68,620,733
July 1992.......... 71,338,444 59,105,077 59,632,342 83,894,785 67,520,749
August 1992........ 70,403,384 58,030,585 58,760,983 82,688,906 66,394,217
September 1992..... 69,118,385 56,973,265 57,987,836 81,379,506 65,459,438
October 1992....... 68,087,038 56,113,844 56,913,562 80,311,428 64,410,681
November 1992...... 67,081,471 55,055,097 56,046,666 78,909,384 63,423,300
December 1992...... 65,898,230 54,076,802 55,130,414 77,855,313 62,419,877
January 1993....... 64,885,781 53,339,615 54,207,265 76,627,167 61,331,737
February 1993...... 63,921,467 52,534,394 53,534,143 75,860,353 60,520,406
March 1993......... 63,017,441 51,824,838 52,844,431 75,064,486 59,859,818
April 1993......... 61,926,618 51,010,651 51,973,010 73,896,389 59,025,174
May 1993........... 60,823,318 50,033,483 51,010,673 72,705,887 58,022,176
June 1993.......... 59,816,112 49,112,439 50,116,296 71,640,147 57,204,456
July 1993.......... 58,740,781 47,949,760 49,276,183 70,318,424 56,013,829
August 1993........ 57,403,489 47,093,773 48,429,392 68,905,390 54,918,745
September 1993..... 56,104,318 46,163,341 47,270,827 67,396,418 53,662,303
October 1993....... 54,967,798 45,015,682 46,345,045 65,979,912 52,300,659
November 1993...... 53,694,235 43,780,593 45,237,469 64,595,039 51,029,959
December 1993...... 52,641,642 42,596,425 44,443,890 63,284,418 50,008,613
January 1994....... 51,692,915 41,750,161 43,398,005 61,978,163 48,976,620
February 1994...... 50,686,785 40,978,715 42,693,929 60,957,709 47,762,749
March 1994......... 49,786,496 40,127,215 41,706,431 59,666,254 46,712,626
April 1994......... 48,578,398 39,398,717 40,887,409 58,244,881 45,493,768
May 1994........... 47,532,457 13.91% 38,573,092 13.67% 40,061,702 13.51% 56,945,607 13.61% 44,701,447 13.73%
</TABLE>
S-27
<PAGE>
INFORMATION REGARDING SELECTED POOLS OF MANUFACTURED HOUSING CONTRACTS
<TABLE>
<CAPTION>
POOL #6 POOL #7 POOL #8 POOL #9
------------------ ------------------ ------------------ ------------------
AGGREGATE AGGREGATE AGGREGATE AGGREGATE
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
BALANCE WAC BALANCE WAC BALANCE WAC BALANCE WAC
------------ ----- ------------ ----- ------------ ----- ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
June 1987...............
July 1987...............
August 1987.............
September 1987..........
October 1987............
November 1987...........
December 1987...........
January 1988............
February 1988...........
March 1988..............
April 1988..............
May 1988................
June 1988...............
July 1988...............
August 1988.............
September 1988..........
October 1988............
November 1988...........
December 1988...........
January 1989............
February 1989...........
March 1989..............
April 1989..............
May 1989................
June 1989............... $121,205,258 14.39%
July 1989............... 120,791,096
August 1989............. 120,208,326
September 1989.......... 119,476,151 $153,845,599 13.93%
October 1989............ 118,943,749 153,031,948
November 1989........... 118,183,572 152,285,093
December 1989........... 117,465,674 151,426,499 $127,799,125 13.74%
January 1990............ 116,918,168 150,534,240 127,024,450
February 1990........... 116,164,551 149,739,836 126,192,365
March 1990.............. 115,348,266 149,131,864 125,315,041
April 1990.............. 114,390,687 148,093,304 124,605,798
May 1990................ 113,352,336 147,070,634 124,002,851
June 1990............... 112,246,343 146,056,885 123,333,588 $118,256,826 14.23%
July 1990............... 110,959,809 144,956,420 122,576,969 117,572,123
August 1990............. 110,083,602 143,672,440 121,784,943 116,892,713
September 1990.......... 109,180,538 142,648,941 121,069,805 116,248,572
October 1990............ 108,268,685 141,647,307 120,055,001 115,726,182
November 1990........... 107,128,784 140,382,797 119,105,339 115,054,486
December 1990........... 106,169,197 139,346,989 118,324,747 114,478,143
January 1991............ 105,110,111 138,364,955 117,582,547 113,896,272
February 1991........... 104,533,870 137,309,065 116,914,932 113,273,369
March 1991.............. 103,358,519 136,126,195 116,204,284 112,686,192
April 1991.............. 102,186,034 134,620,928 115,089,088 111,804,737
May 1991................ 100,923,270 132,989,000 113,944,914 110,887,705
June 1991............... 99,466,155 131,478,011 112,524,530 109,854,875
July 1991............... 98,218,803 130,020,761 111,320,624 108,972,638
August 1991............. 96,816,151 128,492,699 110,210,362 107,815,634
September 1991.......... 95,430,796 126,806,793 109,025,041 106,893,442
October 1991............ 94,227,470 125,422,408 108,059,740 106,029,033
November 1991........... 92,831,020 123,970,374 106,638,729 104,758,418
December 1991........... 91,674,429 122,625,208 105,397,317 103,574,625
January 1992............ 90,646,936 121,205,901 104,200,220 102,731,705
February 1992........... 89,335,995 119,604,050 103,046,534 101,588,643
March 1992.............. 88,070,469 117,824,457 101,898,130 100,422,070
April 1992.............. 86,749,880 116,113,836 100,278,052 98,668,389
May 1992................ 85,021,420 113,895,774 99,131,345 97,276,621
June 1992............... 83,796,442 112,240,635 97,500,236 96,126,963
July 1992............... 82,441,965 110,477,143 96,045,128 94,689,879
August 1992............. 81,029,966 108,677,315 94,947,812 93,473,752
September 1992.......... 79,859,886 107,072,555 93,643,469 92,053,601
October 1992............ 78,393,946 105,524,278 92,055,076 90,514,939
November 1992........... 76,958,320 103,775,864 90,669,591 89,075,320
December 1992........... 75,595,677 101,942,908 89,178,551 87,683,257
January 1993............ 74,123,924 100,371,451 87,640,944 86,089,289
February 1993........... 73,190,804 99,317,882 86,615,871 85,148,397
March 1993.............. 72,179,190 98,094,643 85,418,495 83,997,960
April 1993.............. 70,916,961 96,592,784 84,246,254 82,979,797
May 1993................ 69,426,154 94,804,085 82,694,815 81,240,329
June 1993............... 68,276,240 93,398,394 81,384,135 79,974,583
July 1993............... 66,830,487 91,519,311 79,889,722 78,376,568
August 1993............. 65,292,851 89,875,783 78,405,244 76,677,151
September 1993.......... 63,952,533 87,947,992 76,783,169 75,029,431
October 1993............ 62,488,729 85,942,018 74,840,365 73,206,867
November 1993........... 60,947,191 84,094,341 72,729,693 71,338,398
December 1993........... 59,700,188 82,230,041 71,119,700 69,780,172
January 1994............ 58,415,195 79,969,150 69,486,801 68,465,325
February 1994........... 57,372,578 78,743,838 68,302,925 67,385,608
March 1994.............. 56,048,347 77,442,231 67,017,344 65,936,104
April 1994.............. 54,476,968 75,645,774 65,531,030 64,744,958
May 1994................ 53,142,190 14.37% 73,985,434 13.91% 64,063,244 13.71% 63,426,848 14.22%
</TABLE>
S-28
<PAGE>
INFORMATION REGARDING SELECTED POOLS OF MANUFACTURED HOUSING CONTRACTS
<TABLE>
<CAPTION>
POOL #10 POOL #11 POOL #12 POOL #13
------------------ ------------------ ------------------ ------------------
AGGREGATE AGGREGATE AGGREGATE AGGREGATE
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
BALANCE WAC BALANCE WAC BALANCE WAC BALANCE WAC
------------ ----- ------------ ----- ------------ ----- ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
June 1987...............
July 1987...............
August 1987.............
September 1987..........
October 1987............
November 1987...........
December 1987...........
January 1988............
February 1988...........
March 1988..............
April 1988..............
May 1988................
June 1988...............
July 1988...............
August 1988.............
September 1988..........
October 1988............
November 1988...........
December 1988...........
January 1989............
February 1989...........
March 1989..............
April 1989..............
May 1989................
June 1989...............
July 1989...............
August 1989.............
September 1989..........
October 1989............
November 1989...........
December 1989...........
January 1990............
February 1990...........
March 1990..............
April 1990..............
May 1990................
June 1990...............
July 1990...............
August 1990.............
September 1990.......... $133,311,855 14.21%
October 1990............ 132,708,128
November 1990........... 131,124,784
December 1990........... 131,480,071 $117,246,945 14.07%
January 1991............ 130,784,049 116,685,698
February 1991........... 130,075,857 116,205,141
March 1991.............. 129,353,288 115,652,098 $103,147,656 14.09%
April 1991.............. 128,469,170 114,961,106 102,477,605
May 1991................ 127,597,801 114,240,314 101,868,239
June 1991............... 126,662,575 113,523,797 101,149,654 $137,954,723 14.25%
July 1991............... 125,738,135 112,782,291 100,453,306 137,161,898
August 1991............. 124,763,526 112,044,738 99,707,505 136,253,140
September 1991.......... 123,709,097 110,903,273 98,944,627 135,315,291
October 1991............ 122,649,124 110,221,842 98,305,496 134,429,201
November 1991........... 121,707,958 109,207,436 97,495,270 133,335,057
December 1991........... 120,906,527 108,606,380 96,795,908 132,412,083
January 1992............ 119,916,542 107,749,403 95,945,396 131,431,705
February 1992........... 118,870,421 106,650,322 94,987,688 130,217,458
March 1992.............. 117,461,999 105,757,820 93,779,828 128,989,415
April 1992.............. 115,959,521 104,231,643 92,573,506 127,467,332
May 1992................ 114,090,029 103,065,191 91,224,729 125,947,815
June 1992............... 112,468,590 101,733,540 90,208,002 124,665,328
July 1992............... 111,032,856 100,373,468 88,978,015 123,296,077
August 1992............. 109,610,542 99,312,952 87,779,632 122,063,195
September 1992.......... 108,522,457 98,163,283 86,400,033 120,500,056
October 1992............ 107,162,382 96,855,020 85,198,245 118,974,599
November 1992........... 105,554,653 95,388,400 83,960,033 117,376,649
December 1992........... 104,001,403 94,056,996 83,008,690 116,187,136
January 1993............ 102,403,932 92,180,094 82,013,317 114,461,305
February 1993........... 101,285,823 91,306,816 81,113,524 113,370,189
March 1993.............. 100,317,469 90,172,103 80,292,884 112,347,353
April 1993.............. 98,712,066 88,715,509 78,867,167 110,512,535
May 1993................ 97,129,803 87,194,683 77,345,741 108,577,928
June 1993............... 95,450,491 85,389,950 75,873,606 106,815,606
July 1993............... 93,462,086 83,689,863 74,430,783 104,717,520
August 1993............. 91,418,348 81,937,783 72,993,569 102,547,868
September 1993.......... 89,368,644 79,983,850 71,208,057 100,268,883
October 1993............ 87,181,228 77,865,034 69,466,494 98,377,858
November 1993........... 85,286,039 75,635,478 67,941,483 95,953,596
December 1993........... 83,531,009 74,101,263 66,264,904 93,829,333
January 1994............ 81,658,055 72,288,791 64,866,724 92,060,968
February 1994........... 80,072,577 70,718,202 63,662,343 90,119,896
March 1994.............. 78,478,516 69,290,952 62,469,610 88,724,920
April 1994.............. 76,589,608 67,667,026 61,145,047 86,391,960
May 1994................ 74,905,357 14.18% 66,142,011 14.05% 59,663,515 14.12% 84,621,709 14.19%
</TABLE>
S-29
<PAGE>
WEIGHTED AVERAGE LIFE OF THE CLASS A AND CLASS B CERTIFICATES
The following information is given solely to illustrate the effect of
prepayments of the Contracts on the weighted average life of each Class of
Class A Certificates and Class B Certificates under the stated assumptions and
is not a prediction of the prepayment rate that might actually be experienced
by the Contracts.
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 life of the Class A and Class B
Certificates will be influenced by the rate at which principal on the Contracts
is paid. Principal payments on Contracts may be in the form of scheduled
amortization or prepayments (for this purpose, the term "prepayment" includes
repayments and liquidations due to default or other dispositions of Contracts).
Prepayments on Contracts may be measured by a prepayment standard or model. The
model used in this Prospectus Supplement, the Manufactured Housing Prepayment
Model, is based on an assumed rate of prepayment each month of the then unpaid
principal balance of a pool of new Contracts. A prepayment assumption of 100%
MHP assumes constant prepayment rates of 3.7% per annum of the then unpaid
principal balance of such Contracts in the first month of the life of the
Contracts and an additional 0.1% per annum in each month thereafter until the
24th month. Beginning in the 24th month and in each month thereafter during the
life of all of the Contracts, 100% MHP assumes a constant prepayment rate of
6.0% per annum each month.
As used in the following tables "0% MHP" assumes no prepayments on the
Contracts; "50% MHP" assumes the Contracts will prepay at rates equal to 50% of
the MHP assumed prepayment rates, and so forth.
There is no assurance, however, that prepayment of the Contracts will conform
to any level of the MHP, and no representation is made that the Contracts will
prepay at the prepayment rates shown or any other prepayment rate. The rate of
principal payments on pools of manufactured housing contracts is influenced by
a variety of economic, geographic, social and other factors, including the
level of interest rates and the rate at which manufactured homeowners sell
their manufactured homes or default on their contracts. Other factors affecting
prepayment of contracts include changes in obligors' housing needs, job
transfers, unemployment and obligors' net equity in the manufactured homes. In
the case of mortgage loans secured by site-built homes, in general, if
prevailing interest rates fall significantly below the interest rates on such
mortgage loans, the mortgage loans are likely to be subject to higher
prepayment rates than if prevailing interest rates remained at or above the
rates borne by such mortgage loans. Conversely, if prevailing interest rates
rise above the interest rates on such mortgage loans, the rate of prepayment
would be expected to decrease. In the case of manufactured housing contracts,
however, because the outstanding principal balances are, in general, much
smaller than mortgage loan balances and the original term to maturity of each
such contract is generally shorter, the reduction or increase in the size of
the monthly payment on a contract arising from a change in the interest rate
thereon is generally much smaller. Consequently, changes in prevailing interest
rates may not have a similar effect, or may have a similar effect but to a
smaller degree, on the prepayment rates on manufactured housing contracts.
As described under "Description of the Certificates--Class B Principal,"
payments of principal on the Class B Certificates will not commence until the
Class B Cross-over Date, and will not be made on that Remittance Date or any
subsequent Remittance Date on which a Class B Principal Distribution Test is
not satisfied (unless the Class A Principal Balance has been reduced to zero).
This will have the effect of accelerating the amortization of the Class A
Certificates while increasing the respective interest in the Trust of the Class
B Certificates.
The percentages and weighted average lives in the following tables were
determined assuming that (i) scheduled interest and principal payments on the
Contracts are received in a timely manner and prepayments are made at the
indicated percentages of the MHP set forth in the table; (ii) either the
Company or the
S-30
<PAGE>
Servicer exercises its right of optional termination described above; (iii) the
Cut-off Date Pool Principal Balance is $197,004,761, and the Contracts have the
characteristics described under "The Contract Pool"; (iv) the Class A-1
Certificates initially represent $59,000,000 of the Cut-off Date Pool Principal
Balance and will have a Class A-1 Remittance Rate of 6.60%, the Class A-2
Certificates initially represent $31,000,000 of the Cut-off Date Pool Principal
Balance and will have a Class A-2 Remittance Rate of 7.45%, the Class A-3
Certificates initially represent $20,000,000 of the Cut-off Date Pool Principal
Balance and will have a Class A-3 Remittance Rate of 7.80%, the Class A-4
Certificates initially represent 27,000,000 of the Cut-off Date Pool Principal
Balance and will have a Class A-4 Remittance Rate of 8.05%, the Class A-5
Certificates initially represent $38,334,000 of the Cut-off Date Pool Principal
Balance and will have a Class A-5 Remittance Rate of 8.40%, the Class B-1
Certificates initially represent $8,865,000 of the Cut-off Date Pool Principal
Balance and will have a Class B-1 Remittance Rate of 8.30%, and the Class B-2
Certificates initially represent $12,805,761 of the Cut-off Date Pool Principal
Balance and will have a Class B-2 Remittance Rate of 8.65%; (v) no interest
shortfalls will arise in connection with prepayment in full of the Contracts;
(vi) no delinquencies or losses are experienced on the Contracts; (vii)
distributions are made on the Certificates on the 15th day of each month,
commencing July 15, 1994; and (viii) the Certificates are issued on May 23,
1994. No representation is made that the Contracts will not experience
delinquencies or losses.
It is not likely that Contracts will prepay at any constant percentage of the
MHP to maturity or that all Contracts will prepay at the same rate.
Investors are urged to make their investment decisions on a basis that
includes their determination as to anticipated prepayment rates under a variety
of the assumptions discussed herein.
Based on the foregoing assumptions, the following tables indicate the
projected weighted average life of the Class A-1 Certificates, the Class A-2
Certificates, the Class A-3 Certificates, the Class A-4 Certificates, the Class
A-5 Certificates, the Class B-1 Certificates and the Class B-2 Certificates and
set forth the percentages of the Original Class A-1 Principal Balance, the
Original Class A-2 Principal Balance, the Original Class A-3 Principal Balance,
the Original Class A-4 Principal Balance, Class A-5 Principal Balance, the
Original Class B-1 Principal Balance and the Original Class B-2 Principal
Balance that would be outstanding after each of the dates shown at the
indicated percentages of the MHP.
S-31
<PAGE>
PERCENTAGE OF THE ORIGINAL PRINCIPAL BALANCE OF THE CLASS A-1
CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF THE
MHP SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 0% 50% 75% 100% 125% 150% 200% 300%
- ---- --- --- --- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage..................... 100% 100% 100% 100% 100% 100% 100% 100%
June 15, 1995.......................... 91 84 80 77 73 70 63 49
June 15, 1996.......................... 81 65 58 50 43 36 22 0
June 15, 1997.......................... 69 46 35 24 13 3 0 0
June 15, 1998.......................... 56 26 12 0 0 0 0 0
June 15, 1999.......................... 42 6 0 0 0 0 0 0
June 15, 2000.......................... 27 0 0 0 0 0 0 0
June 15, 2001.......................... 11 0 0 0 0 0 0 0
June 15, 2002.......................... 0 0 0 0 0 0 0 0
Weighted Average Life (1) (years)...... 4.4 2.9 2.4 2.1 1.9 1.7 1.4 1.1
</TABLE>
- --------
(1) The weighted average life of a Class A-1 Certificate is determined by (i)
multiplying the amount of cash distributions in reduction of the principal
balance of such Certificate by the number of years from the date of
issuance of such Class A-1 Certificate to the stated Remittance Date, (ii)
adding the results, and (iii) dividing the sum by the initial principal
balance of such Class A-1 Certificate.
PERCENTAGE OF THE ORIGINAL PRINCIPAL BALANCE OF THE CLASS A-2
CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF THE
MHP SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 0% 50% 75% 100% 125% 150% 200% 300%
- ---- --- --- --- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage..................... 100% 100% 100% 100% 100% 100% 100% 100%
June 15, 1995.......................... 100 100 100 100 100 100 100 100
June 15, 1996.......................... 100 100 100 100 100 100 100 90
June 15, 1997.......................... 100 100 100 100 100 100 68 0
June 15, 1998.......................... 100 100 100 96 71 48 3 0
June 15, 1999.......................... 100 100 80 50 22 0 0 0
June 15, 2000.......................... 100 74 39 6 0 0 0 0
June 15, 2001.......................... 100 36 0 0 0 0 0 0
June 15, 2002.......................... 93 2 0 0 0 0 0 0
June 15, 2003.......................... 63 0 0 0 0 0 0 0
June 15, 2004.......................... 30 0 0 0 0 0 0 0
June 15, 2005.......................... 0 0 0 0 0 0 0 0
Weighted Average Life (1) (years)...... 9.5 6.8 5.8 5.1 4.5 4.1 3.4 2.5
</TABLE>
- --------
(1) The weighted average life of a Class A-2 Certificate is determined by (i)
multiplying the amount of cash distributions in reduction of the principal
balance of such Certificate by the number of years from the date of
issuance of such Class A-2 Certificate to the stated Remittance Date, (ii)
adding the results, and (iii) dividing the sum by the initial principal
balance of such Class A-2 Certificate.
S-32
<PAGE>
PERCENTAGE OF THE ORIGINAL PRINCIPAL BALANCE OF THE CLASS A-3
CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF THE
MHP SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 0% 50% 75% 100% 125% 150% 200% 300%
- ---- ---- --- --- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage.................... 100% 100% 100% 100% 100% 100% 100% 100%
June 15, 1995......................... 100 100 100 100 100 100 100 100
June 15, 1996......................... 100 100 100 100 100 100 100 100
June 15, 1997......................... 100 100 100 100 100 100 100 98
June 15, 1998......................... 100 100 100 100 100 100 100 0
June 15, 1999......................... 100 100 100 100 100 92 17 0
June 15, 2000......................... 100 100 100 100 62 28 0 0
June 15, 2001......................... 100 100 98 49 11 0 0 0
June 15, 2002......................... 100 100 47 5 0 0 0 0
June 15, 2003......................... 100 53 6 0 0 0 0 0
June 15, 2004......................... 100 12 0 0 0 0 0 0
June 15, 2005......................... 97 0 0 0 0 0 0 0
June 15, 2006......................... 47 0 0 0 0 0 0 0
June 15, 2007......................... 4 0 0 0 0 0 0 0
June 15, 2008......................... 0 0 0 0 0 0 0 0
Weighted Average Life (1) (years)..... 12.1 9.2 8.1 7.1 6.4 5.8 4.7 3.5
</TABLE>
- --------
(1) The weighted average life of a Class A-3 Certificate is determined by (i)
multiplying the amount of cash distributions in reduction of the principal
balance of such Certificate by the number of years from the date of
issuance of such Class A-3 Certificate to the stated Remittance Date, (ii)
adding the results, and (iii) dividing the sum by the initial principal
balance of such Class A-3 Certificate.
PERCENTAGE OF THE ORIGINAL PRINCIPAL BALANCE OF THE CLASS A-4
CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF THE
MHP SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 0% 50% 75% 100% 125% 150% 200% 300%
- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage.................. 100% 100% 100% 100% 100% 100% 100% 100%
June 15, 1995....................... 100 100 100 100 100 100 100 100
June 15, 1996....................... 100 100 100 100 100 100 100 100
June 15, 1997....................... 100 100 100 100 100 100 100 100
June 15, 1998....................... 100 100 100 100 100 100 100 88
June 15, 1999....................... 100 100 100 100 100 100 100 20
June 15, 2000....................... 100 100 100 100 100 100 70 0
June 15, 2001....................... 100 100 100 100 100 82 33 0
June 15, 2002....................... 100 100 100 100 75 50 3 0
June 15, 2003....................... 100 100 100 73 45 20 0 0
June 15, 2004....................... 100 100 74 43 17 0 0 0
June 15, 2005....................... 100 81 47 18 0 0 0 0
June 15, 2006....................... 100 52 20 0 0 0 0 0
June 15, 2007....................... 100 25 0 0 0 0 0 0
June 15, 2008....................... 67 0 0 0 0 0 0 0
June 15, 2009....................... 29 0 0 0 0 0 0 0
June 15, 2010....................... 5 0 0 0 0 0 0 0
June 15, 2011....................... 0 0 0 0 0 0 0 0
Weighted Average Life (1) (years)... 14.6 12.2 11.0 9.9 9.0 8.1 6.7 4.7
</TABLE>
- --------
(1) The weighted average life of a Class A-4 Certificate is determined by (i)
multiplying the amount of cash distributions in reduction of the principal
balance of such Certificate by the number of years from the date of
issuance of such Class A-4 Certificate to the stated Remittance Date, (ii)
adding the results, and (iii) dividing the sum by the initial principal
balance of such Class A-4 Certificate.
S-33
<PAGE>
PERCENTAGE OF THE ORIGINAL PRINCIPAL BALANCE OF THE CLASS A-5
CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF THE
MHP SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 0% 50% 75% 100% 125% 150% 200% 300%
- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage.............. 100% 100% 100% 100% 100% 100% 100% 100%
June 15, 1995................... 100 100 100 100 100 100 100 100
June 15, 1996................... 100 100 100 100 100 100 100 100
June 15, 1997................... 100 100 100 100 100 100 100 100
June 15, 1998................... 100 100 100 100 100 100 100 100
June 15, 1999................... 100 100 100 100 100 100 100 100
June 15, 2000................... 100 100 100 100 100 100 100 88
June 15, 2001................... 100 100 100 100 100 100 100 68
June 15, 2002................... 100 100 100 100 100 100 100 52
June 15, 2003................... 100 100 100 100 100 100 83 40
June 15, 2004................... 100 100 100 100 100 96 67 0
June 15, 2005................... 100 100 100 100 95 80 54 0
June 15, 2006................... 100 100 100 95 79 65 43 0
June 15, 2007................... 100 100 97 79 65 53 0 0
June 15, 2008................... 100 98 79 64 51 41 0 0
June 15, 2009................... 100 77 61 49 0 0 0 0
June 15, 2010................... 100 64 51 0 0 0 0 0
June 15, 2011................... 85 51 0 0 0 0 0 0
June 15, 2012................... 65 0 0 0 0 0 0 0
June 15, 2013................... 42 0 0 0 0 0 0 0
June 15, 2014................... 0 0 0 0 0 0 0 0
Weighted Average Life (1)
(years)........................ 18.3 16.6 15.7 14.7 13.7 12.8 11.0 8.1
</TABLE>
- --------
(1) The weighted average life of a Class A-5 Certificate is determined by (i)
multiplying the amount of cash distributions in reduction of the principal
balance of such Certificate by the number of years from the date of
issuance of such Class A-5 Certificate to the stated Remittance Date, (ii)
adding the results, and (iii) dividing the sum by the initial principal
balance of such Class A-5 Certificate.
PERCENTAGE OF THE ORIGINAL PRINCIPAL BALANCE OF THE CLASS B-1
CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF THE
MHP SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 0% 50% 75% 100% 125% 150% 200% 300%
- ---- ---- ---- --- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage................... 100% 100% 100% 100% 100% 100% 100% 100%
June 15, 1995........................ 100 100 100 100 100 100 100 100
June 15, 1996........................ 100 100 100 100 100 100 100 100
June 15, 1997........................ 100 100 100 100 100 100 100 100
June 15, 1998........................ 100 100 100 100 100 100 100 100
June 15, 1999........................ 100 100 100 100 100 100 100 100
June 15, 2000........................ 100 100 100 100 100 79 59 45
June 15, 2001........................ 100 100 100 92 68 47 24 1
June 15, 2002........................ 100 100 91 65 40 19 0 0
June 15, 2003........................ 100 96 65 38 14 0 0 0
June 15, 2004........................ 100 69 39 13 0 0 0 0
June 15, 2005........................ 100 46 16 0 0 0 0 0
June 15, 2006........................ 93 21 0 0 0 0 0 0
June 15, 2007........................ 66 0 0 0 0 0 0 0
June 15, 2008........................ 35 0 0 0 0 0 0 0
June 15, 2009........................ 2 0 0 0 0 0 0 0
June 15, 2010........................ 0 0 0 0 0 0 0 0
Weighted Average Life (1) (years).... 13.6 10.9 9.7 8.7 7.8 7.1 6.4 6.0
</TABLE>
- --------
(1) The weighted average life of a Class B-1 Certificate is determined by (i)
multiplying the amount of cash distributions in reduction of the principal
balance of such Certificate by the number of years from the date of
issuance of such Class B-1 Certificate to the stated Remittance Date, (ii)
adding the results, and (iii) dividing the sum by the initial principal
balance of such Class B-1 Certificate.
S-34
<PAGE>
PERCENTAGE OF THE ORIGINAL PRINCIPAL BALANCE OF THE CLASS B-2
CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF THE
MHP SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 0% 50% 75% 100% 125% 150% 200% 300%
- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage.................... 100% 100% 100% 100% 100% 100% 100% 100%
June 15, 1995......................... 100 100 100 100 100 100 100 100
June 15, 1996......................... 100 100 100 100 100 100 100 100
June 15, 1997......................... 100 100 100 100 100 100 100 100
June 15, 1998......................... 100 100 100 100 100 100 100 100
June 15, 1999......................... 100 100 100 100 100 100 100 100
June 15, 2000......................... 100 100 100 100 100 100 100 100
June 15, 2001......................... 100 100 100 100 100 100 100 100
June 15, 2002......................... 100 100 100 100 100 100 96 78
June 15, 2003......................... 100 100 100 100 100 96 79 59
June 15, 2004......................... 100 100 100 100 93 80 64 0
June 15, 2005......................... 100 100 100 94 79 67 51 0
June 15, 2006......................... 100 100 96 80 66 55 41 0
June 15, 2007......................... 100 99 81 66 54 44 0 0
June 15, 2008......................... 100 82 66 53 43 34 0 0
June 15, 2009......................... 100 65 51 41 0 0 0 0
June 15, 2010......................... 87 54 42 0 0 0 0 0
June 15, 2011......................... 72 43 0 0 0 0 0 0
June 15, 2012......................... 54 0 0 0 0 0 0 0
June 15, 2013......................... 35 0 0 0 0 0 0 0
June 15, 2014......................... 0 0 0 0 0 0 0 0
Weighted Average Life (1) (years)..... 17.9 16.1 15.1 14.1 13.1 12.2 10.9 9.0
</TABLE>
- --------
(1) The weighted average life of a Class B-2 Certificate is determined by (i)
multiplying the amount of cash distributions in reduction of the principal
balance of such Certificate by the number of years from the date of
issuance of such Class B-2 Certificate to the stated Remittance Date, (ii)
adding the results, and (iii) dividing the sum by the initial principal
balance of such Class B-2 Certificate.
S-35
<PAGE>
DESCRIPTION OF THE CERTIFICATES
The following information supplements, and to the extent inconsistent
therewith supersedes, the information in the Prospectus under "Description of
the Certificates."
The Certificates will be issued pursuant to the Agreement between the
Company, as Seller and Servicer, and the Trustee. A copy of the execution form
of the Agreement will be filed in a Current Report on Form 8-K with the
Securities and Exchange Commission after the initial issuance of the
Certificates. The following summary describes certain terms of the Agreement,
does not purport to be complete and is qualified in its entirety by the
Agreement, which is incorporated herein by reference. Wherever provisions of
the Agreement are referred to, such provisions are incorporated herein by
reference.
GENERAL
The Offered Certificates will be issued in fully registered form only in
denominations equal to $1,000 or any integral multiple of $1,000 in excess
thereof, except for one Class B-2 Certificate with a denomination representing
the remainder of the Original Class B-2 Principal Balance. The Percentage
Interest of a Class A Certificate will be equal to the percentage obtained from
dividing its denomination by the Original Class A-1 Principal Balance, the
Original Class A-2 Principal Balance, the Original Class A-3 Principal Balance,
the Original Class A-4 Principal Balance or the Original Class A-5 Principal
Balance, as appropriate. The Class A Certificates in the aggregate will
represent an initial 89% (approximate) undivided interest in the Trust. The
Percentage Interest of a Class B Certificate will be equal to the percentage
obtained from dividing its denomination by the Original Class B-1 Principal
Balance or the Original Class B-2 Principal Balance, as appropriate. The Class
B Certificates in the aggregate will represent an initial 11% (approximate)
undivided interest in the Trust. The Trust will consist of the Contracts and
the rights, benefits, obligations and proceeds arising therefrom or in
connection therewith, proceeds from certain hazard insurance on individual
Manufactured Homes, proceeds from the errors and omissions protection policy to
the extent such proceeds relate to the Contracts and amounts held for the Trust
in the Certificate Account, and all proceeds in any way derived from any of the
foregoing. (Section 1.02.)
Distributions on the Certificates will be made by the Paying Agent on each
Remittance Date to persons in whose names the Certificates are registered as of
the preceding Record Date. The Remittance Date for the Certificates will be the
15th day of each month (or if such 15th day is not a business day, the next
succeeding business day) commencing July 15, 1994. Payments will be made by
check mailed to such Certificateholder at the address appearing on the
Certificate Register; provided that a Certificateholder who holds an aggregate
Percentage Interest of at least 5% of a Class of Certificates may request
payment by wire transfer of immediately available funds pursuant to written
instructions delivered to the Trustee at least 10 days prior to such Remittance
Date. Final payments will be made only upon tender of the Certificates to the
Paying Agent for cancellation. (Articles I and VIII.)
CONVEYANCE OF CONTRACTS
In addition to the representations and warranties described in the Prospectus
under "Description of Certificates--Conveyance of Contracts," the Company has
also made certain warranties with respect to the Contracts in the aggregate,
including that (i) the aggregate principal amount payable by the Obligors as of
the Cut-off Date equals the Cut-off Date Pool Principal Balance; (ii) as of the
Cut-off Date, no more than 10% of the Contracts by Cut-off Date Pool Principal
Balance are secured by Manufactured Homes located in any one state (except for
Contracts secured by Manufactured Homes located in North Carolina), no more
than 5% of the Contracts by remaining principal balance are secured by
Manufactured Homes located in an area with the same zip code and not more than
1% of the Contracts by remaining principal balance are secured by Manufactured
Homes located in California in an area with the same zip code; (iii)
approximately 79% of the Cut-off Date Pool Principal Balance is attributable to
loans to purchase new Manufactured Homes and approximately 21% of the Cut-off
Date Pool Principal Balance is attributable to loans to purchase used
Manufactured Homes; (iv) no Contract has a remaining maturity of more than 300
months; (v) the date of each Contract is on or after November 1980; and (vi) no
adverse selection procedures were employed in selecting the Contracts. (Article
III.)
S-36
<PAGE>
PAYMENTS ON CONTRACTS; DISTRIBUTIONS ON CERTIFICATES
The Trustee, on behalf of the Trust, will establish and maintain the
Certificate Account at a depository institution organized under the laws of the
United States or any state, the deposits of which are insured to the full
extent permitted by law by the Bank Insurance Fund (currently administered by
the Federal Deposit Insurance Corporation), whose short-term securities or
unsecured long-term debt (or, in the case of the principal bank of a bank
holding company system, the short-term securities or unsecured long-term debt
of such bank holding company) has a rating of at least P-1 by Moody's and of
one of the two highest rating categories from Fitch (if rated by Fitch) in the
case of short-term securities, or in one of the two highest rating categories
by Moody's and AAA or AA by Fitch (if rated by Fitch) in the case of unsecured
long-term debt, and which is subject to examination by federal or state
authorities (an "Eligible Institution"). (Section 1.02.) The Servicer may
authorize the Trustee to invest the funds in the Certificate Account in
Eligible Investments (as defined in the Agreement) that will mature not later
than the business day preceding the applicable monthly Remittance Date.
Eligible Investments include, among other investments, obligations of the
United States or of any agency thereof backed by the full faith and credit of
the United States; federal funds, certificates of deposit, time deposits and
bankers' acceptances sold by eligible financial institutions; certain
repurchase agreements with eligible institutions; corporate securities assigned
at least an Aa rating by Moody's and of one of the two highest rating
categories from Fitch (if rated by Fitch) not in excess of 10% of amounts in
the Certificate Account at the time of such investment; commercial paper
assigned at least aP-1 rating by Moody's and an F-1+ rating by Fitch (if rated
by Fitch) at the time of such investment; and shares of a registered investment
company, whose shares are registered under the Securities Act of 1933 and which
are rated by Moody's and by Fitch (if rated by Fitch) in their highest rating
category. (Section 5.05.)
All payments from Obligors on the Contracts received by the Servicer,
including Principal Prepayments and advance payments by Obligors not
constituting Principal Prepayments ("Advance Payments"), shall be paid into the
Certificate Account no later than one business day following receipt thereof,
except amounts received as late payment fees, extension fees, assumption fees
or similar fees. Such fees are included as part of the Servicer's servicing
fees. See "Servicing Compensation and Payment of Expenses" in the Prospectus.
In addition, amounts paid by the Company for Contracts repurchased as a result
of breach of warranties under the Agreement, and amounts required to be
deposited upon substitution of a Contract because of breach of warranties, as
described under "Conveyance of Contracts" in the Prospectus shall be paid into
the Certificate Account. The Servicer will not make any advances in respect of
delinquent payments on the Contracts.
On the third business day prior to each Remittance Date (the "Determination
Date"), the Servicer will determine the Amount Available and the amounts to be
distributed on the Certificates for such Remittance Date. The Amount Available
is the amount in the Certificate Account on the last day of the preceding Due
Period less the following amounts: any repossession profits on defaulted
Contracts (of which there are expected to be none); Advance Payments in respect
of the Due Period just ended; amounts payable to the Servicer to reimburse it
for any REMIC "prohibited transaction" tax imposed on the Trust and paid by the
Servicer; Liquidation Expenses incurred and taxes and insurance (on repossessed
Manufactured Homes) advanced by the Servicer in respect of Manufactured Homes
that are reimbursable to the Servicer under the Agreement; and any amounts
incorrectly deposited in the Certificate Account. "Liquidation Expenses" are
out-of-pocket expenses incurred by the Servicer in connection with the
liquidation of a defaulted Contract, including, without limitation, legal fees
and disbursements. (Sections 1.02 and 8.02.)
The Trustee will withdraw funds from the Certificate Account to make payments
to Certificateholders. From time to time, as provided in the Agreement, the
Trustee will also withdraw funds from the Certificate Account to make payments
to the Servicer. (Sections 1.02 and 8.02.)
DISTRIBUTIONS
On each Remittance Date, distributions on the Offered Certificates will be
made first to the holders of the Class A Certificates and then to the holders
of the Class B Certificates, as described below.
S-37
<PAGE>
Distributions of interest and principal to holders of a Class of Class A
Certificates will be made on each Remittance Date in an amount equal to the sum
of (i) their respective Percentage Interests of the amount of interest
calculated as described under "Class A Interest" below and (ii) their
respective Percentage Interests, distributed to each Class of Class A
Certificates in the order of priority described under "Class A Principal"
below, of the Class A Percentage of the Formula Principal Distribution Amount,
calculated as described under "Class A Principal" below. Distributions on the
Class A Certificates will be applied first to the payment of interest and then
to the payment of principal. The Class A Distribution Amount for any Remittance
Date will be equal to the sum (referred to as the "Class A Formula Distribution
Amount") of (i) the amount of interest calculated as set forth under "Class A
Interest" below and (ii) the Class A Percentage of the Formula Principal
Distribution Amount, except that, if the Class A Formula Distribution Amount
exceeds the Amount Available in the Certificate Account on such Remittance
Date, then the Class A Distribution Amount shall instead equal the Amount
Available. (Sections 1.02 and 8.01.)
Distributions of interest and principal to holders of Class B-1 Certificates
will be made on each Remittance Date in an amount equal to their respective
Percentage Interests multiplied by the Class B-1 Distribution Amount.
Distributions on the Class B-1 Certificates will be applied first to the
payment of interest and then to the payment of principal. The Class B-1
Distribution Amount for any Remittance Date is intended to be equal to the sum
(referred to as the "Class B-1 Formula Distribution Amount") of (a) the amount
of interest calculated as set forth under "Class B-1 Interest" below and (b) on
and after the Class B Cross-over Date, if each Class B Principal Distribution
Test was satisfied on such Remittance Date, an amount of principal equal to the
Class B Percentage of the Formula Principal Distribution Amount calculated as
described under "Class B-1 Principal" below. If the Amount Available in the
Certificate Account available for distribution to the Class B-1
Certificateholders (after giving effect to any distribution made to Class A
Certificateholders on such Remittance Date) (the "Class B-1 Remaining Amount
Available") is less than the Class B-1 Formula Distribution Amount, then the
Class B-1 Distribution Amount will equal the sum of such Class B-1 Remaining
Amount Available and the amount of such deficiency will be carried forward and
added to the amount such holders will be entitled to receive on the next
Remittance Date. (Sections 1.02 and 8.03.)
Distributions of interest and principal to holders of the Class B-2
Certificates will be made on each Remittance Date in an amount equal to their
respective Percentage Interests of the Class B-2 Distribution Amount. The Class
B-2 Distribution Amount for any Remittance Date is intended to be equal to the
sum (referred to as the "Class B-2 Formula Distribution Amount") of (a) the
amount of interest calculated as set forth under "Class B-2 Interest" below and
(b) on and after the Sixth Cross-over Date, if each Class B Principal
Distribution Test was satisfied on such Remittance Date, an amount equal to the
Class B Percentage of the Formula Principal Distribution Amount, calculated as
described under "Class B-2 Principal" below. Distributions on the Class B-2
Certificates will be applied first to the payment of interest and then to the
payment of principal. If the Amount Available in the Certificate Account
available for distribution to the Class B-2 Certificateholders (after giving
effect to distributions made to Class A and Class B-1 Certificateholders on
such Remittance Date) (the "Class B-2 Remaining Amount Available") is not
sufficient to make a full distribution of the Class B-2 Formula Distribution
Amount to the Class B-2 Certificateholders, then the Class B-2 Distribution
Amount will equal the sum of the Class B-2 Remaining Amount Available and the
Company will be obligated to pay the amount of such deficiency (the "Guarantee
Payment") into the Certificate Account pursuant to the Limited Guarantee.
Each distribution with respect to a Book-Entry Certificate will be paid to
DTC, which will credit the amount of such distribution to the accounts of its
Participants in accordance with its normal procedures. Each Participant will be
responsible for disbursing such distribution to the Certificate Owners that it
represents and to each indirect participating brokerage firm (a "brokerage
firm" or "indirect participating firm") for which it acts as agent. Each
brokerage firm will be responsible for disbursing funds to the Certificate
Owners that it represents. All such credits and disbursements with respect to a
Book-Entry Certificate are to be made by DTC and the Participants in accordance
with DTC's rules.
S-38
<PAGE>
The Servicer will furnish to the Trustee, and the Trustee will send with each
distribution on a Remittance Date to each holder of the Offered Certificates, a
statement or statements setting forth, among other things, (i) the amount of
such distribution allocable to principal (including Principal Prepayments, if
any) and (ii) the amount of such distribution allocable to interest. Such
amounts will be expressed as a dollar amount per Class A or Class B Certificate
with a 1% Percentage Interest or per $1,000 denomination of Class A or Class B
Certificate. (Section 6.05.)
On each Remittance Date the Amount Available will be distributed to Class A
Certificateholders and then Class B Certificateholders in the amounts and order
of priority set forth below:
CLASS A INTEREST
One month's interest (computed on the basis of a 360-day year of twelve 30-
day months) will be paid concurrently to the holders of each Class of Class A
Certificates on each Remittance Date, to the extent of the Amount Available in
the Certificate Account on such date, at the related Remittance Rate on the
then outstanding Principal Balance of each Class of Class A Certificates.
Interest on each Class of Class A Certificates will accrue from May 23, 1994,
or from the most recent Remittance Date on which interest has been paid to but
excluding the following Remittance Date. (Sections 1.02 and 8.03.)
The Remittance Rates for the Class A-1, Class A-2, Class A-3, Class A-4 and
Class A-5 Certificates are set forth on the cover of this Prospectus
Supplement, and in each case will be computed on the basis of a 360-day year of
twelve 30-day months.
The Principal Balance of any Class of Class A Certificates as of any
Remittance Date is the Original Principal Balance of such Class less all
amounts previously distributed to holders of such Class on account of
principal. The Class A Principal Balance as of any Remittance Date is the sum
of the Class A-1 Principal Balance, the Class A-2 Principal Balance, the Class
A-3 Principal Balance, the Class A-4 Principal Balance and the Class A-5
Principal Balance. (Section 1.02.)
In the event that, on a particular Remittance Date, the Amount Available in
the Certificate Account is not sufficient to make a full distribution of
interest to the holders of a Class of Class A Certificates, the Amount
Available will be distributed among the outstanding Classes of Class A
Certificates pro rata based on the aggregate amount of interest due on each
such Class of Certificates, and the amount of the shortfall will be carried
forward and added to the amount such holders will be entitled to receive on the
next Remittance Date. (Section 1.02.) Such a shortfall could occur, for
example, if delinquencies or losses realized on the Contracts were
exceptionally high and were concentrated in a particular month. Any such amount
so carried forward will bear interest at the applicable Remittance Rate for
each Class of Class A Certificates, to the extent permitted by law.
The Class A-5 Remittance Rate on each Remittance Date will be 8.40% per
annum, subject to a maximum rate equal to the weighted average of the Contract
Rates on each Contract in the Contract Pool, computed on the basis of a 360-day
year of twelve 30-day months. In all but the most unusual prepayment scenarios,
it is anticipated that the Class A-5 Remittance Rate will be 8.40%. In the
unlikely event that a large number of Contracts having Contract Rates equal to
or higher than 8.40% (which Contracts represent approximately 99.50% of the
Cut-off Date Pool Principal Balance) were to prepay while the Contracts having
Contract Rates lower than 8.40% did not prepay, with the result that the
interest collections on the remaining Contracts were not sufficient to support
a Class A-5 Remittance Rate of 8.40%, then the Class A-5 Remittance Rate would
be equal to the weighted average of the Contract Rates on each Contract
remaining in the Contract Pool. The weighted average Contract Rate of all
Contracts in the Contract Pool as of the Cut-off Date was approximately 10.67%.
S-39
<PAGE>
CLASS A PRINCIPAL
Holders of a Class of Class A Certificates will be entitled to receive on
each Remittance Date as payments of principal, in the order of priority set
forth below and to the extent of the Amount Available in the Certificate
Account on such date after payment of interest on each Class of Class A
Certificates, the Class A Percentage of the sum (such sum being referred to
hereinafter as the "Formula Principal Distribution Amount") of (i) all
scheduled payments of principal due on each outstanding Contract during the
month preceding the month in which the Remittance Date occurs, (ii) the
Scheduled Principal Balance of each Contract which, during the month preceding
the month of such Remittance Date, was purchased by the Company pursuant to the
Agreement on account of certain breaches of its representations and warranties,
(iii) all Partial Principal Prepayments applied and all Principal Prepayments
in Full received during such preceding month and (iv) the Scheduled Principal
Balance of each Contract that became a Liquidated Contract during such
preceding month. When the Principal Balance of a Class of Class A Certificates
is reduced to zero, no further distributions of principal will be made to the
holders of such Class.
The Class A Percentage for any Remittance Date prior to the Class B Cross-
over Date, and for any Remittance Date on or after the Class B Cross-over Date
on which any Class B Principal Distribution Test is not satisfied (each as
described under "Class B-1 Principal" below) will be 100%, and for any
Remittance Date on or after the Class B Cross-over Date on which each Class B
Principal Distribution Test is satisfied will equal a fraction, expressed as a
percentage, the numerator of which is the Class A Principal Balance as of such
Remittance Date and the denominator of which is the Pool Scheduled Principal
Balance as of the immediately preceding Remittance Date. The Scheduled
Principal Balance of a Contract as of any Remittance Date is the unpaid
principal balance of such Contract as specified in the amortization schedule at
the time relating thereto (before any adjustment to such schedule by reason of
bankruptcy, moratorium or similar waiver or grace period) as of the Due Date in
the Due Period next preceding such Remittance Date, after giving effect to any
previous partial prepayments and to the payment of principal due on such Due
Date and irrespective of any delinquency in payment on such Contract. The Pool
Scheduled Principal Balance is the aggregate of the Scheduled Principal
Balances of Contracts outstanding at the end of a month. A Liquidated Contract
is a defaulted Contract as to which all amounts that the Servicer expects to
recover through the date of disposition of the Manufactured Home have been
received. (Section 1.02.)
The Class A Percentage of the Formula Principal Distribution Amount will be
distributed, to the extent of the Amount Available after payment of interest on
each class of Class A Certificates, first to the Class A-1 Certificateholders
until the Class A-1 Principal Balance has been reduced to zero, then to the
Class A-2 Certificateholders until the Class A-2 Principal Balance has been
reduced to zero, then to the Class A-3 Certificateholders until the Class A-3
Principal Balance has been reduced to zero, then to the Class A-4
Certificateholders until the Class A-4 Principal Balance has been reduced to
zero and then to the Class A-5 Certificateholders until the Class A-5 Principal
Balance has been reduced to zero.
As hereinafter described, all losses on Liquidated Contracts will be absorbed
first by the Class B-2 Certificates and then by the Class B-1 Certificates. If
the Amount Available on any Remittance Date is less than the Class A
Distribution Amount, the Amount Available will be applied first to the payment
of interest pro rata to the outstanding Class A Certificates, based on the
aggregate amount of interest then payable on each Class of Class A Certificates
and then to the payment of principal to the Class of Class A Certificates then
entitled.
CLASS B-1 INTEREST
Interest will be paid to the Class B-1 Certificateholders on each Remittance
Date, to the extent of the Class B-1 Remaining Amount Available, if any.
Interest on the outstanding Class B-1 Principal Balance will accrue from May
23, 1994, or from the most recent Remittance Date on which interest has been
paid to but excluding the following Remittance Date. The Class B-1 Principal
Balance is the Original Class B-1 Principal Balance less the sum of all amounts
previously distributed to Class B-1 Certificateholders on account of
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principal. In the event that, on a particular Remittance Date, the Class B-1
Remaining Amount Available in the Certificate Account is not sufficient to make
a full distribution of interest to the Class B-1 Certificateholders, the amount
of such deficiency will be carried forward and added to the amount such holders
will be entitled to receive on the next Remittance Date. Any such amount so
carried forward will bear interest at the Class B-1 Remittance Rate, to the
extent permitted by law.
The Class B-1 Remittance Rate on each Remittance Date will be 8.30% per
annum, subject to a maximum rate equal to the weighted average of the Contract
Rates on each Contract in the Contract Pool, computed on the basis of a 360-day
year of twelve 30-day months. In all but the most unusual prepayment scenarios,
it is anticipated that the B-1 Remittance Rate will be 8.30%. In the unlikely
event that a large number of Contracts having Contract Rates equal to or higher
than 8.30% (which Contracts represent approximately 99.50% of the Cut-off Date
Pool Principal Balance) were to prepay while the Contracts having Contract
Rates lower than 8.30% did not prepay, with the result that the interest
collections on the remaining Contracts were not sufficient to support a Class
B-1 Remittance Rate of 8.30%, then the Class B-1 Remittance Rate would be equal
to the weighted average of the Contract Rates on each Contract remaining in the
Contract Pool. The weighted average Contract Rate of all Contracts in the
Contract Pool as of the Cut-off Date was approximately 10.67%.
CLASS B-1 PRINCIPAL
Prior to the Class B Cross-over Date, there will be no distributions of
principal on the Class B-1 Certificates. The Class B Cross-over Date will be
the later of (A) the Remittance Date in July 1999 and (B) the first Remittance
Date on which the Class B Principal Balance represents 22% or more of the Pool
Scheduled Principal Balance.
On each Remittance Date on or after the Class B Cross-over Date and prior to
the Remittance Date on which the Class A Principal Balance is reduced to zero,
holders of Class B Certificates will be entitled to distributions of principal
only if each of the following tests (each a "Class B Principal Distribution
Test") is satisfied on such Remittance Date: (i) the Average Sixty-Day
Delinquency Ratio (as defined in the Agreement) as of such Remittance Date must
not exceed 4%; (ii) the Average Thirty-Day Delinquency Ratio (as defined in the
Agreement) as of such Remittance Date must not exceed 6%; (iii) the Cumulative
Realized Losses (as defined in the Agreement) as of such Remittance Date must
not exceed a certain specified percentage of the Cut-off Date Pool Principal
Balance, depending on the year in which such Remittance Date occurs; (iv) the
Current Realized Loss Ratio (as defined in the Agreement) as of such Remittance
Date must not exceed 2.50%; (v) the Class B Principal Balance Test (as defined
in the Agreement) must be equal to or greater than 22%; and (vi) the
outstanding Class B Principal Balance must not be less than $3,940,095.22.
On each Remittance Date on or after the Class B Cross-over Date, if each
Class B Principal Distribution Test is satisfied on such Remittance Date, Class
B-1 Certificateholders will be entitled to receive, as payments of principal,
the Class B Percentage of the Formula Principal Distribution Amount to the
extent of the Class B-1 Remaining Amount Available in the Certificate Account
on such date after payment of all interest payable on the Class B-1
Certificates. The Class B-2 Certificateholders will not be entitled to any
distributions of principal from the Class B-1 Remaining Amount Available until
the Class B-1 Principal Balance has been reduced to zero. The Class B
Percentage for any Remittance Date on or after the Class B Cross-over Date on
which each Class B Principal Distribution Test has been satisfied will be equal
to 100% minus the Class A Percentage. The Class B Percentage for each
Remittance Date, if any, after the Class A Principal Balance has been reduced
to zero will be equal to 100%.
CLASS B-2 INTEREST
Interest will be paid to the Class B-2 Certificateholders on each Remittance
Date, to the extent of (i) the Class B-2 Remaining Amount Available, if any and
(ii) the amount, if any, paid pursuant to the Limited Guarantee. Interest on
the outstanding Class B-2 Principal Balance will accrue from May 23, 1994, or
from the most recent Remittance Date on which interest has been paid to but
excluding the following Remittance Date. The Class B-2 Principal Balance is the
Original Class B-2 Principal Balance less the sum of all amounts previously
distributed to Class B-2 Certificateholders on account of principal. In the
event that, on a particular Remittance Date, the Class B-2 Remaining Amount
Available in the Certificate Account is not
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sufficient to make a full distribution of interest to the Class B-2
Certificateholders and the Company fails to pay such amount under the Limited
Guarantee, the amount of such deficiency will be carried forward and added to
the amount such holders will be entitled to receive on the next Remittance
Date. Any such amount so carried forward will bear interest at the Class B-2
Remittance Rate, to the extent permitted by law.
The Class B-2 Remittance Rate on each Remittance Date will be 8.65% per
annum, subject to a maximum rate equal to the weighted average of the Contract
Rates on each Contract in the Contract Pool, computed on the basis of a 360-
day year of twelve 30-day months. In all but the most unusual prepayment
scenarios, it is anticipated that the Class B-2 Remittance Rate will be 8.65%.
In the unlikely event that a large number of Contracts having Contract Rates
equal to or higher than 8.65% (which Contracts represent approximately 99.11%
of the Cut-off Date Pool Principal Balance) were to prepay while the Contracts
having Contract Rates lower than 8.65% did not prepay, with the result that
the interest collections on the remaining Contracts were not sufficient to
support a Class B-2 Remittance Rate of 8.65%, then the Class B-2 Remittance
Rate would be equal to the weighted average of the Contract Rates on each
Contract remaining in the Contract Pool. The weighted average Contract Rate of
all Contracts in the Contract Pool as of the Cut-off Date was approximately
10.67%.
CLASS B-2 PRINCIPAL
Except for distributions of any amounts representing a Class B-2 Principal
Liquidation Loss Amount as described below, prior to the Remittance Date on
which the Class B-1 Principal Balance is reduced to zero (the "Sixth Cross-
over Date"), there will be no distributions of principal on the Class B-2
Certificates. Prior to the Class B Cross-over Date there will be no
distributions of principal on the Class B-1 Certificates. The Class B Cross-
over Date will be the later of (A) the Remittance Date in July 1999, and (B)
the first Remittance Date on which the Class B Principal Balance represents
22% or more of the Pool Scheduled Principal Balance.
On each Remittance Date prior to the Sixth Cross-over Date, and on any
Remittance Date on or after the Sixth Cross-over Date on which any Class B
Principal Distribution Test (as described under "Class B-1 Principal Balance"
above) is not satisfied, the Class B-2 Certificateholders will be entitled to
receive pursuant to the Limited Guarantee the amount (the "Class B-2 Principal
Liquidation Loss Amount"), if any, by which the sum of the Class A Principal
Balance, the Class B-1 Principal Balance and the Class B-2 Principal Balance
for such Remittance Date exceeds the Pool Scheduled Principal Balance for such
Remittance Date (after giving effect to all distributions of principal on such
Remittance Date). The Class B-2 Principal Liquidation Loss Amount represents
future principal payments on the Contracts that, because of the subordination
of the Class B-2 Certificates and Liquidation Losses on Liquidated Contracts,
will not be paid to the Class B-2 Certificateholders.
On each Remittance Date on or after the Sixth Cross-over Date, if each Class
B Principal Distribution Test is satisfied on such Remittance Date, Class B-2
Certificateholders will be entitled to receive, as payments of principal, the
Class B Percentage (as described under "Class B-1 Principal Balance" above) of
the Formula Principal Distribution Amount to the extent of the Class B-2
Remaining Amount Available in the Certificate Account on such date, after
payment of all interest payable on the Class B-2 Certificates and the
Guarantee Payment, if any.
SUBORDINATION OF CLASS B CERTIFICATES AND CLASS C CERTIFICATES
The rights of the holders of the Class B Certificates and the Class C
Certificates to receive distributions with respect to the Contracts in the
Trust will be subordinated to such rights of the Class A Certificateholders.
This subordination is intended to enhance the likelihood of regular receipt by
the holders of the Class A Certificates of the full amount of their scheduled
monthly payments of principal and interest and to afford such holders
protection against losses on Liquidated Contracts. The protection afforded to
the Class A Certificateholders by means of the subordination feature will be
accomplished by the preferential right of the Class A Certificateholders to
receive, prior to any distribution being made on a Remittance Date in respect
of the Class B Certificates and the Class C Certificates, the amount of
principal and interest due them on each Remittance Date out of the Amount
Available on deposit on such date in the Certificate Account and
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by the right of the Class A Certificateholders to receive future distributions
on the Contracts that would otherwise be payable to the holders of Class B-1
Certificates and Class B-2 Certificates. On each Remittance Date the Class B-1
Certificateholders will be entitled to receive only amounts described above
under "Class B-1 Interest" and "Class B-1 Principal," and the Class B-2
Certificateholders will be entitled to receive only amounts described above
under "Class B-2 Interest" and "Class B-2 Principal."
In addition, the rights of the holders of the Class B-2 Certificates and the
Class C Certificates to receive distributions with respect to the Contracts in
the Trust will be subordinate to such rights of the Class B-1
Certificateholders. This subordination is intended to enhance the likelihood
of regular receipt by the holders of the Class B-1 Certificates of the full
amount of their scheduled monthly payments of principal and interest and to
afford such holders protection against losses on Liquidated Contracts. The
protection afforded to the Class B-1 Certificateholders by means of the
subordination feature will be accomplished by the preferential right of the
Class B-1 Certificateholders to receive, prior to any distribution being made
on a Remittance Date in respect of the Class B-2 Certificates and the Class C
Certificates, the amount of principal and interest due them on each Remittance
Date out of the Class B-1 Remaining Amount Available on deposit on such date
in the Certificate Account and by the right of the Class B-1
Certificateholders to receive future distributions on the Contracts that would
otherwise be payable to the holders of Class B-2 Certificates.
The rights of the Class C Certificateholders to receive distributions with
respect to the Contracts in the Trust will be subordinated to the rights of
the Class B-1 and Class B-2 Certificateholders. On each Remittance Date the
Class C Certificateholders will receive the remaining Amount Available, if
any, after payment of the amount distributed to the Class A, Class B-1 and
Class B-2 Certificateholders as described above (less the Monthly Servicing
Fee, and less amounts retained by the Servicer to reimburse itself for taxes
paid in respect of prohibited transactions) plus aggregate Repossession
Profits (as defined in the Agreement).
As described above, prior to the time that the Class A Principal Balance is
reduced to zero, the distribution of principal to the Class A
Certificateholders is intended to include the Class A Percentage of the
Scheduled Principal Balance of each Contract that became a Liquidated Contract
during the month next preceding the month of such distribution. If the
Liquidation Proceeds, net of related Liquidation Expenses, from such
Liquidated Contract are less than its Scheduled Principal Balance plus accrued
interest thereon, the deficiency will, in effect, be absorbed by the Class B
and the Class C Certificateholders and the Company, since a portion of the
Amount Available equal to such deficiency and otherwise distributable to them
will be paid to the Class A Certificateholders. If the Amount Available is not
sufficient to cover the amounts distributable to the Class A
Certificateholders on a particular Remittance Date, then the Class A
Percentage on future Remittance Dates will be increased and the Class B
Percentage on future Remittance Dates will be reduced as a result of such
deficiency. If the Amount Available is sufficient to cover the amounts
distributable in respect of principal to the Class A Certificateholders but is
not sufficient to cover the amounts distributable in respect of principal to
the Class B-1 Certificateholders (if any) on a particular Remittance Date,
then the Class A Percentage on future Remittance Dates will be unaffected, and
the amount of the deficiency will be carried forward as an amount that the
Class B-1 Certificateholders are entitled to receive on the next Remittance
Date. Consequently, but for the effect of the relative subordination of the
Monthly Servicing Fee and amounts otherwise distributable to the Class B-2 and
Class C Certificateholders, the Class B-1 Certificateholders will absorb (i)
all losses on each Liquidated Contract in the amount by which its Liquidation
Proceeds, net of the related Liquidation Expenses, are less than its unpaid
principal balance plus accrued and unpaid interest thereon less the Monthly
Servicing Fee and (ii) all delinquent payments on the Contracts. But for the
effect of the relative subordination of the Monthly Servicing Fee and amounts
otherwise distributable to the Class C Certificateholders on each Remittance
Date, and amounts paid under the Limited Guarantee as described below, the
Class B-2 Certificateholders will absorb (i) all losses on each Liquidated
Contract in the amount by which its Liquidation Proceeds, net of the related
Liquidation Expenses, are less than its unpaid principal balance plus accrued
and unpaid interest thereon less the Monthly Servicing Fee and (ii) all
delinquent payments on the Contracts. Class B-2 Certificateholders, however,
will be entitled to receive Guarantee Payments and amounts otherwise
distributable on Remittance Dates as (i) the Monthly Servicing Fee payable to
the Company, (ii) the Class C Distribution Amount and (iii) those amounts, if
any, not received by the Class B-2 Certificateholders on a prior Remittance
Date. If
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the Company fails to make a payment required under the Limited Guarantee, the
Class B-2 Certificateholders will incur a loss on their investment in the
Class B-2 Certificates.
CAPITALIZED INTEREST ACCOUNT
Because the amount distributable on the Certificates on July 15, 1994 will
include interest accrued from May 23, 1994, a reserve fund (the "Capitalized
Interest Account") will be established on the Closing Date with a deposit of
$750,000. Funds on deposit in the Capitalized Interest Account will be
invested in Eligible Investments (as described under "--Payments on Contracts;
Distributions on Certificates"). If the Amount Available is insufficient to
make a full distribution of principal and interest on the Certificates (other
than the Class B-2 Certificates) on July 15, 1994, the Trustee will withdraw
the amount of any such shortfall from the Capitalized Interest Account and
deposit such amount in the Certificate Account. The Company will be obligated
under the Limited Guarantee to make a Guarantee Payment equal to any shortfall
in the amount distributable on the Class B-2 Certificates, as described below
under "--Limited Guarantee of the Company." Any funds remaining on deposit in
the Capitalized Interest Account after the distribution to Certificateholders
on July 15, 1994 will be released to a subsidiary of the Company.
LIMITED GUARANTEE OF THE COMPANY
In order to mitigate the effect of the subordination of the Class B-2
Certificates and liquidation losses and delinquencies on the Contracts, the
Company will provide a guarantee (the "Limited Guarantee") against losses that
would otherwise be absorbed by the Class B-2 Certificates. Each payment
required to be made under the Limited Guarantee is referred to as a "Guarantee
Payment." Prior to the Sixth Cross-over Date, and on any Remittance Date on or
after the Sixth Cross-over Date on which a Class B Principal Distribution Test
is not satisfied, the Guarantee Payment will equal the amount, if any, by
which (i) the sum of (a) the Class B-2 Formula Distribution Amount for such
Remittance Date (which will be one month's interest at the Class B-2
Remittance Rate on the Class B-2 Principal Balance) and (b) the Class B-2
Principal Liquidation Loss Amount for such Remittance Date exceeds (ii) the
Class B-2 Distribution Amount for such Remittance Date. The Class B-2
Principal Liquidation Loss Amount for any Remittance Date equals the amount,
if any, by which the sum of the Class A Principal Balance, the Class B-1
Principal Balance and the Class B-2 Principal Balance for such Remittance Date
exceeds the Pool Scheduled Principal Balance for such Remittance Date. The
Class B-2 Principal Liquidation Loss Amount is, in substance, the amount of
delinquencies and losses experienced on the Contracts during the related due
period that was not absorbed by the Class C Certificates and the Monthly
Servicing Fee otherwise payable to the Company. On each Remittance Date on or
after the Sixth Cross-over Date, if each Class B Principal Distribution Test
is satisfied on such Remittance Date, the Guarantee Payment will equal the
amount, if any, by which (i) the Class B-2 Formula Distribution Amount for
such Remittance Date (which will include both interest and principal) exceeds
(ii) the Class B-2 Remaining Amount Available for such Remittance Date.
The Limited Guarantee will be an unsecured general obligation of the Company
and will not be supported by any letter of credit or other credit enhancement
arrangement. The Limited Guarantee will not benefit in any way, or result in
any payment to, the Class A, Class B-1 or Class C Certificateholders.
REPORTS TO CERTIFICATEHOLDERS
The Servicer will furnish to the Trustee, and the Trustee will include with
each distribution to a Class A Certificateholder, a statement in respect of
the related Remittance Date setting forth, among other things:
(a) the amount of such distribution to holders of each Class of Class A
Certificates allocable to interest (separately identifying any Unpaid
Interest Shortfall included);
(b) the amount of such distribution to holders of each Class of Class A
Certificates allocable to principal (separately identifying the aggregate
amount of any Principal Prepayments included);
(c) the amount, if any, by which the Class A Formula Distribution Amount
exceeds the Class A Distribution Amount for such Remittance Date;
(d) the Principal Balance of each Class of Class A Certificates after
giving effect to the distribution of principal on such Remittance Date;
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(e) the Class A Percentage for the following Remittance Date;
(f) the Pool Scheduled Principal Balance of the Contracts for the
following Remittance Date;
(g) the Pool Factor (a percentage derived from a fraction the numerator
of which is the sum of the Principal Balance of each Class of Class A
Certificates and the Principal Balance of each Class of Class B
Certificates and the denominator of which is the Cut-off Date Pool
Principal Balance);
(h) the number and aggregate principal balance of Contracts delinquent
(i) 30-59 days and (ii) 60 or more days;
(i) the number of Manufactured Homes that were repossessed during the Due
Period ending immediately prior to such Remittance Date; and
(j) the number of Manufactured Homes that were repossessed but remain in
inventory as of the last day of the Due Period ending immediately prior to
such Remittance Date.
Information furnished pursuant to clauses (a) through (d) will be expressed
as dollar amounts for a Class A Certificate with a 1% Percentage Interest or
per $1,000 denomination of Class A Certificate. (Section 6.05.)
In addition, within a reasonable period of time after the end of each
calendar year, the Servicer will furnish a report to each Class A
Certificateholder of record at any time during such calendar year as to the
aggregate of amounts reported pursuant to (a) and (b) above for such calendar
year.
The Servicer will furnish to the Trustee, and the Trustee will include with
each distribution to a Class B-1 Certificateholder, a statement in respect of
the related Remittance Date setting forth, among other things:
(a) the amount of such distribution to holders of the Class B-1
Certificates allocable to interest (separately identifying any Unpaid
Interest Shortfall included);
(b) the amount of such distribution to holders of the Class B-1
Certificates allocable to principal (separately identifying the aggregate
amount of any Principal Prepayments included);
(c) the amount, if any, by which the Class B-1 Formula Distribution
Amount exceeds the Class B-1 Remaining Amount Available for such Remittance
Date;
(d) the Principal Balance of the Class B-1 Certificates after giving
effect to the distribution of principal on such Remittance Date;
(e) the Class B Percentage for the following Remittance Date;
(f) the Pool Scheduled Principal Balance of the Contracts for the
following Remittance Date;
(g) the Pool Factor (a percentage derived from a fraction the numerator
of which is the sum of the Principal Balance of each Class of Class A
Certificates and the Principal Balance of each Class of Class B
Certificates and the denominator of which is the Cut-off Date Pool
Principal Balance);
(h) the number and aggregate principal balance of Contracts delinquent
(i) 30-59 days and (ii) 60 or more days;
(i) the number of Manufactured Homes that were repossessed during the Due
Period ending immediately prior to such Remittance Date; and
(j) the number of Manufactured Homes that were repossessed but remain in
inventory as of the last day of the Due Period ending immediately prior to
such Remittance Date.
Information furnished pursuant to clauses (a) through (d) will be expressed as
dollar amounts for a Class B-1 Certificate with a 1% Percentage Interest or per
$1,000 denomination of Class B-1 Certificate. (Section 6.05.)
In addition, within a reasonable period of time after the end of each
calendar year, the Servicer will furnish a report to each Class B-1
Certificateholder of record at any time during such calendar year as to the
aggregate of amounts reported pursuant to (a) and (b) above for such calendar
year.
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The Servicer will furnish to the Trustee, and the Trustee will include with
each distribution to a Class B-2 Certificateholder, a statement in respect of
the related Remittance Date setting forth, among other things:
(a) the amount of such distribution to holders of Class B-2 Certificates
allocable to interest;
(b) the amount of such distribution to holders of Class B-2 Certificates
allocable to principal (separately identifying the aggregate amount of any
Principal Prepayments included);
(c) the amount, if any, by which the Class B-2 Formula Distribution
Amount exceeds the Class B-2 Remaining Amount Available for such Remittance
Date;
(d) the Class B-2 Liquidation Loss Amount, if any, for such Remittance
Date;
(e) the Guarantee Payment, if any, for such Remittance Date;
(f) the Class B-2 Principal Balance after giving effect to the
distribution of principal on such Remittance Date;
(g) the Class B Percentage for the following Remittance Date;
(h) the Pool Scheduled Principal Balance of the Contracts for the
following Remittance Date;
(i) the Pool Factor (a percentage derived from a fraction the numerator
of which is the sum of the Principal Balance of each Class of Class A
Certificates and the Principal Balance of each Class of Class B
Certificates and the denominator of which is the Cut-off Date Pool
Principal Balance);
(j) the number and aggregate principal balance of Contracts delinquent
(i) 30-59 days and (ii) 60 or more days;
(k) the number of Manufactured Homes that were repossessed during the Due
Period ending immediately prior to such Remittance Date;
(l) the number of Manufactured Homes that were repossessed but remain in
inventory as of the last day of the Due Period ending immediately prior to
such Remittance Date; and
(m) the weighted average Contract Rate of all outstanding Contracts.
Information furnished pursuant to clauses (a) through (c) will be expressed as
dollar amounts for a Class B-2 Certificate with a 1% Percentage Interest or per
$1,000 denomination of Class B-2 Certificate. (Section 6.05.)
In addition, within a reasonable period of time after the end of each
calendar year, the Servicer will furnish a report to each Class B-2
Certificateholder of record at any time during such calendar year as to the
aggregate amounts reported pursuant to (a) and (b) above for such calendar
year.
REPURCHASE OPTION
The Agreement provides that on any Remittance Date on which the Pool
Scheduled Principal Balance is less than 10% of the Cut-off Date Pool Principal
Balance, the Company or the Servicer will have the option to repurchase, upon
the Company or the Servicer giving notice mailed no earlier than the 15th day
and no later than the 25th day of the month next preceding the month of such
final distribution, all outstanding Contracts at a price equal to the greater
of (a) the sum of (x) 100% of the Scheduled Principal Balance of each Contract
(other than any Contract as to which the related Manufactured Home has been
repossessed and whose fair market value is included pursuant to clause (y)
below) as of the final Remittance Date and (y) the fair market value of such
acquired property (as determined by the Company) and (b) the aggregate fair
market value (as determined by the Company) of all of the assets of the Trust,
plus, in each case, any unpaid interest at the related Remittance Rates on each
Class of Class A Certificates and any unpaid interest at the Related Remittance
Rates on each Class of Class B Certificates, as well as one month's interest at
the applicable Contract Rate on the Scheduled Principal Balance of each
Contract (including any Contract as to which the related Manufactured Home has
been repossessed). (Section 8.05.)
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TERMINATION OF THE AGREEMENT
The Agreement will terminate upon the last action required to be taken by the
Trustee on the final Remittance Date following the later of (i) the purchase by
the Company or the Servicer of all Contracts and all property acquired in
respect of any Contract remaining in the Trust as described under "Repurchase
Option" or (ii) the final payment or other liquidation of the last Contract
remaining in the Trust or the disposition of all property acquired upon
repossession of any Manufactured Home.
Upon presentation and surrender of the Certificates, the Trustee shall cause
to be distributed, in the following order of priority, to Certificateholders on
the final Remittance Date in proportion to their respective Percentage
Interests an amount equal to (i) as to the Class A Certificates, any unpaid
interest at the related Remittance Rates, (ii) as to the Class A Certificates,
the Principal Balances thereof, (iii) as to the Class B-1 Certificates, any
unpaid interest at the Class B-1 Remittance Rate, (iv) as to the Class B-1
Certificates, the Class B-1 Principal Balance, (v) as to the Class B-2
Certificates, any unpaid interest at the Class B-2 Remittance Rate, (vi) as to
the Class B-2 Certificates, the Class B-2 Principal Balance, and (vii) as to
the Class C Certificates, the amount which remains on deposit in the
Certificate Account (other than amounts retained to meet claims) after
application pursuant to clauses (i)-(vi) above. (Section 12.03.)
AMENDMENT
The Agreement may be amended by agreement of the Trustee, the Company and the
Servicer at any time, without the consent of the Certificateholders, to correct
manifest error, to cure any ambiguity, to correct or supplement any provision
which may be inconsistent with any other provision, to add or amend any
provision as required by Moody's or Fitch or any other nationally recognized
statistical rating organization in order to improve or maintain the rating of
any Class of Class A Certificates or any Class of Class B Certificates or to
add other provisions not inconsistent with the Agreement upon receipt of an
Opinion of Counsel to the Servicer that such amendment will not adversely
affect in any material respect the interests of any Certificateholder. (Section
12.07.) Neither the Company nor the Servicer is obligated to take any action to
maintain or improve the rating given any Class of Class A Certificates or any
Class of Class B Certificates.
The Agreement may also be amended from time to time by the Trustee, the
Company and the Servicer, with the consent of the holders of Certificates of
each Class affected thereby evidencing, as to each such Class, Percentage
Interests aggregating at least 51%, provided that no such amendment shall (a)
reduce in any manner the amount of, or delay the timing of, collections of
payments on Contracts or distributions which are required to be made on any
Certificate without the consent of the holder of each Certificate affected
thereby, (b) reduce the aforesaid percentages of Certificateholders required
for any amendment of the Agreement, without the unanimous consent of the
Certificateholders, (c) adversely affect the status of the Trust as a REMIC or
the status of the Certificates as "regular interests" therein, or cause any tax
to be imposed on the Trust, or (d) modify in any manner the rights of the Class
C Certificateholders, without the unanimous consent of the Class C
Certificateholders. (Section 12.07.)
The Agreement may also be amended from time to time, without the consent of
any Certificateholders, by the Company, the Trustee and the Servicer to modify,
eliminate or add to the provisions of the Agreement (i) to maintain the
qualification of the Trust as a REMIC under the Code or avoid, or reduce the
risk of, the imposition of any tax on the Trust under the Code that would be a
claim against the Trust assets, provided that (a) an Opinion of Counsel is
delivered to the Trustee to the effect that such action is necessary to
maintain such qualification or avoid any such tax or reduce the risk of its
imposition and (b) such amendment shall not materially adversely affect the
interests of any Certificateholder or (ii) to prevent the Trust from entering
into any "prohibited transaction" as defined in Section 860F of the Code.
The Trustee is required under the Agreement to furnish Certificateholders
affected thereby with notice promptly upon execution of any amendment to the
Agreement. (Section 12.07.)
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THE TRUSTEE
First Bank National Association (the "Trustee") has its corporate trust
offices at 180 East Fifth Street, St. Paul, Minnesota 55102. The Trustee and
certain of its affiliates maintain commercial banking relationships with the
Company.
The Agreement requires the Trustee to maintain, at its own expense, an
office or agency in Minneapolis or St. Paul, Minnesota, where Certificates may
be surrendered for registration of transfer or exchange and where notices and
demands to or upon the Trustee and the certificate registrar and transfer
agent in respect of the Certificates pursuant to the Agreement may be served.
On the date hereof, the Trustee's offices for such purposes are located at 180
East Fifth Street, St. Paul, Minnesota 55102. The Trustee will promptly give
written notice to the Certificateholders of any change thereof. (Section
12.02.)
REGISTRATION OF THE OFFERED CERTIFICATES
The Offered Certificates will initially be registered in the name of Cede &
Co., the nominee of DTC. DTC is a limited-purpose trust company organized
under the laws of the State of New York, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code and a "clearing agency" registered pursuant to the provisions
of Section 17A of the 1934 Act. DTC accepts securities for deposit from its
participating organizations ("Participants") and facilitates the clearance and
settlement of securities transactions between Participants in such securities
through electronic book-entry changes in accounts of Participants, thereby
eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks and trust companies and clearing
corporations and may include certain other organizations. Indirect access to
the DTC system is also available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("indirect participants").
Certificate Owners who are not Participants but desire to purchase, sell or
otherwise transfer ownership of the Offered Certificates may do so only
through Participants (unless and until Definitive Class A and Class B
Certificates, as defined below, are issued). In addition, Certificate Owners
will receive all distributions of principal of, and interest on, the Offered
Certificates from the Trustee through DTC and Participants. Certificate Owners
will not receive or be entitled to receive certificates representing their
respective interests in the Class A and Class B Certificates, except under the
limited circumstances described below.
Unless and until Definitive Class A and Class B Certificates (as defined
below) are issued, it is anticipated that the only "Certificateholder" of the
Class A and Class B Certificates will be Cede & Co., as nominee of DTC.
Certificate Owners will not be Certificateholders as that term is used in the
Agreement. Certificate Owners are only permitted to exercise the rights of
Certificateholders indirectly through Participants and DTC.
While the Class A and Class B Certificates are outstanding (except under the
circumstances described below), under the rules, regulations and procedures
creating and affecting DTC and its operations (the "Rules"), DTC is required
to make book-entry transfers among Participants on whose behalf it acts with
respect to the Class A and Class B Certificates and is required to receive and
transmit distributions of principal of, and interest on, the Class A and Class
B Certificates. Participants with whom Certificate Owners have accounts with
respect to Class A and Class B Certificates are similarly required to make
book-entry transfers and receive and transmit such distributions on behalf of
their respective Certificate Owners. Accordingly, although Certificate Owners
will not possess certificates, the Rules provide a mechanism by which
Certificate Owners will receive distributions and will be able to transfer
their interests.
Class A and Class B Certificates will be issued in registered form to
Certificate Owners, or their nominees, rather than to DTC (such Certificates
being referred to herein as "Definitive Class A and Class B Certificates"),
only if (i) DTC or the Company advises the Trustee in writing that DTC is no
longer willing or able to discharge properly its responsibilities as nominee
and depository with respect to the Class A and
S-48
<PAGE>
Class B Certificates and the Company or the Trustee is unable to locate a
qualified successor or (ii) the Company at its sole option advises the Trustee
in writing that it elects to terminate the book-entry system through DTC. Upon
issuance of Definitive Class A and Class B Certificates to Certificate Owners,
such Certificates will be transferable directly (and not exclusively on a
book-entry basis) and registered holders will deal directly with the Trustee
with respect to transfers, notices and distributions.
DTC has advised the Company and the Trustee that, unless and until
Definitive Class A and Class B Certificates are issued, DTC will take any
action permitted to be taken by a Certificateholder under the Agreement only
at the direction of one or more Participants to whose DTC accounts the Class A
and Class B Certificates are credited. DTC has advised the Company that DTC
will take such action with respect to any Percentage Interests of the Class A
and Class B Certificates only at the direction of and on behalf of such
Participants with respect to such Percentage Interests of the Class A and
Class B Certificates. DTC may take actions, at the direction of the related
Participants, with respect to some Class A and Class B Certificates which
conflict with actions taken with respect to other Class A and Class B
Certificates.
Issuance of Class A and Class B Certificates in book-entry form rather than
as physical certificates may adversely affect the liquidity of the Class A and
Class B Certificates in the secondary market and the ability of Certificate
Owners to pledge them. In addition, since distributions on the Class A and
Class B Certificates will be made by the Trustee to DTC and DTC will credit
such distributions to the accounts of its Participants, which will further
credit them to the accounts of indirect participants or Certificate Owners,
Certificate Owners may experience delays in the receipt of such distributions.
USE OF PROCEEDS
Substantially all of the net proceeds to be received from the sale of the
Offered Certificates will be used by the Company for general corporate
purposes, including the purchase of the Contracts, the costs of carrying the
Contracts until the sale of the Certificates and to pay other expenses
connected with pooling the Contracts and issuing the Certificates.
ERISA CONSIDERATIONS
The following information supplements, and to the extent inconsistent
therewith supersedes, the information in the Prospectus under "ERISA
Considerations."
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain restrictions on employee benefit plans that are subject to
ERISA ("Plans") and on persons who are fiduciaries with respect to such Plans.
Employee benefit plans that are governmental plans (as defined in section
3(32) of ERISA) and certain church plans (as defined in Section 3(33) of
ERISA) are not subject to ERISA requirements. Accordingly, assets of such
plans may be invested in the Class A Certificates without regards to the ERISA
restrictions described above, subject to applicable provisions of other
federal and state laws. However, any such governmental or church plan which is
qualified under section 401(a) of the Code and exempt from taxation under
section 501(a) of the Code is subject to the prohibited transaction rules set
forth in section 503 of the Code.
The U.S. Department of Labor ("DOL") has granted substantially identical
administrative exemptions to Merrill Lynch, Pierce, Fenner & Smith
Incorporated (Prohibited Transaction Exemption 90-29; Exemption Application
No. D-8012, 55 Fed. Reg. 21,459 (1990)); to CS First Boston Corporation
(Prohibited Transaction Exemption 89-90; Exemption Application No. D-6555, 54
Fed. Reg. 42,581 (1989)); and to Lehman Brothers Inc. (Prohibited Transaction
Exemption 91-14; Exemption Application No. D-7958, 56 Fed. Reg. 7413 (1991))
(collectively referred to as the "Exemption") from certain of the prohibited
transaction rules of ERISA and the Code with respect to the initial purchase,
the holding and the subsequent
S-49
<PAGE>
resale by Plans of certificates representing interests in asset-backed pass-
through trusts that consist of certain receivables, loans and other
obligations that meet the conditions and requirements of the Exemption. The
receivables covered by the Exemption include manufactured housing installment
sales contracts and installment loan agreements such as the Contracts. The
Exemption will apply to the acquisition, holding, and resale of the Class A
Certificates by a Plan, provided that specified conditions (certain of which
are described below) are met.
Among the conditions which must be satisfied for the Exemption to apply to
the Class A Certificates are the following:
(1) The acquisition of the Class A Certificates by a Plan is on terms
(including the price for the Class A 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 the Class A Certificates
acquired by the Plan are not subordinated to the rights and interests
evidenced by other certificates of the Trust;
(3) The Class A Certificates acquired by the Plan have received a rating
at the time of such acquisition that is in one of the three highest generic
rating categories from either Standard & Poor's Ratings Group, a division
of McGraw-Hill, Inc., Moody's, Duff & Phelps Credit Rating Co. or Fitch;
(4) The Trustee is not an affiliate of any member of the Restricted Group
(as defined below);
(5) The sum of all payments made to the Underwriters in connection with
the distribution of the Class A Certificates represents not more than
reasonable compensation for underwriting the Class A Certificates. The sum
of all payments made to and retained by the Company pursuant to the sale of
the Contracts to the Trust represents not more than the fair market value
of such Contracts. The sum of all payments made to and retained by the
Servicer represents not more than reasonable compensation for the
Servicer's services under the Agreement and reimbursement of the Servicer's
reasonable expenses in connection therewith; and
(6) The Plan investing in the Class A 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.
Moreover, the Exemption would provide relief from certain self-
dealing/conflict of interest prohibited transactions only if, among other
requirements, (i) in the case of the acquisition of Class A Certificates in
connection with the initial issuance, at least fifty (50) percent of the Class
A Certificates are acquired by persons independent of the Restricted Group (as
defined below), (ii) the Plan's investment in Class A Certificates does not
exceed twenty-five (25) percent of all of the Class A Certificates outstanding
at the time of the acquisition and (iii) immediately after the acquisition, no
more than twenty-five (25) percent of the assets of the Plan are invested in
certificates representing an interest in one or more trusts containing assets
sold or serviced by the same entity. The Exemption does not apply to Plans
sponsored by the Company, the Underwriters, the Trustee, the Servicer, any
obligor with respect to Contracts included in the Trust constituting more than
five (5) percent of the aggregate unamortized principal balance of the assets
in the Trust or any affiliate of such parties (the "Restricted Group").
The Company believes that the Exemption will apply to the acquisition and
holding of Class A Certificates sold by the Underwriters and by Plans and that
all conditions of the Exemption other than those within the control of the
investors have been met. In addition, as of the date hereof, no obligor with
respect to Contracts included in the Trust constitutes more than five (5)
percent of the aggregate unamortized principal balance of the assets of the
Trust. Any Plan fiduciary who proposes to cause a Plan to purchase Class A
Certificates should consult with its own counsel with respect to the potential
consequences under ERISA and the Code of the Plan's acquisition and ownership
of the Class A Certificates. Assets of a Plan or individual retirement account
should not be invested in the Class A Certificates unless it is clear that the
assets of the Trust will not be plan assets or unless it is clear that the
Exemption or a prohibited transaction class exemption will apply and exempt
all potential prohibited transactions. See "ERISA Considerations" in the
Prospectus.
S-50
<PAGE>
No transfer of Class B Certificates will be permitted to be made to a Plan
unless such Plan, at its expense, delivers to the Trustee and the Company an
opinion of counsel (in form satisfactory to the Trustee and the Company) to
the effect that the purchase or holding of a Class B Certificate by such Plan
will not result in the assets of the Trust being deemed to be "plan assets"
and subject to the prohibited transaction provisions of ERISA and the Code and
will not subject the Trustee, the Company or the Servicer to any obligation or
liability in addition to those undertaken in the Agreement. Unless such
opinion is delivered, each person acquiring a Class B Certificate will be
deemed to represent to the Trustee, the Company and the Servicer that such
person is neither a Plan, nor acting on behalf of a Plan, subject to ERISA or
to Section 4975 of the Code.
LEGAL INVESTMENT CONSIDERATIONS
The Class B Certificates will not constitute "mortgage related securities"
under the Secondary Mortgage Market Enhancement Act of 1984. The appropriate
characterization of the Class B Certificates under various legal investment
restrictions, and thus the ability of investors subject to these restrictions
to purchase Class B Certificates, may be subject to significant interpretive
uncertainties. All investors whose investment authority is subject to legal
restrictions should consult their own legal advisors to determine whether, and
to what extent, the Class B Certificates will constitute legal investments for
them.
The Company makes no representation as to the proper characterization of the
Class B Certificates for legal investment or financial institution regulatory
purposes, or as to the ability of particular investors to purchase Class B
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 Class B
Certificates) may adversely affect the liquidity of the Class B Certificates.
UNDERWRITING
The Underwriters named below have severally agreed, subject to the terms and
conditions of the Underwriting Agreement, to purchase from the Company the
respective principal amounts of the Offered Certificates set forth opposite
their names below.
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT OF
CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4 CLASS A-5 CLASS B-1 CLASS B-2
UNDERWRITER CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES
----------- ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Merrill Lynch, Pierce,
Fenner & Smith
Incorporated............ $19,800,000 $10,400,000 $ 6,800,000 $ 9,000,000 $12,934,000 $2,955,000 $ 4,305,761
CS First Boston
Corporation............ $19,600,000 $10,300,000 $ 6,600,000 $ 9,000,000 $12,700,000 $2,955,000 $ 4,250,000
Lehman Brothers Inc..... $19,600,000 $10,300,000 $ 6,600,000 $ 9,000,000 $12,700,000 $2,955,000 $ 4,250,000
Totals............... $59,000,000 $31,000,000 $20,000,000 $27,000,000 $38,334,000 $8,865,000 $12,805,761
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Offered
Certificates offered hereby if any Offered Certificates are purchased. In the
event of default by an Underwriter, the Underwriting Agreement provides that,
in certain circumstances, the Underwriting Agreement may be terminated.
The Underwriters propose to offer the Offered Certificates in part directly
to purchasers at the initial public offering price set forth on the cover page
of this Prospectus and in part to certain securities dealers at such prices
less concessions not to exceed .25% of the Class A-1 Principal Balance, .35%
of the Class A-2 Principal Balance, .425% of the Class A-3 Principal Balance,
.475% of the Class A-4 Principal Balance, .525% of the Class A-5 Principal
Balance, .525% of the Class B-1 Principal Balance and .6% of the Class B-2
Principal Balance. The Underwriters may allow, and such dealers may reallow,
concessions not to exceed .125% of the Class A-1 Principal Balance, .25% of
the Class A-2 Principal Balance, .25% of the Class A-3
S-51
<PAGE>
Principal Balance, .25% of the Class A-4 Principal Balance, .25% of the Class
A-5 Principal Balance, .25% of the Class B-1 Principal Balance and .25% of the
Class B-2 Principal Balance to certain brokers and dealers. After the Offered
Certificates are released for sale to the public, the offering price and other
selling terms may be varied by the Underwriters.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, or contribute to payments the Underwriters may be
required to make in respect thereof.
LEGAL MATTERS
The validity of the Certificates will be passed upon for the Company by
Dorsey & Whitney, Minneapolis, Minnesota, and for the Underwriters by Brown &
Wood, New York, New York. The material federal income tax consequences of the
Certificates will be passed upon for the Company by Dorsey & Whitney.
S-52
<PAGE>
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTI-
TUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE OFFERED CER-
TIFICATES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICA-
TION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PRO-
SPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
---------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary of Terms of the Offered Certificates............................... S-3
Special Considerations..................................................... S-17
Structure of the Transaction............................................... S-18
The Contract Pool.......................................................... S-18
Green Tree Financial Corporation........................................... S-23
Yield and Prepayment Considerations........................................ S-24
Description of the Certificates............................................ S-36
Use of Proceeds............................................................ S-49
ERISA Considerations....................................................... S-49
Legal Investment Considerations............................................ S-51
Underwriting............................................................... S-51
Legal Matters.............................................................. S-52
PROSPECTUS
Reports to Certificateholders.............................................. 2
Available Information...................................................... 2
Additional Information..................................................... 2
Incorporation of Certain Documents by
Reference................................................................. 2
Summary of Terms........................................................... 4
Special Considerations..................................................... 9
The Trust Fund............................................................. 10
Use of Proceeds............................................................ 12
Green Tree Financial Corporation........................................... 12
Yield Considerations....................................................... 14
Maturity and Prepayment Considerations..................................... 14
Description of the Certificates............................................ 15
Description of FHA Insurance and VA
Guarantees................................................................ 31
Certain Legal Aspects of the Contracts..................................... 32
ERISA Considerations....................................................... 38
Certain Federal Income Tax Consequences.................................... 39
Legal Investment Considerations............................................ 56
Ratings.................................................................... 57
Underwriting............................................................... 57
Legal Matters.............................................................. 58
Experts.................................................................... 58
Glossary................................................................... 59
</TABLE>
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GREEN TREE
FINANCIAL CORPORATION,
SELLER AND SERVICER
$197,004,761 (APPROXIMATE)
MANUFACTURED HOUSING CONTRACT
SENIOR/SUBORDINATE PASS-THROUGH
CERTIFICATES, SERIES 1994-3
$59,000,000 (APPROXIMATE) 6.60% CLASS A-1
$31,000,000 (APPROXIMATE) 7.45% CLASS A-2
$20,000,000 (APPROXIMATE) 7.80% CLASS A-3
$27,000,000 (APPROXIMATE) 8.05% CLASS A-4
$38,334,000 (APPROXIMATE) 8.40% CLASS A-5
$ 8,865,000 (APPROXIMATE) 8.30% CLASS B-1
$12,805,761 (APPROXIMATE) 8.65% CLASS B-2
-----------------
PROSPECTUS SUPPLEMENT
MAY 16, 1994
-----------------
MERRILL LYNCH & CO.
CS FIRST BOSTON
LEHMAN BROTHERS
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