<PAGE>
As filed with the Securities and Exchange Commission on June 2, 1999
Registration No. 333-75365
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
---------------
GREEN TREE FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
---------------
Delaware 41-1807858
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1100 Landmark Towers
345 St. Peter Street
Saint Paul, Minnesota 55102-1639
(612) 293-3400
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------
Joel H. Gottesman
300 Landmark Towers
345 St. Peter Street
Saint Paul, Minnesota 55102-1639
(612) 293-3400
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Charles F. Sawyer Cathy M. Kaplan
Dorsey & Whitney LLP Brown & Wood LLP
220 South Sixth Street One World Trade Center
Minneapolis, Minnesota 55402 New York, New York 10048
---------------
Approximate date of commencement of proposed sale of securities to the
public: As soon as practicable after the effective date of this Registration
Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
Pursuant to Rule 429, the Prospectus contained in this Registration
Statement relates to and constitutes Post-Effective Amendment No. 2 to
Registration Statement No. 333-63265, which first became effective on
September 25, 1998.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that the Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information contained in this prospectus supplement is not complete and +
+may be changed. We may not sell these securities until the registration +
+statement filed with the Securities and Exchange Commission is effective. +
+This prospectus supplement is not an offer to sell these securities, and it +
+is not soliciting an offer to buy these securities in any state where the +
+offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS SUPPLEMENT
(To Prospectus dated June , 1999)
$ (Approximate)
GREEN TREE
Seller and Servicer
Manufactured Housing Contract Senior/Subordinate Pass-Through Certificates
Series 1999-
The Series 1999- certificates will consist of 14 classes, but we are offering
only the classes listed below now.
<TABLE>
<CAPTION>
Remittance Approximate Price to Underwriting Proceeds to
Class Rate Principal Amount Public Discount Company
----- ---------- ---------------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C>
A-1........... % $ % % %
A-2........... % $ % % %
A-3........... % $ % % %
A-4........... % $ % % %
A-5........... % $ % % %
A-6........... % $ % % %
A-7........... %(1) $ % % %
M-1........... %(1) $ % % %
M-2........... %(1) $ % % %
B-1........... %(1) $ % % %
B-2........... %(1) $ % % %
----- -----
Total......... $ $
===== =====
</TABLE>
-----
(1) Or the weighted average of the rates on the contracts in the contract
pool, if less.
The approximate principal amount of the classes of certificates may vary
plus or minus 5%. The price to public will be the percentage listed in the
table above plus any accrued interest beginning on , 1999.
Consider carefully the risk factors beginning on page S-9 in this
prospectus supplement.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
These certificates will be delivered on or about , 1999.
The underwriters named below will offer these securities to the public at
the offering price listed on this cover page and they will receive the discount
listed above. See "Underwriting" on page S-74 in this prospectus supplement and
on page 73 in the prospectus.
[Underwriters]
The date of this prospectus supplement is , 1999
<PAGE>
TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary of the Terms of the Offered Certificates........................... S-3
Risk Factors............................................................... S-9
Structure of the Transaction............................................... S-13
The Contract Pool.......................................................... S-13
Green Tree Financial Corporation........................................... S-20
Yield and Prepayment Considerations........................................ S-23
Description of the Certificates............................................ S-38
Use of Proceeds............................................................ S-68
ERISA Considerations....................................................... S-69
Legal Investment Considerations............................................ S-73
Underwriting............................................................... S-74
Legal Matters.............................................................. S-75
</TABLE>
Prospectus
<TABLE>
<S> <C>
Important Notice About Information Presented in this Prospectus and the
Accompanying Prospectus Supplement....................................... 2
The Trust................................................................. 3
Use of Proceeds........................................................... 10
Green Tree Financial Corporation.......................................... 11
Yield Considerations...................................................... 14
Maturity and Prepayment Considerations.................................... 15
Description of the Certificates........................................... 16
Servicing................................................................. 29
Description of FHA Insurance and VA Guarantees............................ 34
Certain Legal Aspects of the Contracts.................................... 35
ERISA Considerations...................................................... 43
Certain Federal Income Tax Consequences................................... 46
Legal Investment Considerations........................................... 72
Ratings................................................................... 73
Underwriting.............................................................. 73
Legal Matters............................................................. 74
Experts................................................................... 75
Glossary.................................................................. 76
</TABLE>
You should rely only on the information contained in this prospectus. We
and the underwriters have not authorized any other person to provide you with
different information. If anyone provides you with different or inconsistent
information, you should not rely on it. We and the underwriters are not making
an offer to sell these securities in any jurisdiction where the offer or sale
is not permitted.
This document consists of a prospectus supplement and a prospectus. The
prospectus provides general information about Green Tree Financial Corporation,
about our manufactured housing lending business, and about any series of
certificates for manufactured housing loans that we may wish to sell. This
prospectus supplement contains more detailed information about the specific
terms of this series of certificates. If the description of the terms of your
certificate varies between this prospectus supplement and the prospectus, you
should rely on the information in this prospectus supplement.
If you have received a copy of this prospectus supplement and prospectus
in an electronic format, and if the legal prospectus delivery period has not
expired, you may obtain a paper copy of this prospectus supplement and
prospectus from us or an underwriter by asking for it.
S-2
<PAGE>
SUMMARY OF THE TERMS OF THE OFFERED CERTIFICATES
This summary highlights selected information regarding the certificates,
and does not contain all of the information that you need to consider in making
your investment decision. To understand all of the terms of the certificates,
read this entire prospectus supplement and the accompanying prospectus. In
particular, we will refer throughout this summary to sections of this
prospectus supplement or the prospectus, or both, which will contain more
complete descriptions of the matters summarized. All these references will be
to sections of this prospectus supplement only unless we note otherwise.
The classes of the Series 1999- certificates listed in the table below
will represent interests in a trust. The trust will own a pool of manufactured
housing contracts.
<TABLE>
<CAPTION>
Approximate S&P Fitch
Class Remittance Rate Principal Amount Rating Rating
- ----- --------------- ---------------- ------ ------
<S> <C> <C> <C> <C>
A-1.............................. % $
A-2..............................
A-3..............................
A-4..............................
A-5..............................
A-6..............................
A-7.............................. (1)
M-1.............................. (1)
M-2.............................. (1)
B-1.............................. (1)
B-2.............................. (1)
B-3I............................. (2)
C Master......................... (3)
C Subsidiary..................... (3)
</TABLE>
- -------
(1) Or the weighted average of the rates on the contracts in the contract pool,
if less.
(2) The Class B-3I certificates are entitled to any excess interest on each
remittance date.
(3) Neither the Class C Master nor the Class C Subsidiary certificates are
entitled to any distributions of interest.
We will not issue or sell the certificates unless S&P and Fitch assign
each class the rating listed above.
The rating of each class of certificates by S&P addresses the likelihood
of timely receipt of interest and ultimate receipt of principal. The rating of
each class of certificates by Fitch addresses the likelihood of timely payment
of interest and ultimate payment of principal. A security rating is not a
recommendation to buy, sell or hold securities and may be subject to revision
or withdrawal at any time by the assigning rating agency. The ratings of the
Class B-2 certificates are based in part on an assessment of our ability to
make payments under the Class B-2 limited guarantee.
The Class B-3I, Class C Master and Class C Subsidiary certificates are not
being offered under this prospectus supplement and prospectus. We are offering
all the other classes of certificates listed in the table above. We, or one of
our affiliates, will initially retain the Class B-2 Certificates.
S-3
<PAGE>
Seller and Servicer........ Green Tree Financial Corporation.
Trustee.................... [Trustee]
Remittance Date............ The first day of each month, or, if that first
day is not a business day, the next succeeding
business day, beginning in 1999.
Record Date................ The business day just before the related
remittance date.
Priority of
Distributions............. Distributions on the certificates will be made
primarily from amounts collected on the
manufactured housing contracts during the prior
calendar month. The trustee will apply the amount
available to make distributions of principal and
interest on the certificates in the following
order of priority:
- Class A interest
- Class M-1 interest
- Class M-2 interest
- Class B-1 interest
- Class A principal
- Class M-1 principal
- Class M-2 principal
- Class B-1 principal
- Class B-2 interest
- Class B-2 principal
This prospectus supplement summarizes in the next
3 pages the amounts of interest and principal to
be paid. In each case, the payments will be made
only up to the amount available, after making any
payments with a higher priority, is sufficient.
See "Description of the Certificates--Payments on
Contracts; Distributions on Certificates."
A. Interest on the Class
A, Class M-1, Class M-2
and Class B-1
Certificates.............
Interest is payable first to each class of Class
A certificates concurrently, then to the Class M-
1 certificates, then to the Class M-2
certificates, and then to the Class B-1
certificates up to the amount
S-4
<PAGE>
available for distribution. See "Description of
the Certificates--Distributions" and "--Losses on
Liquidated Contracts."
B. Principal on the Class
A, Class M-1, Class M-2
and Class B-1
Certificates.............
The portion of the amount available applied to
the payment of principal on the Class A, Class M-
1, Class M-2 and Class B-1 certificates will be
based on the scheduled amounts of principal due,
whether or not collected, as well as prepayments
and other amounts received for principal, on the
manufactured housing contracts. Any principal
payable will initially be paid only on the Class
A certificates. Principal payable will be paid
first to the Class A-1 certificates until all
certificates of that class have been retired, and
then to each successive class of Class A
certificates. Beginning with the remittance date
occurring in , assuming delinquencies,
defaults and losses on the manufactured housing
contracts remain below levels specified in the
pooling and servicing agreement, the Class M-1,
Class M-2 and Class B-1 certificates will begin
to receive a portion of the principal to be paid
on each remittance date. See "Description of the
Certificates--Distributions."
C. Class B-2 Interest......
The remaining amount available will be paid to
pay interest on the Class B-2 Certificates. See
"Description of the Certificates--Distributions"
and "--Losses on Liquidated Contracts."
D. Class B-2 Principal.....
In general, principal will not be payable on the
Class B-2 certificates until the Class B-1
certificates have been retired. After that has
occurred, the Class B-2 certificates will be
entitled, assuming that delinquencies, defaults
and losses on the manufactured housing contracts
remain below the levels specified in the pooling
and servicing agreement, to receive a portion of
the principal to be paid on each remittance date.
See "Description of the Certificates--
Distributions" and "--Losses on Liquidated
Contracts."
Class B-2 Limited
Guarantee................. We will guarantee payment of interest and
principal on the Class B-2 certificates. See
"Description of the Certificates--Limited
Guarantee of Green Tree."
S-5
<PAGE>
Capitalized Interest A capitalized interest account will fund interest
Account .................. payments on the certificates on the remittance
dates in and 1999 if collections on the
manufactured housing contracts are insufficient.
Repurchase Option..........
After the aggregate principal balance of the
contracts is less than 10% of their aggregate
principal balance at the time they were
transferred to the trust, we will have the option
to purchase all of the outstanding manufactured
housing contracts. See "Description of the
Certificates--Repurchase Option" in this
prospectus supplement and in the prospectus.
The Contract Pool..........
The trust will own a pool of fixed rate
manufactured housing installment sale contracts
and installment loan agreements. This prospectus
supplement provides information regarding only a
portion of the contracts to be included in the
pool on the closing date. These initial contracts
represent about % of the total pool. We will
transfer additional contracts to the trust on the
closing date. If the aggregate principal balance
of these initial contracts and additional
contracts is less than the aggregate original
principal balance of the certificates, we may
transfer subsequent contracts representing that
difference to the trust no later than .
Initial Contracts.......... With respect to the initial contracts, as of ,
1999:
- all are conventional and none are FHA-
insured or VA-guaranteed;
- the related properties are located in
states;
- the contract rates range from % to %, with
a weighted average of %;
- the weighted average term to scheduled
maturity, as of their dates of origination,
is months;
- the weighted average term to scheduled
maturity as of is months; and
- the latest scheduled maturity date is in
S-6
<PAGE>
See "The Contract Pool," which includes the
permissible characteristics of the other
contracts that we will transfer to the trust on
the closing date or later.
Pre-Funding Account........
If the aggregate principal balance of the
contracts we transfer to the trust on the closing
date is less than the aggregate original
principal balance of the certificates, the
trustee will deposit the difference in the pre-
funding account, and those funds will be used to
purchase contracts from time to time until
, 1999. If those funds are not completely used
by , 1999, any remaining funds will be
distributed as principal on the Class A-1
certificates on the next remittance date.
Tax Status.................
In the opinion of our counsel, for federal income
tax purposes the trust will consist of two
segregated asset pools--the Master REMIC and the
Subsidiary REMIC--and each will be treated as a
separate REMIC as described in the Internal
Revenue Code. The Class A certificates, the Class
M certificates, the Class B certificates and the
Class B-3I certificates will constitute regular
interests in the Master REMIC and generally will
be treated as debt instruments of the trust for
federal income tax purposes. As a holder of
certificates, you will be required to include as
income interest on your certificates, including
any original issue discount, under the accrual
method of accounting, even if you usually use the
cash method of accounting. See "Certain Federal
Income Tax Consequences."
Money Market Eligibility...
The Class A-1 certificates will have a final
maturity date of , 2000. The Class A-1
certificates will be eligible securities for
purchase by money market funds under Rule 2a-7
under the Investment Company Act of 1940. A fund
should consult with its advisor regarding the
eligibility of the Class A-1 certificates under
Rule 2a-7 and the fund's investment policies and
objectives.
ERISA Considerations....... Subject to the conditions described under "ERISA
Considerations," employee benefit plans that are
S-7
<PAGE>
subject to the Employee Retirement Income
Security Act of 1974 may purchase the Class A
certificates. An employee benefit plan may not
purchase any other class of certificates, unless
it satisfies the conditions described under
"ERISA Considerations" in this prospectus
supplement and in the prospectus.
Legal Investment
Considerations............ The Class A certificates and the Class M-1
certificates will not constitute mortgage related
securities for purposes of the Secondary Mortgage
Market Enhancement Act until the amount in the
pre-funding account is zero. Then, the Class A
certificates and Class M-1 certificates will be
legal investments for certain types of
institutional investors as provided in SMMEA. The
Class M-2 certificates and the Class B
certificates also will not constitute mortgage
related securities for purposes of SMMEA because
they will not be rated in one of the two highest
ratings by S&P and by Fitch. This means that many
institutions that have the legal authority to
invest in mortgage related securities may not be
legally authorized to invest in the certificates.
You should consult with your own legal advisor to
decide whether and how much you may legally
invest in the certificates.
Reports to Holders of the
Certificates.........
We will provide to the holders of the
certificates monthly and annual reports about the
certificates and the trust. See "Description of
the Certificates--Reports to Certificateholders."
S-8
<PAGE>
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase the certificates.
The more subordinate classes of certificates have a greater risk of loss from
delinquency and defaults on the manufactured housing contracts.
Delinquencies and defaults on the manufactured housing contracts will
result in a smaller amount of cash available for distribution on a remittance
date. Because the available cash is distributed in a specified priority, there
is a risk that certificates that are lower in that priority may not receive
some or even any of the amount due to them on that remittance date. In
addition, there is a risk that a high rate of defaults and losses on the
manufactured housing contracts could result in the outstanding principal
balance of the manufactured housing contracts being lower than the outstanding
principal balance of the certificates. A discrepancy like this would result in
a liquidation loss, which would be imposed first on the Class B-2 certificates
until their principal balance was reduced to zero, then on the Class B-1
certificates until their principal balance was reduced to zero, and so on in
increasing order of seniority.
The more senior classes of certificates have limited protection from
delinquencies and defaults.
The only protection against delinquencies and liquidation losses for the
more senior classes of certificates is the subordination of the more
subordinate classes. For example, if there are high delinquencies or
liquidation losses on the contracts, the Class B-1 certificates would lose the
protection against losses afforded by the subordination of the Class B-2
certificates, Class B-3I certificates and Class C certificates, and investors
in the Class B-1 certificates might suffer a loss on their investment. Even
higher delinquencies or liquidation losses on the contracts would eliminate the
protection the Class M-2 certificates have from the subordination of the Class
B-1 certificates, and so on for the Class M-1 certificates and then the Class A
certificates. For more information, see "Description of the Certificates--
Subordination of Class M-1 Certificates, Class M-2 Certificates, Class B
Certificates, Class B-3I Certificates and Class C Certificates."
The timing of distributions of principal is uncertain.
The Class M-1, Class M-2 and Class B certificates will not receive
distributions of principal until distribution tests are satisfied, and those
distributions of principal will stop if those tests are not met later. Those
tests depend on the rate of prepayments on the manufactured housing contracts
and on the level of delinquencies, defaults and losses of those contracts. We
cannot predict when the tests for distributions of principal on the Class M-1,
Class M-2 and Class B certificates will be satisfied, or when principal will be
paid on the Class M-1, Class M-2 or Class B certificates. For more information,
see "Yield and Prepayment Considerations" in this prospectus supplement and
"Maturity and Prepayment Considerations" in the prospectus.
S-9
<PAGE>
Downturns in regional or local economic conditions historically have caused
increased delinquency, defaults and losses on manufactured housing contracts.
An economic downturn in any region where a number of the obligors on the
contracts are located might cause higher delinquencies, defaults and losses on
the contracts. If delinquencies, defaults or losses on the contracts are higher
than expected, you could suffer a loss on your investment.
Due to depreciation, the market value of the manufactured homes securing the
underlying contracts may decline faster than the outstanding principal balance
of the obligors' loans.
The market value of a manufactured home may decline faster than the
outstanding principal balance of the loan for that home. If the value of the
manufactured homes securing the contracts declines faster than expected, then
defaults and losses on the contracts may rise. If the losses on the contracts
are not covered by the subordination of other classes of certificates, or by
another form of credit enhancement, you will bear all the risk of loss of
default by obligors and will need to look primarily to the value of the
manufactured home to recover the outstanding principal and unpaid interest on
the defaulted contract. For more complete information on our loss experience in
manufactured housing contracts, see the section entitled "The Trust--The
Contract Pools" in the prospectus.
The certificates are not an obligation of Green Tree and they are not insured.
Except for the Class B-2 limited guarantee and our obligation to
repurchase manufactured housing contracts for a breach of representations and
warranties, the certificates will not represent an interest in our company or
our obligation. The certificates are not insured or guaranteed by the
government, any underwriter or its affiliates, the servicer or any other party.
The certificates may have limited liquidity.
There is a risk that a secondary market will not develop for the
certificates of any series. There are also risks that if a secondary market
does develop:
. it may not provide you with liquidity of investment; or
. it may not continue for the term of any series of certificates.
The contracts may be prepaid before their scheduled maturity.
There is a risk that the contracts may be prepaid in full or in part at
any time before their scheduled maturity due to various factors, such as:
. homeowner mobility,
. general and regional economic conditions,
. prevailing interest rates, and
. natural disasters.
S-10
<PAGE>
The prepayment experience on manufactured housing contracts varies
greatly and may affect the average life of the certificates. If a contract is
prepaid in full, the interest on the contract will accrue only to the date of
prepayment. If you purchase a certificate at a discount, then slower than
expected prepayments on the contracts will reduce the yield on your
certificate. If you purchase a certificate at a premium, then faster than
expected prepayments on the contract will reduce the yield on your certificate.
You must not assume that the contracts will prepay at any particular rate, or
at a constant rate. For more information on prepayment on the contracts, see
the section entitled "Yield and Prepayment Considerations" in this prospectus
supplement and "Maturity and Prepayment Considerations" in the prospectus.
Some contracts may not be enforceable.
. The security interest in the manufactured home may not be perfected.
Every manufactured home contract will be secured by a security interest
in either (1) the manufactured home; or (2) if it is a land-and-home contract,
the mortgage or deed of trust on the real estate where the manufactured home is
permanently affixed. Several federal and state laws, including the Uniform
Commercial Code as adopted in each state, govern the perfection of security
interests in the manufactured homes and the enforcement of rights to realize
upon the value of the manufactured homes as collateral for the contracts. In
most states, certificate of title statutes, although generally not state real
estate laws, also govern the perfection of security interests and the
enforcement of these rights. The steps required to perfect a security interest
in a manufactured home vary from state to state. We will represent and warrant
that each contract is secured by a perfected security interest in the
manufactured home, and we must repurchase the contract if there is a breach of
this representation and warranty. Nevertheless, if we fail to perfect our
security interest in the manufactured homes securing a number of contracts, it
could cause an increase in losses on the contracts, and you could suffer a loss
on your investment as a result.
. The security interest in the manufactured home may not have been
assigned to the trustee.
Due to the expense and administrative inconvenience, we will not amend a
certificate of title to a manufactured home to name the trustee as the
lienholder, note the trustee's interest on the certificate of title, or deliver
the certificate of title to the trustee. As a result, in some states the
assignment of the security interest in the manufactured home to the trustee may
not be effective against our creditors or a trustee in the event we enter
bankruptcy, or the security interest may not be perfected. We also will not
record the assignment to the trustee of the mortgage or deed of trust securing
land-and-home contracts because of the expense and administrative inconvenience
involved. As a result, in some states the assignment of the mortgage or deed of
trust to the trustee may not be effective against our creditors or purchasers.
If we are no longer the servicer and the trustee or a successor servicer is
unable to enforce the security interest in the manufactured home following a
default on a contract, losses on the contracts would increase and you could
suffer a loss on your investment as a result.
S-11
<PAGE>
. Noncompliance with consumer protection laws can make a contract
partly unenforceable.
Numerous federal and state consumer protection laws impose requirements
on lenders under installment sales contracts and installment loan agreements
such as the manufactured home contracts. If the lender or seller of goods does
not comply with these requirements, the assignees may be liable for amounts due
under the contracts and may have the right of set-off against claims the
assignees bring. These laws would apply to the trust as assignee of the
manufactured home contracts. We have been involved in litigation, including
class actions, brought under consumer or debtor protection laws. We will
represent and warrant that each contract complies with applicable federal and
state consumer protection laws, and we must repurchase the contract if there is
a breach of this representation and warranty. Nevertheless, if we fail to
comply with these laws, it could cause an increase in defaults and losses on
the contracts, and you could suffer a loss on your investment as a result.
If we become insolvent, there may be delays or reductions in distributions to
holders of certificates.
We intend to have each transfer of contracts to the trust constitute a
sale, rather than a pledge of the contracts to secure indebtedness. However, if
we become a debtor under the federal bankruptcy code, it is possible that our
creditors, a bankruptcy trustee, or we as debtor-in-possession, may argue that
our sale of the contracts was a pledge rather than a sale. If this position is
presented to or accepted by a court, it could result in a delay in or reduction
of distributions to the holders of the certificates.
The case of Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir.
1993) contains language to the effect that accounts sold by an entity which
subsequently became bankrupt remained property of the debtor's bankruptcy
estate. Although the contracts constitute chattel paper rather than accounts
under the UCC, sales of chattel paper, like sales of accounts, are governed by
Article 9 of the UCC. If we became a debtor under the federal bankruptcy code
and a court follows the reasoning of the 10th Circuit and applies this rule to
chattel paper, holders of certificates could experience a delay or reduction in
distribution.
Other rating agencies could provide unsolicited ratings on the certificates
that could be lower than the requested ratings.
Although we have not requested a rating of the certificates from any
rating agencies other than S&P and Fitch, other rating agencies may rate the
certificates. These ratings could be higher or lower than the ratings S&P and
Fitch initially give to the certificates. There is a risk that a lower rating
of your certificate from another rating agency could reduce the market value or
liquidity of your certificate.
S-12
<PAGE>
We have defined terms in the "Glossary" section at the back of the
prospectus.
STRUCTURE OF THE TRANSACTION
The Series 1999- certificates will represent interests in a trust
consisting of a pool of manufactured housing installment sale contracts and
installment loan agreements and related property conveyed by Green Tree
Financial Corporation. We will establish the trust and transfer the contracts
and related rights to the trust under a pooling and servicing agreement between
Green Tree and [trustee], as trustee. The property of the trust will consist
of:
(1) the manufactured housing contracts, including the security interest
in the manufactured home;
(2) our rights under the hazard insurance policies on each manufactured
home;
(3) all funds in the accounts we describe in this prospectus supplement;
and
(4) all proceeds of the items in (1) through (3) above
We will also service the contracts for the trust. [Custodian] will act as
custodian to hold the documents relating to all land-and-home contracts,
meaning those contracts that are primarily secured by a lien on real estate,
including the manufactured home that is considered permanently affixed to the
real estate. We will hold all the other contracts on behalf of the trustee.
Payments by obligors on the contracts will be deposited in a separate
account maintained in the name of the trustee at least one business day after
receipt. Funds in this certificate account will be applied on each remittance
date to make the distributions to certificateholders described under
"Description of the Certificates--Distributions" and to pay our monthly fees as
compensation for servicing the contracts.
Terms used and not otherwise defined in this prospectus supplement have
the meanings given to those terms in the prospectus.
THE CONTRACT POOL
This prospectus supplement contains information regarding a portion of
the contracts to be included in the pool as of the closing date. These initial
contracts consist of manufactured housing installment sale contracts and
installment loan agreements originated through , 1999. The pooling and
servicing agreement provides that we will transfer additional manufactured
housing contracts to the trust on the closing date and that, if necessary, we
will transfer other subsequent manufactured housing contracts to the trust from
time to time after the closing date until , 1999. Although these
additional contracts and subsequent contracts will have characteristics that
differ somewhat from the initial contracts we describe in this prospectus
supplement, we do not expect that their characteristics will vary materially
from the initial contracts. In addition, all additional contracts and
subsequent contracts
S-13
<PAGE>
must conform to the representations and warranties in the pooling and servicing
agreement. See "Description of the Certificates."
The trust is entitled to all payments due or made on each contract on or
after the cut-off date for that contract, which will be for the initial
contracts and the additional contracts and a later date for subsequent
contracts.
We expect that the contracts will have an aggregate principal balance as
of the date of their transfer to the trust of approximately $ . The
initial contracts have an aggregate principal balance as of their cut-off date
of $ , or approximately % of the contract pool. All of the
contracts will have been originated by a manufactured housing dealer and
purchased by us from the dealer, or will have been originated by us directly.
The contracts will have been originated or acquired by us in the ordinary
course of business.
Manufactured housing installment sale contracts and manufactured housing
installment loan agreements are referred to in this prospectus supplement as
manufactured housing contracts or contracts. Each contract will be secured by a
manufactured home or, in the case of a land-and-home contract, will be secured
by a lien on real estate to which the manufactured home is deemed permanently
affixed. As of the cut-off date, a total of , or % by aggregate
principal amount of the initial contracts, were land-and-home contracts.
Each contract will bear a fixed contract rate of interest. Most of the
contracts, other than step-up rate contracts, provide for level payments over
the entire term of the contract. Of the initial contracts, a total of , or
% by aggregate principal amount, are step-up rate contracts. The contract
rate of a step-up rate contract steps up on a particular date from its initial
contract rate. A total of step-up rate contracts, or % of the initial
contracts by aggregate principal amount, provide for two increases in the
contract rate from the initial contract rate and the remaining step-up rate
contracts provide for a single increase in the contract rate. All of the
initial contracts that are step-up rate contracts are still bearing interest at
their initial contract rate. We refer to the period during which these
contracts bear interest at their initial contract rate as the low rate period.
During the low rate period, the total amount and the principal portion of each
scheduled payment is determined on a basis that would cause the contract to be
fully amortized over its term if the contract were to bear interest during its
entire term at its initial contract rate and were to have level payments over
its entire term. The total amount and principal portion of each scheduled
payment due after the end of the applicable low rate period is determined on a
basis that would cause the contract, which would then be bearing interest at a
stepped-up rate, to be fully amortized over its remaining term on a level-
payment basis. Of the initial contracts, the low rate periods for those step-up
rate contracts providing for a single increase in the contract rate will end no
earlier than 1999 and no later than 2000. The contract rates for these
step-up rate contracts will increase by % or %. Of the initial
contracts, the low rate periods for those step-up rate contracts providing for
two increases in the contract rate will end no later than 2000, and the
period with the interim applicable contract rate will end in 2001. The
contract rates for these step-up rate contracts will increase first by %
and then by an additional
S-14
<PAGE>
%. The combined increases in scheduled payments for all step-up rate
contracts range from $ to $ per month. The statistical information
concerning the initial contracts which is described below, to the extent it
relates to the contract rates of the step-up rate contracts, takes into account
only their contract rates as of the cut-off date.
The initial contracts were originated between and .
Approximately % of the aggregate principal amount of the initial contracts is
attributable to loans to purchase manufactured homes which were new and
approximately % is attributable to loans to purchase manufactured homes which
were used at the time the related initial contract was originated. All of the
initial contracts are conventional contracts and none are FHA-insured or VA-
guaranteed. The contract rate on the initial contracts ranged from % to
% with a weighted average of approximately %. The initial contracts
have remaining maturities, as of the cut-off date, of at least months but not
more than months and original maturities of at least months but not more
than months, and a weighted average remaining term to scheduled maturity, as
of the cut-off date, of months. The average remaining principal balance per
initial contract as of the cut-off date was $ and the outstanding
principal balances of the initial contracts as of the cut-off date ranged from
$ to $ . The obligors on the initial contracts are located in
states. The obligors on approximately % of the initial contracts by
remaining principal balance are located in , % in , % in ,
% in , % in and % in . No other state represented more
than 5% of the initial contracts.
S-15
<PAGE>
The table below describes additional characteristics of the initial
contracts as of the cut-off date. The geographical distribution of the initial
contract obligors is based on the obligor's billing address.
Geographical Distribution of Initial Contract Obligors
<TABLE>
<CAPTION>
% of Contract
Aggregate Pool by
% of Contract Principal Balance Outstanding
Number of Pool by Number of Outstanding Principal
Contracts as of Contracts as of as of Cut- Balance as of
State Cut-off Date Cut-off Date off Date Cut-off Date
- ----- --------------- ----------------- ----------------- -------------
<S> <C> <C> <C> <C>
Alabama................. % $ %
Alaska..................
Arizona.................
Arkansas................
California..............
Colorado................
Connecticut.............
Delaware................
Florida.................
Georgia.................
Hawaii..................
Idaho...................
Illinois................
Indiana.................
Iowa....................
Kansas..................
Kentucky................
Louisiana...............
Maine...................
Maryland................
Massachusetts...........
Michigan................
Minnesota...............
Mississippi.............
Missouri................
Montana.................
Nebraska................
Nevada..................
New Hampshire...........
New Jersey..............
New Mexico..............
New York................
North Carolina..........
North Dakota............
Ohio....................
Oklahoma................
Oregon..................
Pennsylvania............
South Carolina..........
South Dakota............
Tennessee...............
Texas...................
Utah....................
Vermont.................
Virginia................
Washington..............
West Virginia...........
Wisconsin...............
Wyoming.................
----- ------ -------- ------
Total................... 100.00% $ 100.00%
===== ====== ======== ======
</TABLE>
- --------
[* Indicates an amount greater than zero but less than .005% of the aggregate
principal balance of the initial contracts as of the cut-off date.]
S-16
<PAGE>
Years of Origination of Initial Contracts
<TABLE>
<CAPTION>
Number of Aggregate % of Contract Pool by
Contracts Principal Balance Outstanding Principal
as of Outstanding Balance as of
Year of Origination Cut-off Date as of Cut-off Date Cut-off Date
- ------------------- ------------ ------------------ ---------------------
<S> <C> <C> <C>
1985..................... $ %
1988.....................
1989.....................
1990.....................
1991.....................
1992.....................
1993.....................
1994.....................
1995.....................
1996.....................
1997.....................
1998.....................
1999.....................
----- -------- ------
Total................. $ 100.00%
===== ======== ======
</TABLE>
- --------
[* Indicates an amount greater than zero but less than .005% of the aggregate
principal balance of the initial contracts as of the cut-off date.]
The initial contracts shown in the table above with earlier years of
origination primarily represent contracts we originated and subsequently
refinanced through us. We retain the first origination dates on our records for
these refinanced contracts.
S-17
<PAGE>
Distribution of Original Initial Contract Amounts
<TABLE>
<CAPTION>
Number of Aggregate % of Contract Pool by
Contracts Principal Balance Outstanding Principal
Oiginal Contractr as of Outstanding Balance as of
Amunt (in Dollars)o Cut-off Date as of Cut-off Date Cut-off Date
- ------------------- ------------ ------------------ ---------------------
<S> <C> <C> <C>
Less than $10,000........ $ %
Between $10,000 and
$19,999.................
Between $20,000 and
$29,999.................
Between $30,000 and
$39,999.................
Between $40,000 and
$49,999.................
Between $50,000 and
$59,999.................
Between $60,000 and
$69,999.................
Between $70,000 and
$79,999.................
Between $80,000 and
$89,999.................
Between $90,000 and
$99,999.................
Between $100,000 and
$109,999................
Between $110,000 and
$119,999................
Between $120,000 and
$129,999................
Between $130,000 and
$139,999................
Between $140,000 and
$149,999................
Between $150,000 and
$159,999................
Between $160,000 and
$169,999................
Between $170,000 and
$179,999................
Between $180,000 and
$189,999................
Between $190,000 and
$199,999................
Between $200,000 and
$249,999................
----- -------- ------
Total................. $ 100.00%
===== ======== ======
</TABLE>
The largest original initial contract amount is $ , which represents
% of the aggregate principal balance of the initial contracts as of the cut-
off date.
Distribution of Original Loan-to-Value Ratios of Initial Contracts
The loan-to-value ratio in the table below is rounded to the nearest 1%.
The method of calculating loan-to-value ratios is described in the prospectus.
<TABLE>
<CAPTION>
Aggregate Principal % of Contract Pool by
Number of Contracts Balance Outstanding Outstanding Principal
Loan-to-Value Ratio as of Cut-off Date as of Cut-off Date Balance as of Cut-off Date
- ------------------- ------------------- ------------------- --------------------------
<S> <C> <C> <C>
Less than 61%........... $ %
61% to 65%..............
66% to 70%..............
71% to 75%..............
76% to 80%..............
81% to 85%..............
86% to 90%..............
91% to 95%..............
Over 95%................
----- --------- ------
Total................ $ 100.00%
===== ========= ======
</TABLE>
S-18
<PAGE>
Initial 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>
0.00000% to 5.00000%.... $ %
5.00001% to 6.00000%....
6.00001% to 7.00000%....
7.00001% to 8.00000%....
8.00001% to 9.00000%....
9.00001% to 10.00000%...
10.00001% to 11.00000%..
11.00001% to 12.00000%..
12.00001% to 13.00000%..
13.00001% to 14.00000%..
14.00001% to 15.00000%..
15.00001% to 16.00000%..
16.00001% to 17.00000%..
----- ----------- ------
Total................ $ 100.00%
===== =========== ======
</TABLE>
Remaining Months to Maturity of Initial Contracts
<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............ $ %
31 to 60................
61 to 90................
91 to 120...............
121 to 150..............
151 to 180..............
181 to 210..............
211 to 240..............
241 to 270..............
271 to 300..............
301 to 330..............
331 to 360..............
------- -------- ------
Total................ $ 100.00%
======= ======== ======
</TABLE>
S-19
<PAGE>
GREEN TREE FINANCIAL CORPORATION
The following information supplements, and if inconsistent supersedes,
the information in the prospectus under the heading "Green Tree Financial
Corporation."
Delinquency, Loan Loss and Repossession Experience
The following table shows the delinquency experience for the periods
indicated of the portfolio of conventional manufactured housing contracts
serviced by Green Tree, other than contracts already in repossession. We have
from time to time subserviced manufactured housing contracts originated by
other lenders. These subserviced contracts are not reflected in the following
table. The information for December 31, 1996 and later does not include as
delinquent those manufactured housing contracts whose obligors have entered
bankruptcy proceedings and had their scheduled payment changed under a
bankruptcy payment plan, provided that these obligors are current under their
bankruptcy payment plan.
Delinquency Experience
<TABLE>
<CAPTION>
At
At December 31, ,
------------------------------------------- -----
1994 1995 1996 1997 1998 1999
------- ------- ------- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Number of Contracts
Outstanding(1)............. 322,495 416,436 503,076 584,814 650,867
Number of Contracts
Delinquent(2):
30-59 Days................ 2,809 4,404 6,475 6,567 8,103
60-89 Days................ 903 1,571 2,121 2,382 3,151
90 Days or More........... 1,440 2,426 3,668 4,016 5,146
Total Contracts Delinquent.. 5,152 8,401 12,264 12,965 16,400
Delinquencies as a Percent
of Contracts
Outstanding(3)............. 1.60% 2.02% 2.44% 2.22% 2.52% %
</TABLE>
- --------
(1) Excludes contracts already in repossession.
(2) The period of delinquencies for the number of contracts delinquent 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 shows information regarding the loan loss and
repossession experience for the periods indicated of the portfolio of
conventional manufactured housing contracts we serviced. We have from time to
time subserviced manufactured housing contracts originated by other lenders.
These subserviced contracts are not reflected in the following table.
S-20
<PAGE>
Loan Loss/Repossession Experience
(Dollars in thousands)
<TABLE>
<CAPTION>
At December 31, At
-------------------------------------------------------------- --------
1994 1995 1996 1997 1998 1999
---------- ----------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Number of Contracts
Serviced (1)........... 324,141 419,090 507,539 590,327 656,774
Principal Balance of
Contracts
Serviced (1)........... $7,033,882 $10,182,676 $13,553,080 $17,038,136 $20,330,064 $
Contract
Liquidations (2)....... 1.44% 1.45% 2.01% 2.72% 2.58% %
Net Losses:
Dollars (3)........... $ 42,402 $ 55,162 $ 98,632 $ 180,699 $ 216,108 $
Percentage (4)........ .60% .54% .73% 1.06% 1.06% %
</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.
The data presented in the tables above are for illustrative purposes only
and there is no assurance that the delinquency, loan loss or repossession
experience of the contracts owned by the trust will be similar to that shown
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. These regional or local economic
conditions are often volatile, and we cannot predict future economic conditions
in any 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 with obligors located in any one state generally
will not exceed 10% of the cut-off date pool principal balance. However, it is
possible that one or more states would exceed this threshold after the transfer
of all the additional contracts.
S-21
<PAGE>
Ratio of Earnings to Fixed Charges for Green Tree
The table below shows our ratios of earnings (losses) to fixed charges
for the past five years and the three months ended March 31, 1999. For the
purposes of compiling these ratios, earnings (losses) consist of earnings
(losses) before income taxes plus fixed charges. Fixed charges consist of
interest expense and the interest portion of rent expense.
<TABLE>
<CAPTION>
Months
Ended
Year Ended December 31,
------------------------ -----------
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- -----------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings (Losses) to Fixed
Charges................................. 7.98 7.90 5.44 3.94 .62* 4.53
</TABLE>
- --------
* For 1998, adjusted earnings were $83.4 million less than fixed charges.
Adjusted earnings for 1998 included an impairment charge of $549.4 million
and nonrecurring charges of $108.0 million related to our merger with
Conseco, Inc.
Recent Developments
We have been served with various lawsuits in the United States District
Court for the District of Minnesota. These lawsuits were filed by our
stockholders as purported class actions on behalf of persons or entities who
purchased common stock or traded in options during the alleged class periods.
In addition to the company, some of our current and former officers and
directors are named as defendants in one or more of the lawsuits. The lawsuits
have been consolidated into two complaints, one relating to an alleged class of
purchasers of our common stock and the other relating to an alleged class of
traders in options for our common stock. In addition to these two complaints, a
separate non-class action lawsuit containing similar allegations was also
filed. Plaintiffs in the lawsuits assert claims under Sections 10(b) and 20(a)
of the Securities Exchange Act of 1934. In each case, plaintiffs allege that we
and the other defendants violated federal securities laws by making false and
misleading statements about our current state and our future prospects
particularly about prepayment assumptions and performance of some of our loan
portfolios, which allegedly rendered our financial statements false and
misleading. We believe that the lawsuits are without merit and intend to defend
the lawsuits vigorously.
S-22
<PAGE>
YIELD AND PREPAYMENT CONSIDERATIONS
The following information supplements, and if inconsistent supersedes,
the information in the prospectus under the heading "Yield Considerations."
The contracts will have original terms to scheduled maturity ranging from
approximately months to 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
certificates. Based on our experience with the portfolio of manufactured
housing contracts we service, we anticipate that a number of the contracts will
be prepaid before their maturity. A number of factors, including homeowner
mobility, general and regional economic conditions and prevailing interest
rates, may influence prepayments. Natural disasters may also influence
prepayments. In addition, repurchases of contracts due to breaches of
representations and warranties, including repurchases of staged-funding
contracts that have not been fully disbursed within 90 days, have the effect of
prepaying such contracts and therefore would affect the average life of the
certificates. Approximately % of the initial contracts by aggregate principal
balance as of the cut-off date were staged-funding contracts. 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, we
will permit assumptions of those contracts if the purchaser of the related
manufactured home satisfies our 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 on which the Class M-1 distribution test is not satisfied, on
each remittance date on which the Class M-2 distribution test is not satisfied,
or on each remittance date on which the Class B 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, the Class
M-1 principal balance, the Class M-2 principal balance and the Class B
principal balance. If the Class A certificates are 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 A certificates that is faster than
the rate actually realized, the purchaser's actual yield to maturity will be
lower than the yield calculated by the purchaser. See "Description of the
Certificates--Class A Principal."
On any remittance date on which the Class M-1 distribution test, the
Class M-2 distribution test and the Class B distribution test is not satisfied,
the Class A certificateholders will receive 100% of the Formula Principal
Distribution Amount, as described under "Description of the Certificates--Class
A Principal," subject to the limit of the amount available for distribution.
The rate of principal payments on the Class M-1 certificates, Class M-2
certificates and Class B certificates and the aggregate amount of distributions
on the Class M-1 certificates, Class M-2 certificates and 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
S-23
<PAGE>
the timing of those delinquencies and losses. See "Description of the
Certificates--Subordination of Class M-1 Certificates, Class M-2 Certificates,
Class B Certificates, Class B-3I Certificates and Class C Certificates" for a
description of the manner in which such losses are borne by the Class M-1
certificates, the Class M-2 certificates and each class of the Class B
certificates. If you purchase a class of Class B certificates, Class M-2
certificates or Class M-1 certificates at a discount and you calculate your
anticipated yield to maturity based on an assumed rate of payment of principal
on the Class B certificates, Class M-2 certificates or Class M-1 certificates
that is faster than the rate actually realized, your actual yield to maturity
will be lower than the yield you calculated. See "Description of the
Certificates--Class B-1 Principal."
Obligors who have entered bankruptcy proceedings and have had their
monthly scheduled payment reduced as a result of an extension of the term of
the related contract may not be pursued by us as delinquent, and accordingly we
use the reduced monthly payment in calculating the Formula Principal
Distribution Amount for each remittance date after that. If, however, the
principal amount of the contract were reduced in the bankruptcy proceedings,
the reduction would be recognized as a loss immediately and added to the
Formula Principal Distribution Amount.
We cannot assure you that the delinquency or repossession experience
described under "Green Tree Financial Corporation--Delinquency, Loan Loss and
Repossession Experience" will be representative of the results that may be
experienced on the contracts.
We and the servicer each have the option to purchase from the trust all
remaining contracts, and 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."
If the aggregate principal balance of the initial and additional
contracts transferred to the trust on the closing date is less than the
aggregate original principal balance of the certificates, the trustee will
establish and we will fund a pre-funding account on the closing date to provide
the trust with sufficient funds to purchase subsequent contracts. Any amounts
remaining in the pre-funding account which have not been used to purchase
subsequent contracts will be paid to the Class A-1 certificateholders no later
than . We believe that if a pre-funding account is established,
substantially all of the amounts in the account will be used to acquire
subsequent contracts. It is unlikely, however, that the aggregate principal
amount of subsequent contracts purchased by the trust will be identical to the
amount in the pre-funding account, and consequently, Class A-1
certificateholders will receive some prepayment of principal. See "Description
of Certificates--Conveyance of Subsequent Contracts and Pre-Funding Account."
Although partial prepayments of principal on contracts are applied on
scheduled payment dates for the 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 these contracts in any due period will reduce the amount of interest
received from obligors during the due period.
S-24
<PAGE>
Subject to the availability of the subordination provided by the Class M-1,
Class M-2, Class B-1, Class B-2, Class B-3I and Class C certificates, the
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
the Class A certificates on the following remittance date would not be affected
by the shortfall.
The expected final scheduled payment date on the initial contract with
the latest maturity is in . The expected final maturity of each class
of certificates, based on the assumptions that there are no defaults,
prepayments or delinquencies on payments due under the contracts and that the
repurchase option has not been exercised, are as follows:
. for the Class A-1 certificates,
. for the Class A-2 certificates,
. for the Class A-3 certificates,
. for the Class A-4 certificates,
. for the Class A-5 certificates,
. for the Class A-6 certificates,
. for the Class A-7 certificates,
. for the Class M-1 certificates,
. for the Class M-2 certificates,
. for the Class B-1 certificates, and
. for the Class B-2 certificates.
The table below shows statistical information about the prepayment
behavior of pools of manufactured housing contracts we sold and serviced. The
table relates to the sold pools for which prepayment information is
available covering a period of at least 36 months and which 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 in the table and its relationship
to the expected prepayment behavior of the contracts, you should consider that
we have 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. Also, the contracts owned by the trust may have an average age as of
the cut-off date substantially different from the average ages, as of the first
day of the month of sale, of the contracts in the sold pools to which the table
relates and may have other characteristics substantially different from 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,
Class M-1, Class M-2 and Class B Certificates" which may influence the amount
of prepayments of manufactured housing contracts, we cannot assure you that the
prepayment experience of the contracts will exhibit prepayment behavior similar
to the behavior summarized in the table for the periods covered. In addition,
prospective Class A, Class M-1, Class M-2 and Class B certificateholders should
consider that the table is limited to those periods covered and cannot reflect
any effects of aging on the prepayment behavior of manufactured housing
contracts beyond those periods.
S-25
<PAGE>
The table below shows for each sold pool:
. the initial aggregate principal balance, calculated as of the first
day of the month of the sale,
. 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,
. the original weighted average maturity ("WAM") of the contracts in
each pool,
. the estimated average age of the pool as of the first day of the
month of the sale of each pool,
. the aggregate principal balance of each pool as of ,
. the WAC of the contracts in each pool as of , and
. the percentage of the MHP, as described in "Weighted Average Life of
the Class A, Class M-1, Class M-2 and Class B Certificates" below,
for the life of each sold pool through , calculated as the
annual rate of the decline in the outstanding aggregate principal
balance exhibited over the life of the pool.
<TABLE>
<CAPTION>
Aggregate Current
Principal Original Average Aggregate
Month and Balance WAC WAM Age at Sale Principal Current Percentage
Year of Sale at Sale at Sale (months) (months) Balance WAC of MHP
- ------------ ------------ ------- -------- ----------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
December 1987........... $112,294,744 13.68% 172 2 $ % %
March 1988.............. 106,739,475 13.56 170 8
September 1988.......... 132,287,851 13.64 176 1
December 1988........... 105,566,962 13.76 172 1
June 1989............... 121,205,258 14.39 178 0
September 1989.......... 153,845,599 13.93 179 4
December 1989........... 127,799,125 13.74 182 1
June 1990............... 118,256,826 14.23 178 1
September 1990.......... 133,311,855 14.21 182 1
December 1990........... 117,246,945 14.07 182 2
March 1991.............. 103,147,656 14.09 181 14
June 1991............... 137,954,723 14.25 179 18
September 1991.......... 169,226,610 13.49 188 8
December 1991........... 163,375,476 13.07 185 8
March 1992.............. 671,900,943 13.55 176 53
June 1992............... 220,603,657 12.22 190 2
September 1992.......... 254,409,783 11.89 197 1
December 1992........... 288,323,475 11.28 201 2
March 1993.............. 250,400,638 11.36 206 1
June 1993............... 450,602,539 10.65 204 1
September 1993.......... 663,353,326 10.23 203 1
December 1993........... 725,268,946 9.73 203 1
March 1994.............. 561,614,157 9.81 211 1
May 1994................ 387,789,118 10.29 205 1
June 1994............... 197,004,761 10.67 211 1
July 1994............... 307,948,034 11.03 214 1
August 1994............. 384,942,940 11.14 224 1
September 1994.......... 463,885,067 11.45 217 1
</TABLE>
S-26
<PAGE>
<TABLE>
<CAPTION>
Aggregate Current
Principal Original Average Aggregate
Month and Balance WAC WAM Age at Sale Principal Current Percentage
Year of Sale at Sale at Sale (months) (months) Balance WAC of MHP
- ------------ ----------- ------- -------- ----------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
November 1994........... 353,492,359 11.42 223 1
December 1994........... 523,188,855 11.53 225 1
February 1995........... 378,339,823 11.85 239 1
March 1995.............. 328,256,612 12.04 246 1
May 1995................ 502,186,400 11.61 250 1
June 1995............... 319,783,607 11.13 255 1
July 1995............... 451,233,973 10.65 268 1
August 1995............. 396,694,720 10.27 269 1
September 1995.......... 347,754,066 10.12 271 1
October 1995............ 479,886,809 10.11 274 1
November 1995........... 398,796,644 10.15 276 1
December 1995........... 405,121,766 10.05 281 1
</TABLE>
Weighted Average Life of the Class A, Class M-1, Class M-2 and Class B
Certificates
The following information is intended to illustrate the effect of
prepayments of the initial contracts on the weighted average life of the Class
A certificates, Class M-1 certificates, Class M-2 certificates and Class B
certificates under the stated assumptions and is not a prediction of the
prepayment rate that the contracts might actually experience.
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, Class M-1,
Class M-2 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 we use in this prospectus supplement,
the manufactured housing prepayment model ("MHP"), 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 year of the then unpaid principal balance of the contracts in
the first month of the life of the contracts and an additional 0.1% per year 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 year each month.
As used in the following tables, 75% MHP assumes the contracts will
prepay at rates of 75% of the MHP assumed prepayment rates; 150% assumes the
contracts will prepay at rates of 150% of the MHP assumed prepayment rates, and
so forth.
We cannot assure you, however, that prepayment of the contracts owned by
the trust will conform to any level of the MHP, and we make no representation
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
S-27
<PAGE>
a variety of economic, geographic, social and other factors, including the
level of interest rates and the rate at which homeowners sell their
manufactured homes or default on their contracts. Increased competition among
manufactured housing lenders and recently declining interest rates have had the
effect of increasing the prepayment rates of our 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 these
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 these mortgage loans. Conversely, if prevailing interest rates
rise above the interest rates on the 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 the
contracts is generally shorter, the reduction or increase in the size of the
monthly payment on a contract arising from a change in its interest rate 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 M-1
Principal," payments of principal on the Class M-1 certificates will not
commence until the remittance date on which (1) the Class A principal balance
has been reduced to zero or (2) the Class M-1 distribution test is satisfied.
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
M-1, Class M-2 and Class B certificates. As described under "Description of the
Certificates--Class M-2 Principal," payments of principal on the Class M-2
certificates will not commence until the remittance date on which (a) the Class
A principal balance and Class M-1 principal balance have been reduced to zero
or (b) the Class M-2 distribution test is satisfied. This will have the effect
of accelerating the amortization of the Class A certificates and Class M-1
certificates while increasing the respective interest in the trust of the Class
M-2 certificates and Class B certificates. As described under "Description of
the Certificates--Class B-1 Principal," payments of principal on the Class B
certificates will not commence until the remittance date on which (1) the Class
A principal balance, the Class M-1 principal balance and the Class M-2
principal balance have been reduced to zero or (2) the Class B distribution
test is satisfied. This will have the effect of accelerating the amortization
of the Class A certificates, Class M-1 certificates and Class M-2 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:
(1) 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 listed in the table;
(2) either we or the servicer exercises its right of optional
termination described above;
S-28
<PAGE>
(3) the aggregate principal balance of the initial contracts as of the
cut-off date is $ and the initial contracts have the
characteristics described under "The Contract Pool" and have their
first scheduled payment due in , 1999;
(4) the additional contracts and subsequent contracts will have the
characteristics listed in the table following this paragraph and
will have their first scheduled payment due in and 1999;
(5) each class of certificates has the approximate principal amount and
the remittance rate shown for that class under "Summary of the Terms
of the Offered Certificates;"
(6) no interest shortfalls will arise because of prepayment in full of
the contracts;
(7) no delinquencies or losses are experienced on the contracts;
(8) distributions are made on the certificates on the first day of each
month, commencing in 1999; and
(9) the certificates are issued on , 1999.
We make no representation that the contracts will not experience delinquencies
or losses.
Assumed Characteristics of Additional and Subsequent Contracts as of the Cut-
off Date
<TABLE>
<CAPTION>
Weighted Average Weighted Average
Remaining Months Aggregate Principal Original Term Remaining Term Weighted Average
to Maturity Balance Outstanding (months) (months) Contract Rate
- ---------------- ------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
0 to
120 $ %
121 to
180
181 to
240
241 to
300
301 to
360
---- --- --- ---
Total $ %
====
</TABLE>
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 A-6 certificates, the Class A-7 certificates, the
Class M-1 certificates, the Class M-2 certificates, the Class B-1 certificates
and the Class B-2 certificates and show 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, the
original Class A-5 principal balance, the original Class A-6 principal balance,
the original Class A-7 principal balance, the original Class M-1 principal
balance, the original Class M-2 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-29
<PAGE>
The weighted average life of each class of each of certificates listed in
the tables below is determined by (1) multiplying the amount of cash
distributions in reduction of the principal balance of the certificate by the
number of years from the date of issuance of certificate to the stated
remittance date, (2) adding the results, and (3) dividing the sum by the
initial principal balance of the certificate.
Percentage of the Original Principal Balance of the Class A-1
Certificates at the Respective Percentages of the
MHP Listed Below:
<TABLE>
<CAPTION>
Date 75% 100% 125% 150% 175% 200% 250% 300% 350%
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage....... 100% 100% 100% 100% 100% 100% 100% 100% 100%
February 1, 2000.........
Weighted Average Life
(Years).................
</TABLE>
Percentage of the Original Principal Balance of the Class A-2
Certificates at the Respective Percentages of the
MHP Listed Below:
<TABLE>
<CAPTION>
Date 75% 100% 125% 150% 175% 200% 250% 300% 350%
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage....... 100% 100% 100% 100% 100% 100% 100% 100% 100%
February 1, 2000.........
February 1, 2001.........
February 1, 2002.........
Weighted Average Life
(Years).................
</TABLE>
Percentage of the Original Principal Balance of the Class A-3
Certificates at the Respective Percentages of the
MHP Listed Below:
<TABLE>
<CAPTION>
Date 75% 100% 125% 150% 175% 200% 250% 300% 350%
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage....... 100% 100% 100% 100% 100% 100% 100% 100% 100%
February 1, 2000.........
February 1, 2001.........
February 1, 2002.........
February 1, 2003.........
February 1, 2004.........
February 1, 2005.........
February 1, 2006.........
Weighted Average Life
(Years).................
</TABLE>
S-30
<PAGE>
Percentage of the Original Principal Balance of the Class A-4
Certificates at the Respective Percentages of the
MHP Listed Below:
<TABLE>
<CAPTION>
Date 75% 100% 125% 150% 175% 200% 250% 300% 350%
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage....... 100% 100% 100% 100% 100% 100% 100% 100% 100%
February 1, 2000.........
February 1, 2001.........
February 1, 2002.........
February 1, 2003.........
February 1, 2004.........
February 1, 2005.........
February 1, 2006.........
February 1, 2007.........
February 1, 2008.........
February 1, 2009.........
February 1, 2010.........
February 1, 2011.........
Weighted Average Life
(Years).................
</TABLE>
- --------
[ * Indicates an amount greater than zero but less than .5% of the Original
Class A-4 Principal Balance.]
Percentage of the Original Principal Balance of the Class A-5
Certificates at the Respective Percentages of the
MHP Listed Below:
<TABLE>
<CAPTION>
Date 75% 100% 125% 150% 175% 200% 250% 300% 350%
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage....... 100% 100% 100% 100% 100% 100% 100% 100% 100%
February 1, 2000.........
February 1, 2001.........
February 1, 2002.........
February 1, 2003.........
February 1, 2004.........
February 1, 2005.........
February 1, 2006.........
February 1, 2007.........
February 1, 2008.........
February 1, 2009.........
February 1, 2010.........
February 1, 2011.........
February 1, 2012.........
February 1, 2013.........
February 1, 2014.........
February 1, 2015.........
February 1, 2016.........
Weighted Average Life
(Years).................
</TABLE>
S-31
<PAGE>
Percentage of the Original Principal Balance of the Class A-6
Certificates at the Respective Percentages of the
MHP Listed Below:
<TABLE>
<CAPTION>
Date 75% 100% 125% 150% 175% 200% 250% 300% 350%
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage....... 100% 100% 100% 100% 100% 100% 100% 100% 100%
February 1, 2000.........
February 1, 2001.........
February 1, 2002.........
February 1, 2003.........
February 1, 2004.........
February 1, 2005.........
February 1, 2006.........
February 1, 2007.........
February 1, 2008.........
February 1, 2009.........
February 1, 2010.........
February 1, 2011.........
February 1, 2012.........
February 1, 2013.........
February 1, 2014.........
February 1, 2015.........
February 1, 2016.........
February 1, 2017.........
February 1, 2018.........
February 1, 2019.........
Weighted Average Life
(Years).................
</TABLE>
S-32
<PAGE>
Percentage of the Original Principal Balance of the Class A-7
Certificates at the Respective Percentages of the
MHP Listed Below:
<TABLE>
<CAPTION>
Date 75% 100% 125% 150% 175% 200% 250% 300% 350%
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage....... 100% 100% 100% 100% 100% 100% 100% 100% 100%
February 1, 2000.........
February 1, 2001.........
February 1, 2002.........
February 1, 2003.........
February 1, 2004.........
February 1, 2005.........
February 1, 2006.........
February 1, 2007.........
February 1, 2008.........
February 1, 2009.........
February 1, 2010.........
February 1, 2011.........
February 1, 2012.........
February 1, 2013.........
February 1, 2014.........
February 1, 2015.........
February 1, 2016.........
February 1, 2017.........
February 1, 2018.........
February 1, 2019.........
February 1, 2020.........
February 1, 2021.........
February 1, 2022.........
February 1, 2023.........
February 1, 2024.........
Weighted Average Life
(Years).................
</TABLE>
S-33
<PAGE>
Percentage of the Original Principal Balance of the Class M-1
Certificates at the Respective Percentages of the
MHP Listed Below:
<TABLE>
<CAPTION>
Date 75% 100% 125% 150% 175% 200% 250% 300% 350%
- ---- --- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage........ 100% 100% 100% 100% 100% 100% 100% 100% 100%
February 1, 2000..........
February 1, 2001..........
February 1, 2002..........
February 1, 2003..........
February 1, 2004..........
February 1, 2005..........
February 1, 2006..........
February 1, 2007..........
February 1, 2008..........
February 1, 2009..........
February 1, 2010..........
February 1, 2011..........
February 1, 2012..........
February 1, 2013..........
February 1, 2014..........
February 1, 2015..........
February 1, 2016..........
February 1, 2017..........
February 1, 2018..........
February 1, 2019..........
February 1, 2020..........
February 1, 2021..........
February 1, 2022..........
February 1, 2023..........
February 1, 2024..........
Weighted Average Life
(Years)..................
</TABLE>
S-34
<PAGE>
Percentage of the Original Principal Balance of the Class M-2
Certificates at the Respective Percentages of the
MHP Listed Below:
<TABLE>
<CAPTION>
Date 75% 100% 125% 150% 175% 200% 250% 300% 350%
- ---- --- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage........ 100% 100% 100% 100% 100% 100% 100% 100% 100%
February 1, 2000..........
February 1, 2001..........
February 1, 2002..........
February 1, 2003..........
February 1, 2004..........
February 1, 2005..........
February 1, 2006..........
February 1, 2007..........
February 1, 2008..........
February 1, 2009..........
February 1, 2010..........
February 1, 2011..........
February 1, 2012..........
February 1, 2013..........
February 1, 2014..........
February 1, 2015..........
February 1, 2016..........
February 1, 2017..........
February 1, 2018..........
February 1, 2019..........
February 1, 2020..........
February 1, 2021..........
February 1, 2022..........
February 1, 2023..........
February 1, 2024..........
Weighted Average Life
(Years)..................
</TABLE>
S-35
<PAGE>
Percentage of the Original Principal Balance of the Class B-1
Certificates at the Respective Percentages of the
MHP Listed Below:
<TABLE>
<CAPTION>
Date 75% 100% 125% 150% 175% 200% 250% 300% 350%
- ---- --- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage........ 100% 100% 100% 100% 100% 100% 100% 100% 100%
February 1, 2000..........
February 1, 2001..........
February 1, 2002..........
February 1, 2003..........
February 1, 2004..........
February 1, 2005..........
February 1, 2006..........
February 1, 2007..........
February 1, 2008..........
February 1, 2009..........
February 1, 2010..........
February 1, 2011..........
February 1, 2012..........
February 1, 2013..........
Weighted Average Life
(Years)..................
</TABLE>
S-36
<PAGE>
Percentage of the Original Principal Balance of the Class B-2
Certificates at the Respective Percentages of the
MHP Listed Below:
<TABLE>
<CAPTION>
Date 75% 100% 125% 150% 175% 200% 250% 300% 350%
- ---- --- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage........ 100% 100% 100% 100% 100% 100% 100% 100% 100%
February 1, 2000..........
February 1, 2001..........
February 1, 2002..........
February 1, 2003..........
February 1, 2004..........
February 1, 2005..........
February 1, 2006..........
February 1, 2007..........
February 1, 2008..........
February 1, 2009..........
February 1, 2010..........
February 1, 2011..........
February 1, 2012..........
February 1, 2013..........
February 1, 2014..........
February 1, 2015..........
February 1, 2016..........
February 1, 2017..........
February 1, 2018..........
February 1, 2019..........
February 1, 2020..........
February 1, 2021..........
February 1, 2022..........
February 1, 2023..........
February 1, 2024..........
Weighted Average Life
(Years)..................
</TABLE>
S-37
<PAGE>
DESCRIPTION OF THE CERTIFICATES
The following information supplements, and if inconsistent supersedes,
the information in the prospectus under "Description of the Certificates."
The certificates will be issued under the pooling and servicing
agreement. A copy of the execution form of the agreement will be filed in a
current report on Form 8-K with the SEC after the initial issuance of the
certificates. The following summary describes certain terms of the pooling and
servicing agreement, does not purport to be complete and is qualified in its
entirety by the pooling and servicing agreement, which is incorporated by
reference in this prospectus supplement.
General
The certificates will be issued in fully registered form only in
denominations of $1,000 or an integral multiple of $1,000. 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, the original Class A-5 principal
balance, the original Class A-6 principal balance or the original Class A-7
principal balance, as appropriate. The Class A certificates in the aggregate
will represent approximately an initial % undivided interest in the trust.
The percentage interest of a Class M-1 certificate will be equal to the
percentage obtained by dividing its denomination by the original Class M-1
principal balance. The Class M-1 certificates in the aggregate will represent
approximately an initial % undivided interest in the trust. The percentage
interest of a Class M-2 certificate will be equal to the percentage obtained by
dividing its denomination by the original Class M-2 principal balance. The
Class M-2 certificates in the aggregate will represent approximately an initial
% 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 approximately an initial % undivided interest in the
trust.
The paying agent will make distributions on the certificates 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
first day of each month or, if the first day is not a business day, the next
succeeding business day, commencing in 1999. Payments will be made by check
mailed on the remittance date to the 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 before the
remittance date. Final payments will be made only when of the certificates are
tendered to the paying agent for cancellation. (Articles I and VIII.)
S-38
<PAGE>
Conveyance of Contracts
On the closing date, we will establish the trust and transfer to the
trust the initial and additional contracts, including all principal and
interest received on the contracts other than receipts of principal and
interest due on the contracts before the cut-off date. The pooling and
servicing agreement permits the trust to purchase subsequent contracts on one
or more subsequent transfer dates through , 1999. See "Conveyance of
Subsequent Contracts and Pre-Funding Account."
In addition to the representations and warranties described in the
prospectus under "Description of Certificates--Conveyance of Contracts, " we
will make warranties about the initial contracts, including that:
(1) the aggregate principal amount payable by the obligors on the
initial contracts as of the cut-off date equals $ ;
(2) as of the cut-off date, the obligors on no more than 10% of the
initial contracts by remaining principal balance are located in any
one state, the obligors on no more than 5% of the initial contracts
by remaining principal balance are located in an area with the same
zip code and the obligors on not more than 1% of the initial
contracts by remaining principal balance are located in California
in an area with the same zip code;
(3) approximately % of the aggregate principal amount of initial
contracts as of the cut-off date is attributable to loans to
purchase new manufactured homes and approximately % is attributable
to loans to purchase used manufactured homes;
(4) no initial contract has a remaining maturity of more than 360
months;
(5) the date of each initial contract is on or after ; and
(6) no adverse selection procedures were employed in selecting the
initial contracts.
We will make additional representations and warranties about the additional
contracts and subsequent contracts.
Conveyance of Subsequent Contracts and Pre-Funding Account
If the aggregate principal balance of the initial and additional
contracts transferred to the trust on the closing date is less than the
aggregate original principal balance of the certificates, the trustee will
establish and we will fund a pre-funding account on the closing date to provide
the trust with sufficient funds to purchase subsequent contracts. The amount
deposited in the pre-funding account will initially equal the difference
between $ and the aggregate principal balance as of the cut-off date of
the initial contracts and additional contracts. The pre-funding account will be
used to purchase subsequent contracts during the pre-funding period from the
closing date until the earliest of (1) the date on which the amount in the pre-
funding account is less than $10,000, (2) , 1999, or (3) the date on which
an event of termination occurs under the pooling and servicing agreement. Any
reinvestment income earned on amounts on deposit in the pre-funding account
will be taxable to us.
S-39
<PAGE>
Under the pooling and servicing agreement, following the initial issuance
of the certificates, the trust will be obligated to purchase subsequent
contracts from us during the pre-funding period, subject to their availability.
Each subsequent contract will have been underwritten in accordance with our
standard underwriting criteria. Subsequent contracts will be transferred to the
trust under subsequent transfer instruments between us and the trust. In
connection with the purchase of subsequent contracts on the subsequent transfer
dates, the trust will be required to pay to Green Tree from amounts on deposit
in the pre-funding account a cash purchase price of 100% of the contract's
principal balance as of the cut-off date. The amount paid from the pre-funding
account on each subsequent transfer date will not include accrued interest on
the related subsequent contracts. Following each subsequent transfer date, the
aggregate principal balance of the contracts in the trust will increase by an
amount equal to the aggregate principal balance of the contracts purchased and
the amount in the pre-funding account will decrease by the same amount. Any
amounts remaining in the pre-funding account after the purchase of subsequent
contracts will be applied on the first remittance date on or after the last day
of the pre-funding period to prepay principal on the Class A-1 certificates.
Any conveyance of subsequent contracts on a subsequent transfer date is
subject to conditions including:
(1) each subsequent contract must satisfy the representation and
warranties specified in the related subsequent transfer instrument
and the pooling and servicing agreement;
(2) we must not select subsequent contracts in a manner that we believe
is adverse to the interests of the certificateholders;
(3) as of its respective cut-off date, each subsequent contract must
satisfy the following criteria:
. no subsequent contract may be more than 30 days contractually
delinquent;
. the remaining stated term to maturity of each subsequent
contract may not exceed 360 months;
. each subsequent contract must be underwritten in accordance
with our standard underwriting criteria; and
. no subsequent contract may have a loan-to-value ratio greater
than 100%;
(4) the contract pool following the addition of the subsequent contracts
must satisfy the following criteria:
. the weighted average contract rate must not be less than %;
. the weighted average loan-to-value ratio must not be greater
than %;
S-40
<PAGE>
. not less than % of the cut-off date pool principal balance
must be attributable to loans to purchase new manufactured
homes;
. not more than % of the cut-off date pool principal balance
must be secured by single-wide manufactured homes and not less
than % of the cut-off date pool principal balance must be
secured by double-wide manufactured homes; and
. at least % of the cut-off date pool principal balance must
consist of land-and-home contracts;
(5) due to the purchase of the subsequent contracts, the certificates
will not receive from S&P or Fitch a lower credit rating than the
rating assigned at the initial issuance of the class of
certificates; and
(6) an independent accountant will provide a letter stating whether or
not the characteristics of the subsequent contracts conform to the
characteristics described in this prospectus supplement.
Payments on Contracts; Distributions on Certificates
The trustee, on behalf of the trust, will establish and maintain the
certificate account in an eligible account. (Section 1.02.) An eligible account
is any account which is
(1) an account maintained with an eligible institution; or
(2) a segregated trust account maintained with the corporate trust
department of a federal or state chartered depository institution or
trust company with trust powers and acting in its fiduciary capacity
for the benefit of the trustee, which depository institution or
trust company has capital and surplus or, if the depository
institution or trust company is a subsidiary of a bank holding
company system, the capital and surplus of the bank holding company
of not less than $50,000,000 and the securities of the depository
institution or trust company (or, if the depository institution or
trust company is a subsidiary of a bank holding company system and
the depository institution's or trust company's securities are not
rated, the securities of the bank holding company) has a credit
rating from Moody's, if rated by Moody's, S&P, if rated by S&P and
Fitch, if rated by Fitch, in one of its generic credit rating
categories which signifies investment grade; or
(3) an account that will not cause S&P or Fitch to downgrade or withdraw
its then-current rating assigned to the certificates, as confirmed
in writing by S&P and Fitch.
An eligible institution is any 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 deposits have
been rated P-1 by Moody's, if rated by Moody's, A-1+ by S&P, if rated by S&P
and F-1 by Fitch, or in one of the two highest rating categories by Moody's, if
rated by Moody's, S&P, if rated by S&P, and Fitch in the case of unsecured
long-term debt, and which is subject to supervision
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and examination by federal or state authorities. The servicer may authorize the
trustee to invest the funds in the certificate account in eligible investments
that will mature not later than the business day before the applicable monthly
remittance date. Eligible investments include:
. direct obligations of, and obligations fully guaranteed by, the United
States or of any agency backed by the full faith and credit of the
United States and which are noncallable;
. federal funds, certificates of deposit, time deposits and bankers'
acceptances sold by eligible financial institutions;
. repurchase agreements with eligible institutions;
. securities bearing interest or sold at a discount issued by a
corporation which has a credit rating of at least Aa2 from Moody's, at
least AAA by S&P and in one of the two highest rating categories from
Fitch, not in excess of 10% of amounts in the certificate account at the
time of the investment;
. commercial paper assigned at least a P-1 rating by Moody's and at least
an A-1+ rating by S&P, if rated by S&P, at the time of the investment;
and
. shares of registered investment companies whose shares are registered
under the Securities Act of 1933 and have the highest credit rating then
available from Moody's and Fitch, if rated by Fitch, and are rated AAAm
or AAAm-G by S&P.
All payments from obligors on the contracts which the servicer receives,
including principal prepayments and advance payments by obligors not
constituting principal prepayments, must be paid into the certificate account
no later than one business day after receipt of the payment, except amounts
received as late payment fees, extension fees, assumption fees or similar fees.
These fees are included as part of the servicer's servicing fees. See
"Servicing Compensation and Payment of Expenses" in the prospectus. In
addition, amounts we paid for contracts repurchased as a result of breach of
warranties under the pooling and service agreement, and amounts required to be
deposited upon substitution of a contract because of breach of warranties, must
be paid into the certificate account. See "Conveyance of Contracts" in the
prospectus. The servicer will not make any advances in respect of delinquent
payments on the contracts.
On the third business day before each remittance date, the servicer will
determine the amount available and the amounts to be distributed on the
certificates for that remittance date. The amount available on each remittance
date generally includes:
(1) payments on the contracts due and received during the related due
period, as defined in the next paragraph,
(2) prepayments and other unscheduled collections received during the
related due period,
(3) all collections of principal on the contracts received during the
due period in which the remittance date occurs up to and including
the third business day before the remittance date, but in no event
later than the 25th day of the month before the remittance date,
minus
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(4) for all remittance dates other than the remittance date in 1999,
all collections in respect of principal on the contracts received
during the related due period up to and including the third business
day before the preceding remittance date, but in no event later than
the 25th day of the prior month.
The amount available will be reduced by the following amounts:
.advance payments in respect of the related due period;
. 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 for manufactured homes
that are reimbursable to the servicer under the pooling and
servicing 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 due period for all remittance dates, other than the remittance date
in 1999, is the period from and including the 15th day of the second month
preceding that remittance date, to and including the 14th day of the month
immediately preceding that remittance date. For the remittance date in
1999, the due period will be the period from and including 1, 1999 to and
including 14, 1999.
The trustee will withdraw funds from the certificate account to make
payments to certificateholders. From time to time, as provided in the pooling
and servicing 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, the trustee will apply the amount available to
make distributions of principal and interest in the following order of
priority:
(1)Class A interest
(2)Class M-1 interest
(3)Class M-2 interest
(4)Class B-1 interest
(5)Class A principal
(6)Class M-1 principal
(7)Class M-2 principal
(8)Class B-1 principal
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(9)Class B-2 interest
(10)Class B-2 principal
Each distribution on a book-entry certificate will be paid to DTC, which
will credit the amount of the distribution to the accounts of its participants
in accordance with its normal procedures. Each participant will be responsible
for disbursing the distribution to the certificate owners that it represents
and to each indirect participating brokerage firm for which it acts as agent.
Each brokerage firm will be responsible for disbursing funds to the certificate
owners that it represents. All credits and disbursements on a book-entry
certificate are to be made by DTC and the participants in accordance with DTC's
rules.
The servicer will furnish to the trustee, and the trustee will send with
each distribution on a remittance date to each holder of the certificates, a
statement or statements describing the amount of the distribution allocable to
principal and the amount of the distribution allocable to interest. These
amounts will be expressed as a dollar amount per Class A, Class M-1, Class M-2
or Class B certificate with a 1% percentage interest or per $1,000 denomination
of Class A, Class M-1, Class M-2 or Class B certificate. (Section 6.05.)
Class A Interest
One month's interest will be paid to the holders of the Class A
certificates on each remittance date, to the extent of the amount available in
the certificate account on that date, at the Class A remittance rate on the
then outstanding principal balance of the Class A certificates. Interest on the
Class A certificates will accrue from , 1999, or from the most recent
remittance date on which interest has been paid, to but excluding the following
remittance date. The interest due on the Class A-1 certificates will be
computed on the basis of the actual number of days elapsed from and including
the most recent remittance date to but excluding the current remittance date
and a 360-day year, and the interest due on all other Class A Certificates, on
the basis of a 360-day year of twelve 30-day months. (Sections 1.02 and 8.03.)
The remittance rates for the Class A-1, Class A-2, Class A-3, Class A-4,
Class A-5, Class A-6 and Class A-7 certificates are listed on the cover of this
prospectus supplement.
The principal balance of any class of Class A certificates as of any
remittance date is the original principal balance of that class less all
amounts previously distributed to holders of that 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, the Class A-5 principal
balance, the Class A-6 principal balance and the Class A-7 principal balance.
(Section 1.02.)
If 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 the Class A certificates, the amount available will be
distributed among the outstanding Class A
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certificates pro rata based on the aggregate amount of interest due on each
class, and the amount of the shortfall will be carried forward and added to the
amount these holders will be entitled to receive on the next remittance date.
(Section 1.02) A shortfall could occur, for example, if delinquencies or losses
realized on the contracts were exceptionally high and were concentrated in a
particular due period. Any amount carried forward will bear interest at the
remittance rate for each class of Class A certificates, to the extent permitted
by law.
The Class A-7 remittance rate on each remittance date will be % per
year, subject to a maximum rate equal to the weighted average of the contract
rates on the contracts 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,
we anticipate that the Class A-7 remittance rate will be %. In the unlikely
event that a large number of contracts having contract rates higher than %
were to prepay while the contracts having contract rates equal to or lower than
% did not prepay, with the result that the interest collections on the
remaining contracts were not sufficient to support a Class A-7 remittance rate
of %, then the Class A-7 remittance rate would be equal to the weighted
average of the contract rates on the contracts remaining in the contract pool.
Of the initial contracts, % by aggregate principal balance as of the cut-off
date had contract rates higher than %. The weighted average of the contract
rates on the initial contracts as of the cut-off date was approximately %.
Class M-1 Interest
Interest will be paid to the Class M-1 certificateholders on each
remittance date, up to the amount available in the certificate account after
payment of interest on the Class A certificates. Interest on the outstanding
Class M-1 adjusted principal balance will accrue from , 1999, or from the
most recent remittance date on which interest has been paid, to but excluding
the following remittance date. The Class M-1 principal balance is the original
Class M-1 principal balance less the sum of all amounts previously distributed
to Class M-1 certificateholders on account of principal. The Class M-1 adjusted
principal balance as of any remittance date is the Class M-1 principal balance
less any Class M-1 liquidation loss amount. If, on a particular remittance
date, the remaining amount available in the certificate account is not
sufficient to make a full distribution of interest to the Class M-1
certificateholders, other funds in the certificate account representing
collections received before that remittance date, up to a limited amount, will
be applied to the deficiency, and any remaining deficiency will be carried
forward and added to the amount the holders will be entitled to receive on the
next remittance date. Any amount carried forward will bear interest at the
Class M-1 remittance rate, to the extent permitted by law.
The Class M-1 remittance rate on each remittance date will be % per
year, subject to a maximum rate equal to the weighted average of the contract
rates on the contracts 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,
we anticipate that the Class M-1 remittance rate will be %. In the unlikely
event that a large number of contracts having contract rates higher than %
were to prepay while the contracts having contract rates equal to or lower than
% did not prepay, with the result that
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the interest collections on the remaining contracts were not sufficient to
support a Class M-1 remittance rate of %, then the Class M-1 remittance rate
would be equal to the weighted average of the contract rates on the contracts
remaining in the contract pool. Of the initial contracts, % by aggregate
principal balance as of the cut-off date had contract rates higher than %.
The weighted average of the contract rates on the initial contracts as of the
cut-off date was approximately %.
Class M-2 Interest
Interest will be paid to the Class M-2 certificateholders on each
remittance date, up to the amount available in the certificate account after
payment of interest on the Class A certificates and the Class M-1 certificates.
Interest on the outstanding Class M-2 adjusted principal balance will accrue
from , 1999, or from the most recent remittance date on which interest has
been paid, to but excluding the following remittance date. The Class M-2
principal balance is the original Class M-2 principal balance less the sum of
all amounts previously distributed to Class M-2 certificateholders on account
of principal. The Class M-2 adjusted principal balance as of any remittance
date is the Class M-2 principal balance less any Class M-2 liquidation loss
amount. If, on a particular remittance date, the remaining amount available in
the certificate account is not sufficient to make a full distribution of
interest to the Class M-2 certificateholders, other funds in the certificate
account representing collections received before that remittance date, up to a
limited amount, will be applied to the deficiency, and any remaining deficiency
will be carried forward and added to the amount the holders will be entitled to
receive on the next remittance date. Any amount carried forward will bear
interest at the Class M-2 remittance rate, to the extent permitted by law.
The Class M-2 remittance rate on each remittance date will be % per
year, subject to a maximum rate equal to the weighted average of the contract
rates on the contracts 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,
we anticipate that the Class M-2 remittance rate will be %. In the unlikely
event that a large number of contracts having contract rates higher than %
were to prepay while the contracts having contract rates equal to or lower than
% did not prepay, with the result that the interest collections on the
remaining contracts were not sufficient to support a Class M-2 remittance rate
of %, then the Class M-2 remittance rate would be equal to the weighted
average of the contract rates on the contracts remaining in the contract pool.
Of the initial contracts, % by aggregate principal balance as of the cut-off
date had contract rates higher than %. The weighted average of the contract
rates on the initial contracts as of the cut-off date was approximately %.
Class B-1 Interest
Interest will be paid to the Class B-1 certificateholders on each
remittance date, up to the amount available in the certificate account after
payment of interest on the Class A certificates, Class M-1 certificates and
Class M-2 certificates. Interest on the outstanding Class B-1 adjusted
principal balance will accrue from , 1999 or from the most recent remittance
date on which interest has been paid, to but excluding the
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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 principal. The Class B-1 adjusted
principal balance as of any remittance date is the Class B-1 principal balance
less any Class B-1 liquidation loss amount. If, on a particular remittance
date, the remaining amount available in the certificate account is not
sufficient to make a full distribution of interest to the Class B-1
certificateholders, other funds in the certificate account representing
collections received before that remittance date, up to a limited amount, will
be applied to the deficiency, and any remaining deficiency will be carried
forward and added to the amount the holders will be entitled to receive on the
next remittance date. Any amount 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 % per
year, subject to a maximum rate equal to the weighted average of the contract
rates on the contracts 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,
we anticipate that the Class B-1 remittance rate will be %. In the unlikely
event that a large number of contracts having contract rates higher than %
were to prepay while the contracts having contract rates equal to or lower than
% 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 %, then the Class B-1 remittance rate would be equal to the weighted
average of the contract rates on the Contracts remaining in the contract pool.
Of the initial contracts, % by aggregate principal balance as of the cut-off
date had contract rates higher than %. The weighted average of the contract
rates on the initial contracts was approximately %.
Class A Principal
Holders of the Class A certificates will be entitled to receive a payment
of principal on each remittance date, to the extent of the amount available in
the certificate account on the date after payment of interest on the Class A
principal balance, the Class M-1 adjusted principal balance, the Class M-2
adjusted principal balance and the Class B-1 adjusted principal balance, in an
amount equal to the Class A Percentage of the "Formula Principal Distribution
Amount," which equals the sum of:
(1) all scheduled payments of principal due on each outstanding contract
during the related due period, after adjustments for previous
partial principal prepayments and after any adjustments to a
contract's amortization schedule as a result of a bankruptcy or a
similar proceeding involving the related obligor),
(2) the Scheduled Principal Balance of each contract which, during the
month preceding the related due period, we purchased under the
pooling and servicing agreement on account of breaches of our
representations and warranties,
(3) all partial principal prepayments applied and all principal
prepayments in full received during the related due period,
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(4) the Scheduled Principal Balance of each contract that became a
liquidated contract during the related due period, plus the amount
of any reduction in the outstanding principal balance of a contract
during the related due period ordered as the result of a bankruptcy
or similar proceeding involving the related obligor,
(5) without repeating the above, all collections in respect of principal
on the contracts received during the due period in which the
remittance date occurs up to and including the third business day
prior to such remittance date, but in no event later than the 25th
day of the month before the remittance rate, minus
(6) for all remittance dates other than the remittance date in 1999,
the amount included in the formula principal distribution amount for
the preceding remittance date by virtue of clause (5) above, plus
(7) for the remittance date in 2000, any amount, by which the Class
A-1 principal balance as of the remittance date exceeds the sum on
the remittance date of the amounts described in clause (1) through
(6) above; minus
(8) for the remittance date in 2000, any amount, distributed in
respect of principal on the Class A-1 certificates on the remittance
date in 2000 under clause (7) above.
The "Class A Percentage" for any remittance date will equal a fraction,
expressed as a percentage, the numerator of which is the Class A principal
balance, and the denominator of which is the sum of:
. the Class A principal balance,
. if the Class M-1 distribution test is satisfied on that remittance
date, the Class M-1 principal balance, otherwise zero,
. if the Class M-2 distribution test is satisfied on that remittance
date, the Class M-2 principal balance, otherwise zero, and
. if the Class B distribution test is satisfied on that remittance
date, the Class B principal balance, otherwise zero.
The "Scheduled Principal Balance" of a contract as of any remittance date
is the unpaid principal balance of the contract as specified in the
amortization schedule at the time relating to the contract as of the due date
in the related due period, after giving effect to any previous partial
prepayments and to the payment of principal due on the due date and
irrespective of any delinquency in payment on the contract. The "Pool Scheduled
Principal Balance" as of any remittance date is the aggregate of the Scheduled
Principal Balances of contracts outstanding at the end of the related due
period. 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, up to the amount available after payment of interest accrued on
the Class A principal balance, Class M-1 adjusted principal balance, Class M-2
adjusted principal balance and Class B-1 adjusted principal balance, as
follows:
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. 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,
. then to the Class A-5 certificateholders until the Class A-5
principal balance has been reduced to zero,
. then to the Class A-6 certificateholders until the Class A-6
principal balance has been reduced to zero and
. then to the Class A-7 certificateholders until the Class A-7
principal balance has been reduced to zero.
The Class A-1 certificates will have a final maturity date of .
Mandatory Prepayments on the Class A-1 Certificates
If the aggregate principal balance of the initial and additional
contracts transferred to the trust on the closing date is less than the
aggregate original principal balance of the certificates, the trustee will
establish and we will fund a pre-funding account on the closing date. See
"Yield and Prepayment Considerations" and "Description of the Certificates--
Conveyance of Subsequent Contracts and Pre-Funding Account.
Class M-1 Principal
Holders of the Class M-1 certificates will be entitled to receive a
payment of principal on each remittance date on which the Class A principal
balance has been reduced to zero or the Class M-1 distribution test is
satisfied. The amount of principal paid on the Class M-1 certificates on any
remittance date will be the Class M-1 Percentage of the Formula Principal
Distribution Amount, subject to the limit of the amount available in the
certificate account on the date remaining after payment of interest on the
Class A principal balance, the Class M-1 adjusted principal balance, the Class
M-2 adjusted principal balance and the Class B-1 adjusted principal balance and
the payment of principal due on the Class A certificates.
The "Class M-1 Percentage" for any remittance date will equal
(1) zero, if the Class A principal balance has not yet been reduced to
zero and the Class M-1 distribution test is not satisfied, or
(2) a fraction, expressed as a percentage, the numerator of which is the
Class M-1 principal balance as of the remittance date, and the
denominator of which is, as of the remittance date, the sum of:
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(a) any Class A principal balance
(b) the Class M-1 principal balance,
(c) if the Class M-2 distribution test is satisfied on that
remittance date, the Class M-2 principal balance, otherwise
zero and
(d) if the Class B distribution test is satisfied on that
remittance date, the Class B principal balance, otherwise
zero.
The Class M-1 distribution test will be satisfied if each of the
following tests is satisfied:
(1) the remittance date occurs in or after ;
(2) the average sixty-day delinquency ratio test, as defined in the
pooling and servicing agreement as of the remittance date must not
exceed 4.50%;
(3) cumulative realized losses, as defined in the pooling and servicing
agreement, as of the remittance date must not exceed a certain
specified percentage of the cut-off date pool principal balance,
depending on the year in which the remittance date occurs;
(4) the current realized loss ratio, as defined in the agreement, as of
the remittance date must not exceed 2.75%; and
(5) the sum of the Class M-1 principal balance, the Class M-2 principal
balance and the Class B principal balance divided by the pool
scheduled principal balance as of the immediately preceding
remittance date must be equal to or greater than %.
After payment of all principal then distributable on the Class M-1
certificates, any Class M-1 liquidation loss interest amount that has accrued
and has not previously been paid will be distributed, together with interest on
that amount at the Class M-1 remittance rate to the extent legally permissible,
to the extent of the remaining amount available.
Class M-2 Principal
Holders of the Class M-2 Certificates will be entitled to receive a
payment of principal on each remittance date on which the Class A principal
balance and the Class M-1 principal balance have been reduced to zero or the
Class M-2 distribution test is satisfied. The amount of principal paid on the
Class M-2 certificates on any remittance date will be the Class M-2 Percentage
of the Formula Principal Distribution Amount, subject to the limit of the
amount available in the certificate account on the date remaining after payment
of interest on the Class A principal balance, the Class M-1 adjusted principal
balance, the Class M-2 adjusted principal balance and the Class B-1 adjusted
principal balance and the payment of principal due on the Class A and Class M-1
certificates.
The "Class M-2 Percentage" for any remittance date will equal:
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(1) zero, if the Class A principal balance and the Class M-1 principal
balance have not yet been reduced to zero and the Class M-2
distribution test is not satisfied or
(2) a fraction, expressed as a percentage, the numerator of which is the
Class M-2 principal balance as of the remittance date, and the
denominator of which is, as of the remittance date, the sum of:
(a) any Class A principal balance,
(b) any Class M-1 principal balance,
(c) the Class M-2 principal balance, and
(d) if the Class B distribution test is satisfied on that
remittance date, the Class B principal balance, otherwise
zero.
The Class M-2 distribution test will be satisfied if each of the
following tests is satisfied:
(1) the remittance date occurs in or after ;
(2) the average sixty-day delinquency ratio test as defined in the
pooling and servicing agreement as of the remittance date must not
exceed 4.50%;
(3) cumulative realized losses as defined in the pooling and servicing
agreement as of the remittance date must not exceed a specified
percentage of the cut-off date pool principal balance, depending on
the year in which the remittance date occurs;
(4) the current realized loss ratio as defined in the pooling and
servicing agreement as of the remittance date must not exceed 2.75%;
and
(5) the sum of the Class M-2 principal balance and the Class B principal
balance divided by the pool scheduled principal balance as of the
immediately preceding remittance date must be equal to or greater
than %.
After payment of all principal then distributable on the Class M-2
certificates, any Class M-2 liquidation loss interest amount that has accrued
and has not previously been paid will be distributed, together with interest on
that amount at the Class M-2 remittance rate to the extent legally permissible,
up to the remaining amount available.
Class B-1 Principal
Holders of the Class B-1 certificates will be entitled to receive a
payment of principal on each remittance date on which the Class A principal
balance, the Class M-1 principal balance and the Class M-2 principal balance
have been reduced to zero or the Class B distribution test is satisfied. The
amount of principal paid on the Class B-1 certificates on any remittance date
will be the Class B Percentage of the Formula Principal Distribution Amount,
subject to the limit of the amount available in the certificate account on the
date remaining after payment of interest on the Class A principal balance, the
Class M-1 adjusted principal balance, the Class M-2 adjusted
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principal balance and the Class B-1 adjusted principal balance and the payment
of principal due on the Class A, Class M-1 and Class M-2 certificates.
The "Class B Percentage" for any remittance date will equal:
(1) zero, if the Class A principal balance, the Class M-1 principal
balance and the Class M-2 principal balance have not yet been
reduced to zero and the Class B distribution test is not satisfied
or
(2) a fraction, expressed as a percentage, the numerator of which is the
Class B principal balance as of the remittance date, and the
denominator of which is, as of the remittance date, the sum of:
(a) any Class A principal balance,
(b) any Class M-1 principal balance,
(c) any Class M-2 principal balance, and
(d) the Class B principal balance.
The Class B distribution test will be satisfied if each of the following
tests is satisfied:
(1) the remittance date occurs in or after ;
(2) the average sixty-day delinquency ratio test as defined in the
pooling and servicing agreement as of the remittance date must not
exceed 4.50%;
(3) the cumulative realized losses as defined in the pooling and
servicing agreement as of the remittance date must not exceed a
specified percentage of the cut-off date pool principal balance,
depending on the year in which the remittance date occurs:
(4) the current realized loss ratio as defined in the pooling and
servicing agreement as of the remittance date must not exceed 2.75%;
(5) the class B principal balance divided by the pool scheduled
principal balance as of the immediately preceding remittance date
must be equal to or greater than 12.00%; and
(6) the Class B principal balance must not be less than $ .
After payment of all principal then distributable on the Class B-1
certificates, any Class B-1 liquidation loss interest amount that has accrued
and has not previously been paid will be distributed, together with interest on
that amount at the Class B-1 remittance rate to the extent legally permissible,
up to the remaining amount available.
Class B-2 Interest
Interest will be paid to the Class B-2 certificateholders on each
remittance date, up to any remaining amount available, and any amount paid
under the limited guarantee. Interest on the outstanding Class B-2 principal
balance will accrue from , 1999, 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
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the original Class B-2 principal balance less the sum of all amounts previously
distributed to Class B-2 certificateholders on account of principal. If, on a
particular remittance date, the remaining amount available in the certificate
account is not sufficient to make a full distribution of interest to the Class
B-2 certificateholders and we fail to pay the amount under the limited
guarantee, the amount of the deficiency will be carried forward and added to
the amount the holders will be entitled to receive on the next remittance date.
Any amount carried forward will bear interest at the Class B-2 remittance rate,
as permitted by law.
The Class B-2 remittance rate on each remittance date will be % per
year, subject to a maximum rate equal to the weighted average of the contract
rates on the contracts 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,
we anticipate that the Class B-2 remittance rate will be %. In the unlikely
event that a large number of contracts having contract rates higher than %
were to prepay while the contracts having contract rates equal to or lower than
% 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 %, then the Class B-2 remittance rate would be equal to the weighted
average of the contract rates on the contracts remaining in the contract pool.
Of the initial contracts, % by aggregate principal balance as of the cut-off
date had contract rates higher than %. The weighted average of the contract
rates on the initial contracts as of the cut-off date was approximately %.
Class B-2 Principal
Except for payments of the Class B-2 liquidation loss amount, as
described below under "--Losses on Liquidated Contracts", the Class B-2
certificateholders will be entitled to receive principal only on remittance
dates on which:
. the Class B-1 principal balance has been reduced to zero, which we
refer to as the "Class B-1 cross-over date" and
. the Class B distribution test is satisfied; provided, however, that
if the Class A principal balance, the Class M-1 principal balance,
the Class M-2 principal balance and the Class B-1 principal balance
have been reduced to zero, the Class B-2 certificateholders will
still be entitled to receive principal.
On each remittance date on or after the Class B-1 cross-over date on
which each Class B distribution test is satisfied, the Class B Percentage of
the Formula Principal Distribution Amount will be distributed, to the extent of
the remaining amount available after payment of interest on the Class B-2
certificates, to the Class B-2 certificateholders until the Class B-2 principal
balance has been reduced to zero.
Subordination of Class M-1 Certificates, Class M-2 Certificates, Class B
Certificates, Class B-3I Certificates and Class C Certificates
The rights of the holders of the Class M-1 certificates, the Class M-2
certificates, the Class B certificates, the Class B-3I certificates and the
Class C certificates to receive
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distributions on the contracts in the trust will be subordinated to the rights
of the Class A certificateholders, as described in this section. 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 these 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 on any remittance date the amount of interest due on the Class A
certificates, including any interest due on a prior remittance date but not
received, prior to any distribution being made on a remittance date in respect
of interest on the Class M-1 certificates, the Class M-2 certificates, the
Class B certificates and the Class B-3I certificates. Thereafter, any remaining
amount available in the certificate account will be applied to the payment of
interest due on the Class M-1 certificates, then to the Class M-2 certificates,
and then to the payment of interest due on the Class B-1 certificates.
After payment of all interest due on the Class A principal balance, the
Class M-1 adjusted principal balance, the Class M-2 adjusted principal balance
and the Class B-1 adjusted principal balance, any remaining amount available
will be distributed in the following order of priority:
(1) first, the Class A Percentage of the Formula Principal Distribution
Amount will be distributed to the Class A certificateholders;
(2) then, if the remaining amount available is sufficient, the Class M-1
Percentage of the Formula Principal Distribution Amount plus any
unpaid Class M-1 liquidation loss interest amount will be
distributed to the Class M-1 certificateholders;
(3) then, if the remaining amount available is sufficient, the Class M-2
Percentage of the Formula Principal Distribution Amount plus any
unpaid Class M-2 liquidation loss interest amount will be
distributed to the Class M-2 certificateholders;
(4)then, the remaining amount available is sufficient, the Class B
Percentage of the Formula Principal Distribution Amount plus any unpaid Class
B-1 liquidation loss interest amount will be distributed to the Class B-1
certificateholders.
After distribution of all interest and principal then payable on the Class A,
Class M-1, Class M-2 and Class B-1 certificates, the Class B-2
certificateholders will be entitled to distribution of all interest and
principal then payable on the Class B-2 certificates.
In addition, the rights of the holders of the Class B-2 certificates, the
Class B-3I certificates and the Class C certificates to receive distributions
will be subordinate to the 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 the 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 on the Class B-2
certificates, the Class
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B-3I certificates and the Class certificates, the amount of principal and
interest due them on each remittance date out of the remaining amount available
on deposit on that 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 B-3I and Class C certificateholders to receive
distributions will be subordinated to the rights of the Class B-2
certificateholders. On each remittance date the Class B-3I certificateholders
will receive any remaining amount available, after payment of the amount
distributed to the Class A, Class M-1, Class M-2, Class B-1 and Class B-2
certificateholders as described above, less the monthly servicing fee and
amounts retained by the servicer to reimburse itself for taxes paid for
prohibited transactions, but in no event greater than the excess interest, as
defined in the pooling and servicing agreement. On each remittance date, the
Class C subsidiary certificateholders will be entitled to receive any portion
of the remaining amount available, after payment of all amounts described
above, attributable to aggregate repossession profits, as defined in the
pooling and servicing agreement.
As described above, before the Class A principal balance is reduced to
zero, the distribution of principal to the Class A certificateholders on any
remittance date is intended to include the Class A percentage of the scheduled
principal balance of each contract that became a liquidated contract during the
related due period. If the liquidation proceeds, net of related liquidation
expenses, from the liquidated contract are less than its scheduled principal
balance plus accrued interest, the deficiency will, in effect, be absorbed by
the Class M-1, Class M-2, Class B, Class B-3I and Class C certificateholders
and Green Tree, since a portion of the amount available equal to that
deficiency 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, the Class M-1
certificateholders or the Class M-2 certificateholders on a particular
remittance date, then the amount distributable to the Class A
certificateholders, the Class M-1 certificateholders or the Class M-2
certificateholders, as applicable, will be increased on future remittance dates
by the amount of that deficiency plus the applicable interest on that amount.
To the extent such deficiency is not covered by future collections or is not
absorbed by the Class B-3I certificateholders or the monthly servicing fee, so
long as we are the servicer, the Class B certificateholders will absorb these
deficiencies. If the amount available is sufficient to cover the
amounts distributable on principal to the Class A certificateholders, the Class
M-1 certificateholders or Class M-2 certificateholders but is not sufficient to
cover any amounts distributable on principal to the Class B-1
certificateholders on a particular remittance date, 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 payable to the servicer so long as we are the servicer and
amounts otherwise distributable to the Class B-2, Class B-3I and Class C
certificateholders, the Class B-1 certificateholders will absorb:
. 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
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principal balance plus accrued and unpaid interest less the monthly
servicing fee; and
. all delinquent payments on the contracts.
But for the effect of the relative subordination of the monthly servicing fee
payable to the servicer so long as we are the servicer and amounts otherwise
distributable to the Class B-3I and the Class C certificateholders on each
remittance date, and amounts paid under the limited guarantee, the Class B-2
certificateholders will absorb:
. 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 less the monthly servicing fee; and
. 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:
. the Class B-3I distribution amount; and
. the monthly servicing fee payable to the servicer, so long as we are
the servicer, and would be entitled to receive any amounts, not
received by the Class B-2 certificateholders on a prior remittance
date.
If we fail 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.
Losses on Liquidated Contracts
If the amount available in the certificate account for any remittance
date is insufficient to distribute the full formula principal distribution
amount for that remittance date to the certificateholders, the aggregate
outstanding principal balance of the certificates will be greater than the pool
scheduled principal balance for that remittance date. If this occurs, the
amount of the deficiency, which we refer to as the "liquidation loss amount,"
would be allocated first to the Class B-2 certificates, and we would be
obligated to pay the amount of the Class B-2 liquidation loss amount to the
Class B-2 certificateholders under the limited guarantee. If on any remittance
date the sum of the Class A principal balance, the Class M-1 principal balance,
the Class M-2 principal balance and the Class B-1 principal balance equal the
pool scheduled principal balance, no further liquidation loss amounts could be
allocated to the Class B-2 certificates and any further liquidation loss
amounts realized would be allocated to reduce the Class B-1 adjusted principal
balance. If the Class B-1 adjusted principal balance were reduced to zero, any
further liquidation loss amounts realized would be allocated to reduce the
Class M-2 adjusted principal balance. If the Class M-2 adjusted principal
balance were reduced to zero, any further liquidation loss amounts realized
would be allocated to the Class M-1 adjusted principal balance. Any liquidation
loss amounts would be reduced on subsequent remittance dates to the extent that
the amount available in the certificate account on the remittance dates is
sufficient to permit the distribution of principal due on the certificates on
prior remittance dates but not paid. If
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the adjusted principal balance of a class of certificates were reduced by a
liquidation loss amount, interest accruing on that class other than the Class
B-2 certificates would be calculated on the adjusted principal balance of that
class. The interest accruing on that class's liquidation loss amount each
month, plus interest at the applicable certificate rate on any liquidation loss
interest amount due on a prior remittance date but not paid, would be paid to
the certificateholders of that class from the amount available after
distribution of principal on that class but prior to any distribution of
principal on a subordinate class.
Capitalized Interest Account
Because payments received with respect to interest on the contracts may
be insufficient to cover payments of interest on the certificates on the
remittance dates in and 1999, a capitalized interest account will
be established on the closing date with a deposit of an amount approved by the
rating agencies. 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 interest on the certificates, other than the Class B-2
certificates, on the remittance dates in and 1999, the trustee will
withdraw the amount of any shortfall from the capitalized interest account and
deposit that amount in the certificate account. We 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 Green Tree." The capitalized interest account will be
part of the trust but not part of the Master REMIC or the Subsidiary REMIC. Any
funds remaining on deposit in the capitalized interest account after the
distribution to certificateholders in 1999 will be released to one of our
a subsidiaries.
Limited Guarantee of Green Tree
To mitigate the effect of the subordination of the Class B-2 certificates
and liquidation losses and delinquencies on the contracts, we will provide a
limited guarantee against losses that would otherwise be absorbed by the Class
B-2 certificates. Before the Class B-1 cross-over date, or on any remittance
date on or after the Class B-1 cross-over date on which the Class B
distribution test is not satisfied unless the Class A principal balance, the
Class M-1 principal balance and the Class M-2 principal balance have been
reduced to zero, the guarantee payment will equal any amount, by which:
(1) the Class B-2 Formula Distribution Amount for that remittance date
which will be equal to accrued and unpaid interest on the Class B-2
certificates for that remittance date plus any Class B-2 liquidation
loss amount for that remittance date, exceeds
(2) the Class B-2 distribution amount for that remittance date.
The Class B-2 liquidation loss amount for any remittance date equals any
amount, by which the sum of the Class A principal balance, the Class M-1
principal balance, the Class M-2 principal balance, the Class B-1 principal
balance and the Class B-2
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principal balance for that remittance date exceeds the pool scheduled principal
balance for that remittance date. On each remittance date on or after the Class
B-1 cross-over date, if the Class B distribution test is satisfied on that
remittance date, or if the Class A principal balance, the Class M-1 principal
balance and the Class M-2 principal balance have been reduced to zero, the
guarantee payment will equal any amount, by which:
(1) the Class B-2 Formula Distribution Amount for that remittance date,
which will include both interest and principal and any Class B-2
liquidation loss amount exceeds:
(2) the remaining amount available for that remittance date.
The limited guarantee will be an unsecured general obligation of Green
Tree 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 M-1, Class M-2, Class B-1, Class
B-3I or Class C certificateholders. The ratings assigned to the Class B-2
certificates may be affected by the ratings of our debt securities. See
"Summary of the Terms of the Offered Certificates--Rating."
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 with the
following information for the related remittance date.
(a) the amount of the distribution to holders of the Class A
certificates allocable to interest, separately identifying any prior
Class A interest shortfall included in the distribution and any
remaining Class A interest shortfall after giving effect to the
distribution;
(b) the amount of the distribution to holders of the Class A
certificates allocable to principal, separately identifying the
aggregate amount of any principal prepayments included in the
distribution and any remaining Class A principal shortfall after
giving effect to the distribution;
(c) the principal balance of the Class A certificates after giving
effect to the distribution of principal on the remittance date;
(d) the pool scheduled principal balance of the contracts for the
remittance date;
(e) the Class A Percentage for the remittance date and the following
remittance date;
(f) the pool factor, which is a percentage derived from a fraction the
numerator of which is the sum of the Class A principal balance, the
Class M-1 principal balance, the Class M-2 principal balance and the
Class B principal balance and the denominator of which is the cut-
off date pool principal balance;
(g) the number and aggregate principal balance of contracts delinquent
(1) 30-59 days and (2) 60 or more days;
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(h) the number of manufactured homes that were repossessed during the
related due period;
(i) the number of manufactured homes that were repossessed but remain in
inventory as of the last day of the related due period;
(j) the Class M-1 distribution test;
(k) the Class M-2 distribution test;
(l) the Class B distribution test;
(m) the weighted average contract rate of all outstanding contracts;
(n) any deficiency in the amount available to pay the Class M-1 interest
for the remittance date;
(o) any deficiency in the amount available to pay the Class M-2 interest
for the remittance date; and
(p) any deficiency in the amount available to pay the Class B-1 interest
for the remittance date.
Information furnished for clauses (a) and (b) 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 for (a) and (b) above for that calendar year.
The servicer will furnish to the trustee, and the trustee will include
with each distribution to a Class M-1 certificateholder, a statement with the
following information for the related remittance date:
(a) the amount of the distribution to holders of the Class M-1
certificates allocable to interest, separately identifying any prior
Class M-1 interest shortfall included in the distribution and any
remaining Class M-1 interest shortfall after giving effect to the
distribution, and any Class M-1 liquidation loss interest amount;
(b) the amount of the distribution to holders of the Class M-1
certificates allocable to principal, separately identifying the
aggregate amount of any principal prepayments included in the
distribution and any remaining Class M-1 principal shortfall after
giving effect to the distribution;
(c) the principal balance and adjusted principal balance, if different,
of the Class M-1 certificates after giving effect to the
distribution of principal on the remittance date;
(d) the Class M-1 Percentage for the remittance date and the following
remittance date;
(e) the pool scheduled principal balance of the contracts for the
remittance date;
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(f) the pool factor, as described in clause (f) above;
(g) the number and aggregate principal balance of contracts delinquent
(1) 30-59 days and (2) 60 or more days;
(h) the number of manufactured homes that were repossessed during the
related due period
(i) the number of manufactured homes that were repossessed but remain in
inventory as of the last day of the related due period;
(j) the Class M-1 distribution test;
(k) the Class M-2 distribution test;
(l) the Class B distribution test; and
(m) the weighted average contract rate of all outstanding contracts.
Information furnished for clauses (a) and (b) will be expressed as dollar
amounts for a Class M-1 certificate with a 1% percentage interest or per $1,000
denomination of Class M-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 M-1
certificateholder of record at any time during that calendar year as to the
aggregate of amounts reported for (a) and (b) above for that calendar year.
The servicer will furnish to the trustee, and the trustee will include
with each distribution to a Class M-2 certificateholder, a statement with the
following information for the related remittance date:
(a) the amount of the distribution to holders of the Class M-2
certificates allocable to interest, separately identifying any prior
Class M-2 interest shortfall included in the distribution and any
remaining Class M-2 interest shortfall after giving effect to the
distribution, and any Class M-2 liquidation loss interest amount;
(b) the amount of the distribution to holders of the Class M-2
certificates allocable to principal separately identifying the
aggregate amount of any principal prepayments included in the
distribution and any remaining Class M-2 principal shortfall after
giving effect to the distribution;
(c) the principal balance and adjusted principal balance, if different,
of the Class M-2 certificates after giving effect to the
distribution of principal on the remittance date;
(d) the Class M-2 percentage for the remittance date and the following
remittance date;
(e) the pool scheduled principal balance of the contracts for the
remittance date;
(f) the pool factor, as described in clause (f) above;
(g) the number and aggregate principal balance of contracts delinquent
(1) 30-59 days and (2) 60 or more days;
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(h) the number of manufactured homes that were repossessed during the
related due period;
(i) the number of manufactured homes that were repossessed but remain in
inventory as of the last day of the related due period;
(j) the Class M-1 distribution test;
(k) the Class M-2 distribution test;
(l) the Class B distribution test; and
(m) the weighted average contract rate of all outstanding contracts.
Information furnished for clauses (a) and (b) will be expressed as dollar
amounts for a Class M-2 certificate with a 1% percentage interest or per $1,000
denomination of Class M-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 M-2
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 with the
following information for the related remittance date.
(a) the amount of the distribution to holders of the Class B-1
certificates allocable to interest, separately identifying any prior
Class B-1 interest shortfall included in the distribution and any
remaining Class B-1 interest shortfall after giving effect to the
distribution, and any Class B-1 liquidation loss amount;
(b) the amount of the distribution to holders of the Class B-1
certificates allocable to principal, separately identifying the
aggregate amount of any principal prepayments included in the
distribution and any remaining Class B-1 principal shortfall after
giving effect to such distribution;
(c) the principal balance and adjusted principal balance, if different,
of the Class B-1 certificates after giving effect to the
distribution of principal on the remittance date;
(d) the Class B percentage for the remittance date and the following
remittance date;
(e) the pool scheduled principal balance of the contracts for the
remittance date;
(f) the pool factor, as described in clause (f) above;
(g) the number and aggregate principal balance of contracts delinquent
(1) 30-59 days and (2) 60 or more days;
(h) the number of manufactured homes that were repossessed during the
related due period;
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(i) the number of manufactured homes that were repossessed but remain in
inventory as of the last day of the related due period;
(j) the Class M-1 distribution test;
(k) the Class M-2 distribution test;
(l) the Class B distribution test; and
(m) the weighted average contract rate of all outstanding contracts.
Information furnished for clauses (a) and (b) 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 that calendar year as to the
aggregate of amounts reported for (a) and (b) above for that calendar year.
The servicer will furnish to the trustee, and the trustee will include
with each distribution to a Class B-2 certificateholder, a statement with the
following information for the related remittance date.
(a) the amount of the distribution to holders of Class B-2 certificates
allocable to interest, separately identifying any prior Class B-2
interest shortfall included in the distribution and any remaining
Class B-2 interest shortfall after giving effect to such
distribution;
(b) the amount of the distribution to holders of Class B-2 certificates
allocable to principal, separately identifying the aggregate amount
of any principal prepayments included in the distribution and any
remaining Class B-2 principal shortfall after giving effect to the
distribution;
(c) the amount, if any, by which the Class B-2 formula distribution
amount exceeds the Class B-2 remaining amount available for the
remittance date;
(d) the Class B-2 principal balance after giving effect to the
distribution of principal on the remittance date;
(e) the Class B Percentage for the remittance date and the following
remittance date;
(f) the pool scheduled principal balance of the contracts for the
remittance date and the following remittance date;
(g) the pool factor as described in clause (f) above;
(h) any Class B-2 liquidation loss amount, for the remittance date;
(i) any guarantee payment, for the remittance date;
(j) the number and aggregate principal balance of contracts delinquent
(1) 30-59 days and (2) 60 or more days;
(k) the number of manufactured homes that were repossessed during the
related due period;
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(l) the number of manufactured homes that were repossessed but remain in
inventory as of the last day of the related due period;
(m) the Class M-1 distribution test;
(n) the Class M-2 distribution test;
(o) the Class B distribution test; and
(p) the weighted average contract rate of all outstanding contracts.
Information furnished for 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 that calendar year as to the
aggregate amounts reported for (a) and (b) above for that calendar year.
Repurchase Option
The pooling and servicing 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, we or the servicer will have the option to
repurchase, when we or the servicer gives notice mailed no earlier than the
first day and no later than the 10th day of the month next preceding the month
of the final distribution, all outstanding contracts at a price equal to the
greater of:
(1) the sum of:
(a) 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 to clause below as of the final remittance date, and
(b) the fair market value of any acquired property, as determined
by Green Tree; and
(2) the aggregate fair market value, as determined by Green Tree of all
of the assets of the trust, plus, in each case, any unpaid interest
at the applicable Class A remittance rate on each class of Class A
certificates, any unpaid interest at the Class M-1 remittance rate
on the Class M-1 certificates, any unpaid interest at the Class M-2
remittance rate on the Class M-2 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 Pooling and Servicing Agreement
The pooling and servicing agreement will terminate upon the last action
required to be taken by the trustee on the final remittance date following the
later of:
(1) the purchase by us 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:
(2) 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:
(1)any unpaid interest on any class of Class A certificates,
(2)any unpaid interest on the Class M-1 certificates,
(3)any unpaid interest on the Class M-2 certificates,
(4)any unpaid interest on the Class B-1 certificates,
(5)the principal balance of each class of Class A certificates,
(6)the Class M-1 principal balance,
(7)the Class M-2 principal balance,
(8)the Class B-1 principal balance,
(9)any unpaid interest on the Class B-2 certificates,
(10)the Class B-2 principal balance,
(11)any unpaid interest on the Class B-3I certificates and,
(12) 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 under clauses (1)-(11) above. (Section
12.03.)
Amendment
The pooling and servicing agreement may be amended by agreement of the
trustee, Green Tree 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 S&P, Fitch or any other
nationally recognized statistical rating organization in order to improve or
maintain the rating of any class of Class A certificates, the Class M-1
certificates, the Class M-2 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 the amendment will not adversely
affect in any material respect the interests of any certificateholder. (Section
12.07.) Neither we nor the servicer is obligated to take any action to maintain
or improve the
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<PAGE>
rating given any class of Class A certificates, the Class M-1 certificates, the
Class M-2 certificates or any class of Class B certificates.
The pooling and servicing agreement may also be amended from time to time
by the trustee, Green Tree and the servicer, with the consent of the holders of
certificates of each class affected evidencing, as to each class, percentage
interests aggregating at least 51%, provided that no amendment shall:
. 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,
. reduce these percentages of certificateholders required for any
amendment of the agreement, without the unanimous consent of the
certificateholders,
. adversely affect the status of either the Subsidiary REMIC or the
Master REMIC as a REMIC or the status of the certificates as regular
interests in the REMIC, or cause any tax to be imposed on the trust,
or
. modify in any manner the rights of the Class C certificateholders,
without the unanimous consent of the Class C certificateholders.
(Section 12.07.)
The pooling and servicing agreement may also be amended from time to
time, without the consent of any certificateholders, by Green Tree, the trustee
and the servicer to modify, eliminate or add to the provisions of the
agreement:
(1) to maintain the qualification of each of the Subsidiary REMIC and
the Master REMIC as a REMIC under the IRS code or avoid, or reduce
the risk of, the imposition of any tax on the trust under the IRS
code that would be a claim against the trust assets, provided that:
(a) an opinion of counsel is delivered to trustee to the effect
that the action is necessary to maintain the qualification or
avoid a tax or reduce the risk of its imposition and:
(b) the amendment shall not materially adversely affect the
interests of any certificateholder or:
(2) to prevent the trust from entering into any prohibited transaction
as defined in Section 860F of the IRS code.
The trustee is required under the agreement to furnish certificateholders
affected with notice promptly upon execution of any amendment to the agreement.
(Section 12.07.)
The Trustee
[Trustee] is a national banking association, the corporate trust offices
of which are located at [address].
The pooling and servicing agreement requires the trustee to maintain, at
its own expense, an office or agency in St. Paul, Minnesota, where certificates
may be surrendered for registration of transfer or exchange and where notices
and demands to
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<PAGE>
or upon the trustee and the certificate registrar and transfer agent for the
certificates under the agreement may be served. On the date of this prospectus
supplement, the address of the trustee for these purposes is [trustee/address].
The trustee will promptly give written notice to the certificateholders of any
change in address. (Section 12.02.)
Registration of the Certificates
The certificates will initially be registered in the name of Cede & Co.,
the nominee of The Depository Trust Company. 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 under the
provisions of Section 17A of the 1934 Act. DTC accepts securities for deposit
from its participating organizations and facilitates the clearance and
settlement of securities transactions between participants in the securities
through electronic book-entry changes in accounts of participants, eliminating
the need for physical movement of certificates. Participants include securities
brokers and dealers, banks and trust companies and clearing corporations and
may include 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.
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, Class M-1, Class M-2
and Class B certificates, as defined in the paragraph below, are issued. In
addition, certificate owners will receive all distributions of principal of,
and interest on, the 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, Class M-1,
Class M-2 and Class B certificates, except under the limited circumstances
described below.
Unless and until definitive Class A, Class M-1, Class M-2 and Class B
certificates are issued, it is anticipated that the only certificateholder of
the Class A, Class M-1, Class M-2 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 pooling and servicing agreement. Certificate owners are
only permitted to exercise the rights of certificateholders indirectly through
participants and DTC.
While the Class A, Class M-1, Class M-2 and Class B certificates are
outstanding, except under the circumstances described in the paragraph below,
under the rules, regulations and procedures creating and affecting DTC and its
operations, DTC is required to make book-entry transfers among participants on
whose behalf it acts with respect to the Class A, Class M-1, Class M-2 and
Class B certificates and is required to receive and transmit distributions of
principal of, and interest on, the Class A, Class M-1, Class M-2 and Class B
certificates. Participants with whom certificate owners have accounts for the
Class A, Class M-1, Class M-2 and Class B certificates are similarly required
to make book-entry transfers and receive and transmit
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<PAGE>
distributions on behalf of their respective certificate owners. Accordingly,
although certificate owners will not possess certificates, the DTC rules
provide a mechanism by which certificate owners will receive distributions and
will be able to transfer their interests.
Class A, Class M-1, Class M-2 and Class B certificates will be issued in
registered form to certificate owners, or their nominees, rather than to DTC.
We refer to these certificates as definitive Class A, Class M-1, Class M-2 and
Class B certificates only if:
(1) DTC or Green Tree advises the trustee in writing that DTC is no
longer willing or able to discharge properly its responsibilities as
nominee and depository for the Class A, Class M-1, Class M-2 and
Class B certificates and Green Tree or the trustee is unable to
locate a qualified successor, or
(2) We at our sole option advise the trustee in writing that we elect to
terminate the book-entry system through DTC.
Upon issuance of definitive Class A, Class M-1, Class M-2 and Class B
certificates to certificate owners, these certificates will be transferable
directly, and not exclusively on a book-entry basis, and registered holders
will deal directly with the trustee for transfers, notices and distributions.
DTC has advised us and the trustee that, unless and until definitive
Class A, Class M-1, Class M-2 and Class B certificates are issued, DTC will
take any action permitted to be taken by a certificateholder under the pooling
and servicing agreement only at the direction of one or more participants to
whose DTC accounts the Class A, Class M-1, Class M-2 and Class B certificates
are credited. DTC has advised us that DTC will take action on any percentage
interests of the Class A, Class M-1, Class M-2 and Class B certificates only at
the direction of and on behalf of the participants for these percentage
interests of the Class A, Class M-1, Class M-2 and Class B certificates. DTC
may take actions, at the direction of the related participants, for some Class
A, Class M-1, Class M-2 and Class B certificates which conflict with actions
taken on other Class A, Class M-1, Class M-2 and Class B certificates.
Issuance of the Class A, Class M-1, Class M-2 and Class B certificates in
book-entry form rather than as physical certificates may adversely affect the
liquidity of the Class A, Class M-1, Class M-2 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, Class M-1, Class M-2 and Class B
certificates will be made by the trustee to DTC and DTC will credit these
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 these distributions.
DTC management is aware that some computer applications, systems, and the
like for processing data that are dependent upon calendar dates, including
dates before, on, and after January 1, 2000, may encounter Year 2000 problems.
DTC has informed its participants and other members of the financial community
that it has developed and is implementing a program so that its systems, as
they relate to the timely payment of
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<PAGE>
distributions, including principal and income payments to securityholders,
book-entry deliveries, and settlement of trades within DTC continue to function
appropriately. This program includes a technical assessment and a remediation
plan, each of which is complete. Additionally, DTC's plan includes a testing
phase, which is expected to be completed within appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including issuers and their agents, as well as third party
vendors from whom DTC licenses software and hardware, and third party vendors
on whom DTC relies for information or the provision of services, including
telecommunication and electrical utility service providers. DTC has informed
its participants and the financial community that it is contacting, and will
continue to contact, third party vendors from whom DTC acquires services to:
. impress upon them the importance of their services being Year 2000
compliant; and
. determine the extent of their efforts for Year 2000 remediation and,
as appropriate, testing of their services.
In addition, DTC is in the process of developing contingency plans as it deems
appropriate.
According to DTC, this information about DTC has been provided to its
participants and the financial community for informational purposes only and is
not intended to serve as a representation, warranty, or contract modification
of any kind.
USE OF PROCEEDS
We will use substantially all of the net proceeds to be received from the
sale of the certificates 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 for pooling the contracts and issuing
the certificates.
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<PAGE>
ERISA CONSIDERATIONS
The following information supplements, and if inconsistent supersedes,
the information in the prospectus under "ERISA Considerations."
The Employee Retirement Income Security Act of 1974, and section 4975 of
the Code impose certain restrictions on employee benefit and other plans that
are subject to ERISA or to section 4975 of the IRS code ("Plans") and on
persons who are fiduciaries with respect to those Plans. Employee benefit plans
that are governmental plans, as defined in section 3(32) of ERISA, and some
church plans, as defined in section 3(33) of ERISA, are not subject to ERISA
requirements. Accordingly, assets of those plans may be invested in the Class A
certificates without regard to the ERISA restrictions described in this section
and in the prospectus, 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 IRS code and exempt from taxation under section
501(a) of the IRS code is subject to the prohibited transaction rules provided
in section 503 of the IRS code.
The U.S. Department of Labor has granted substantially identical
administrative exemptions to the underwriters as follows:
. [underwriter]: Prohibited Transaction Exemption ; Exemption
Application No. D- , Fed. Reg. ( );
. [underwriter]: Prohibited Transaction Exemption ; Exemption
Application No. D- , Fed. Reg. ( ); and
. [underwriter]: Prohibited Transaction Exemption ; Exemption
Application No. D- , Fed. Reg. ( ).
We refer to all of the exemptions listed above collectively as the "Exemption."
They provide an exemption from certain of the prohibited transaction rules of
ERISA and the IRS code with respect to the initial purchase, the holding and
the subsequent 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
sale contracts and installment loan agreements such as the manufactured housing
contracts. The Exemption will apply to the acquisition, holding, and resale of
the Class A certificates by a Plan, provided that specified conditions are met,
including those described in the paragraph below.
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;
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<PAGE>
(3) The Class A certificates acquired by the Plan have received a rating
at the time of the acquisition that is in one of the three highest
generic rating categories from any of Moody's, S&P, Fitch or Duff &
Phelps Credit Rating Co. (the "Exemption Rating Agencies");
(4) The trustee of the Plan is not an affiliate of any member of the
Restricted Group, as defined in the next paragraph 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 Green
Tree in the sale of the manufactured housing contracts to the trust
represents not more than the fair market value of those 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 pooling and servicing agreement and reimbursement
of the servicer's reasonable expenses; 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.
On July 21, 1997, the DOL published in the Federal Register an amendment
to the Exemption, which extends exemptive relief to mortgage-backed and asset-
backed securities transactions using pre-funding accounts for trusts issuing
pass-through certificates. The amendment generally allows mortgage loans or
other secured receivables (the "Obligations") supporting payments to
certificateholders, and having a value equal to no more than 25% of the total
principal amount of the certificates being offered by the trust, to be
transferred to the trust within a 90-day or three-month pre-funding period
following the closing date, instead of requiring that all such Obligations be
either identified or transferred on or before the closing date. The relief is
available when the following conditions are met:
(1) The ratio of the amount allocated to the pre-funding account to the
total principal amount of the certificates being offered (the "Pre-
Funding Limit") must not exceed 25%.
(2) All Obligations transferred after the closing date (the "Additional
Obligations") must meet the same terms and conditions for
eligibility as the original Obligations used to create the trust,
which terms and conditions have been approved by an Exemption Rating
Agency.
(3) The transfer of the Additional Obligations to the trust during the
pre-funding period must not result in the certificates to be covered
by the Exemption receiving a lower credit rating from an Exemption
Rating Agency upon termination of the pre-funding period than the
rating that was obtained at the time of the initial issuance of the
certificates by the trust.
(4) Solely as a result of the use of pre-funding period, the weighted
average annual percentage interest rate for all of the Obligations
in the trust at the end of the pre-funding period must not be more
than 100 basis points lower
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<PAGE>
than the average interest rate for the Obligations transferred to the
trust on the closing date.
(5) In order to insure that the characteristics of the Additional
Obligations are substantially similar to the original Obligations
which were transferred to the trust:
. the characteristics of the Additional Obligations must be
monitored by an insurer or other credit support provider that is
independent of the depositor; or
. an independent accountant retained by the depositor must provide
the depositor with a letter (with copies provided to each
Exemption Rating Agency rating the certificates, the related
underwriter and the related prospectus or trustee) stating
whether or not the characteristics of the Additional Obligations
conform to the characteristics described in the related
prospectus or prospectus supplement and/or pooling and servicing
agreement. In preparing this letter, the independent accountant
must use the same type of procedures as were applicable to the
Obligations transferred to the trust as of the closing date.
(6) The period of pre-funding must end no later than three months or 90
days after the closing date or earlier in certain circumstances if
the pre-funding account falls below the minimum level specified in
the pooling and servicing agreement or an event of default occurs.
(7) Amounts transferred to any pre-funding account and/or capitalized
interest account used in connection with the pre-funding may be
invested only in certain permitted investments.
(8) The related prospectus or prospectus supplement must describe:
. any pre-funding account and/or capitalized interest account used
in connection with a pre-funding account;
. the duration of the period of pre-funding;
. the percentage and/or dollar amount of the Pre-Funding Limit for
the trust; and
. that the amounts remaining in the pre-funding account at the end
of the pre-funding period will be remitted to certificateholders
as repayments of principal.
(9) The related pooling and servicing agreement must describe these
permitted investments for the pre-funding account and/or capitalized
interest account and, if not disclosed in the related prospectus or
prospectus supplement, the terms and conditions for eligibility of
Additional Obligations.
Moreover, the Exemption would provide relief from certain self-
dealing/conflict of interest prohibited transactions only if, among other
requirements:
. in the case of the acquisition of Class A certificates in connection
with the initial issuance, at least 50% of the Class A certificates
are acquired by
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persons independent of the Restricted Group, as defined in the
paragraph below;
. the Plan's investment in Class A certificates does not exceed 25% of
all of the Class A certificates outstanding at the time of the
acquisition; and
. immediately after the acquisition, no more than 25% 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 Green Tree, the
underwriters, the trustee, the servicer, any obligor on the contracts included
in the trust constituting more than 5% of the aggregate unamortized principal
balance of the assets in the trust or any affiliate of these parties (the
"Restricted Group").
We believe 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 of this prospectus
supplement, no obligor on the contracts included in the trust constitutes more
than 5% 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 about the potential
consequences under ERISA and the IRS 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.
Insurance companies contemplating the investment of general account
assets in the certificates should consult with their legal advisors regarding
the applicability of PTCE 95-60 and Section 401(c) of ERISA, as described under
"ERISA Considerations" in the prospectus.
No transfer of Class M-1, Class M-2 or Class B certificates will be
permitted to be made to a Plan or to any person acquiring the certificates on
behalf of or with assets of a Plan, unless the transferee, at its expense,
delivers to the trustee and Green Tree an opinion of counsel (in form
satisfactory to the trustee and Green Tree) to the effect that the purchase or
holding of a Class M-1, Class M-2 or Class B certificate by the 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 IRS code and will not
subject the trustee, Green Tree or the servicer to any obligation or liability
in addition to those undertaken in the pooling and servicing agreement.
Alternatively, an insurance company general account may, at its expense,
deliver to the trustee and Green Tree a representation that the transfer and
holding of such a certificate are exempt under Section I and Section III of
PTCE 95-60. Unless such opinion or representation is delivered, each person
acquiring a Class M-1, Class M-2 or Class B Certificate will be deemed to
represent to the trustee, Green Tree and the servicer that that person is not a
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Plan, acting on behalf of a Plan or investing assets of a Plan subject to ERISA
or to Section 4975 of the IRS code.
LEGAL INVESTMENT CONSIDERATIONS
After the pre-funding period has ended, the Class A certificates and the
Class M-1 certificates offered under this prospectus supplement will constitute
mortgage related securities under SMMEA and will be legal investments for some
types of institutional investors as provided in SMMEA. Because the Class M-2
certificates and the Class B certificates will not be rated in one of the two
highest rating categories by S&P or Fitch, the Class M-2 certificates and the
Class B certificates will not constitute mortgage related securities for
purposes of SMMEA. Accordingly, many institutions 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 M-2 certificates and the Class B
certificates.
We make no representation as to the proper characterization of the Class
M-2 certificates and the Class B certificates for legal investment or financial
institution regulatory purposes, or as to the ability of particular investors
to purchase Class M-2 certificates or Class B certificates under applicable
legal investment restrictions. The uncertainties described in the paragraph
above, and any unfavorable future determinations concerning legal investment or
financial institution regulatory characteristics of the Class M-2 certificates
and the Class B certificates, may adversely affect the liquidity of the Class
M-2 certificates and the Class B certificates.
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<PAGE>
UNDERWRITING
The underwriters named below have severally agreed, subject to the terms
and conditions of the underwriting agreement, to purchase from Green Tree the
respective principal amounts of the certificates listed opposite their names
below.
<TABLE>
<CAPTION>
Principal Principal Principal Principal
Amount of Amount of Amount of Amount of
Class A-1 Class A-2 Class A-3 Class A-4
Underwriter Certificates Certificates Certificates Certificates
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
[Underwriters].............. $ $ $ $
[Underwriters]..............
[Underwriters]..............
------------ ------------ ------------ --------
Totals................... $ $ $ $
============ ============ ============ ========
Principal Principal Principal
Amount of Amount of Amount of
Class A-5 Class A-6 Class A-7
Underwriter Certificates Certificates Certificates
----------- ------------ ------------ ------------
[Underwriters].............. $ $ $
[Underwriters]..............
[Underwriters]..............
------------ ------------ ------------
Totals................... $ $ $
============ ============ ============
<CAPTION>
Principal Principal Principal
Amount of Amount of Amount of
Class M-1 Class M-2 Class B-1
Underwriter Certificates Certificates Certificates
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
[Underwriters].............. $ $ $
[Underwriters]..............
[Underwriters]..............
------------ ------------ ------------
Totals................... $ $ $
============ ============ ============
</TABLE>
In the underwriting agreement, the underwriters have agreed, subject to
the terms and conditions in the agreement, to purchase all of the certificates
if any certificates are purchased. If an underwriter defaults, the underwriting
agreement provides that, in some circumstances, the underwriting agreement may
be terminated.
We have been advised by the underwriters that they propose initially to
offer the certificates to the public at the offering prices listed on the cover
page of this prospectus supplement and to dealers at the price less a
concession not in excess of the amounts listed in the table below, expressed as
a percentage of the related certificate principal balance. The 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. The underwriters will purchase the certificates at the discount specified
below. The underwriters may allow and dealers may reallow a discount not more
than the amounts listed in the table below to other dealers.
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<PAGE>
<TABLE>
<CAPTION>
Underwriting Selling Reallowance
Class Discount Concession Discount
----- ------------ ---------- -----------
<S> <C> <C> <C>
A-1.................................... % % %
A-2.................................... % % %
A-3.................................... % % %
A-4.................................... % % %
A-5.................................... % % %
A-6.................................... % % %
A-7.................................... % % %
M-1.................................... % % %
M-2.................................... % % %
B-1.................................... % % %
</TABLE>
Until the distribution of the certificates is completed, rules of the SEC
may limit the ability of the underwriters and selling group members to bid for
and purchase the certificates. As an exception to these rules, the underwriters
are permitted to engage in transactions that stabilize the price of the
certificates. These transactions consist of bids or purchases for the purpose
of pegging, fixing or maintaining the price of the certificates.
In general, purchases of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be without these purchases.
Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the prices of the certificates. In addition,
neither we nor any of the underwriters makes any representation that the
underwriters will engage in these transactions or that these transactions, once
commenced, will not be discontinued without notice.
The underwriting agreement provides that we will indemnify the
underwriters against liabilities, including liabilities under the Securities
Act of 1933, or contribute to payments the underwriters may be required to
make.
Upon receipt of a request by an investor who has received an electronic
prospectus supplement and prospectus from an underwriter or a request by the
investor's representative within the period during which there is an obligation
to deliver a prospectus supplement and prospectus, we or the underwriters will
promptly deliver, or cause to be delivered, without charge, a paper copy of the
prospectus supplement and prospectus.
LEGAL MATTERS
The validity of the certificates will be passed upon for Green Tree by
[counsel to Green Tree], Minnesota, and for the underwriters by Brown & Wood
LLP, New York, New York. The material federal income tax consequences of the
certificates will be passed upon for Green Tree by [counsel to Green Tree].
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information contained in this prospectus is not complete and may be +
+changed. We may not sell these securities until the registration statement +
+filed with the Securities and Exchange Commission is effective. This +
+prospectus is not an offer to sell these securities, and it is not soliciting +
+an offer to buy these securities in any state where the offer or sale is not +
+permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS
Green Tree Financial Corporation,
Seller and Servicer
Manufactured Housing Contract Pass-Through Certificates
(Issuable In Series)
We are offering certificates for manufactured housing contracts under this
prospectus and a prospectus supplement. Green Tree Financial Corporation will
form a trust for each series, and the trust will issue the certificates of that
series. The certificates of any series may comprise several different classes.
A trust may also issue one or more other interests in the trust that will not
be offered under this prospectus.
The right of each class of certificates within a series to receive payments
may be senior or subordinate to the rights of one or more of the other classes
of certificates. In addition, a series of certificates may include one or more
classes which on the one hand are subordinated to one or more classes of
certificates, while on the other hand are senior to one or more classes of
certificates. The rate of principal and interest payment on the certificates of
any class will depend on the priority of payment of that class and the rate and
timing of payments of the related manufactured housing contracts.
-----------
The certificates will represent obligations of the related trust and will not
represent any interest in or obligation of Green Tree Financial Corporation or
any of its affiliates, except as specified in the prospectus supplement.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
-----------
This prospectus may not be used to consummate sales of any certificates
unless accompanied by a prospectus supplement for that series.
Prospectus dated June , 1999
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We tell you about the certificates in two separate documents that
progressively provide more detail: (1) this prospectus, which provides general
information, some of which may not apply to a particular series of
certificates, including your series; and (2) the prospectus supplement for the
particular terms of your series of certificates.
If the terms of your certificate varies between this prospectus and the
prospectus supplement, you should rely on the information in your prospectus
supplement.
You should rely only on the information contained in this document or
information to which we have referred you. We have not authorized anyone to
provide you with information that is different. This document may only be used
where it is legal to sell these securities.
2
<PAGE>
To understand all of the terms of the certificates, read this entire
prospectus and the accompanying prospectus supplement. We have also defined
terms in the "Glossary" section at the back of this prospectus.
THE TRUST
General
Certificates evidencing interests in pools of manufactured housing
contracts may be issued from time to time in series under a separate pooling
and servicing agreement between Green Tree, as seller and servicer, and the
trustee.
The certificates of each series may be issued in one or more classes or
subclasses as and on the terms specified in the related prospectus supplement,
each of which will evidence the interest specified in the related prospectus
supplement in the contract pool and other property held in a trust for the
benefit of the certificateholders. Each trust will include:
. a contract pool,
. the amounts held from time to time in a trust certificate account
maintained by the trustee under the pooling and servicing agreement,
. proceeds from hazard insurance on individual manufactured homes and
manufactured homes, or the related real estate in the case of land-and-
home contracts, acquired by repossession,
. any letter of credit, guarantee, surety bond, insurance policy, cash
reserve fund or other credit enhancement securing payment of all or
part of a series of certificates, and
. other property as specified in the related prospectus supplement.
Each certificate will evidence the interest specified in the related
prospectus supplement in one trust, containing one contract pool comprised of
contracts having the aggregate principal balance as of the close of business on
the cut-off date specified in the related prospectus supplement. Holders of
certificates of a series will have interests only in that contract pool and
will have no interest in the contract pool created for any other series of
certificates. If specified in the related prospectus supplement, the trust may
include a pre-funding account which would be used to purchase subsequent
contracts from Green Tree during the pre-funding period specified in the
related prospectus supplement. The related prospectus supplement will specify
the conditions that must be satisfied before any transfer of subsequent
contracts, including the requisite characteristics of the subsequent contracts.
Except as otherwise specified in the related prospectus supplement, we will
have originated all of the contracts in the ordinary course of our business.
The following is a brief description of the contracts expected to be included
in the trust. Specific information respecting the contracts will be provided in
the prospectus supplement and, if not contained
3
<PAGE>
in the related prospectus supplement, in a report on Form 8-K to be filed with
the SEC within fifteen days after the initial issuance of the certificates. A
copy of the pooling and servicing agreement for each series of certificates
will be attached to the Form 8-K and will be available for inspection at the
corporate trust office of the trustee specified in the related prospectus
supplement. A schedule of the contracts relating to that series will be
attached to the pooling and servicing agreement delivered to the trustee upon
delivery of the certificates.
When we use terms in this prospectus such as contract pool, trust, pooling
and servicing agreement or remittance rate, those terms respectively apply,
unless the context otherwise indicates, to one specific contract pool, trust,
each pooling and servicing agreement and the remittance rate applicable to the
related series of certificates.
The Contract Pools
Except as otherwise specified in the related prospectus supplement, each
contract pool for a series of certificates will consist of manufactured housing
installment sales contracts and installment loan agreements we originated on an
individual basis in the ordinary course of business. The contracts may be
conventional manufactured housing contracts or contracts insured by the Federal
Housing Administration or partially guaranteed by the Veterans Administration.
Each contract will be secured by a manufactured home, as defined in the next
paragraph below, or by a mortgage or deed of trust relating to the real estate
to which the manufactured home is deemed permanently affixed, which we refer to
as a land-and-home contract. Except as otherwise specified in the related
prospectus supplement, the contracts will be fully amortizing and will bear
interest at a fixed or variable annual percentage contract rate or at a
contract rate which steps up on a particular date or dates.
We will represent that the manufactured homes securing the contracts
consist of manufactured homes within the meaning of 42 United States Code,
Section 5402(6), which defines a "manufactured home" as "a structure,
transportable in one or more sections, which in the traveling mode, is eight
body feet or more in width or forty body feet or more in length, or, when
erected on site, is three hundred twenty or more square feet, and which is
built on a permanent chassis designed to be used as a dwelling with or without
a permanent foundation when connected to the required utilities, and includes
the plumbing, heating, air-conditioning, and electrical systems contained
therein; except that such term shall include any structure which meets all the
requirements of this paragraph except the size requirements and with respect to
which the manufacturer voluntarily files a certification required by the
Secretary [of Housing and Urban Development] and complies with the standards
established under this chapter."
For each series of certificates, we will assign the contracts constituting
the contract pool to the trustee named in the related prospectus supplement.
We, as servicer, will service the contracts under the pooling and servicing
agreement. See "Description of the Certificates--Servicing." Unless otherwise
specified in the related prospectus supplement, the contract
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<PAGE>
documents, other than the documents for land-and-home contracts, will be held
by the servicer as custodian for the trustee. The documents relating to any
land-and-home contracts will be held for the benefit of the trustee by a
custodian appointed under a custodial agreement between the trustee and the
custodian.
Each contract pool will be composed of contracts with the annual fixed or
variable weighted average contractual rates of interest or step-up rates
specified in the prospectus supplement. Unless we specify otherwise in the
related prospectus supplement, the monthly payments for contracts bearing
interest at a step-up rate will increase on the dates on which the contract
rates are stepped up. Unless we specify otherwise in the related prospectus
supplement, each registered holder of a certificate will be entitled to receive
periodic distributions, which will be monthly unless we specify otherwise in
the related prospectus supplement, of all or a portion of principal on the
underlying contracts or interest on the principal balance of the certificate at
the remittance rate, or both.
A contract pool may include staged-funding contracts, under which we make
multiple disbursements to enable the obligor to finance both the purchase of a
manufactured home and the acquisition or improvement of the related real
estate. For example, we might make disbursements to enable the obligor to
purchase the real estate on which the manufactured home is to be located, then
to make improvements on the real estate, such as a driveway, well and septic
system, then to purchase and deliver the manufactured home, and then to make
final site improvements. Before the final disbursement, the obligor pays only
interest on the disbursed amount of the loan; following the final disbursement,
the obligor begins making fully amortizing payments of principal and interest.
We will represent and warrant in the related pooling and servicing agreement
that all staged-funding contracts included in a contract pool will have been
fully disbursed within 90 days after the related closing date, and we will be
obligated to repurchase on the next remittance date any staged-funding contract
that has not been fully disbursed by that date.
The related prospectus supplement will specify for the contracts contained
in the related contract pool, the range of the dates of origination of the
contracts; the range of the contract rates and the weighted average contract
rate; the loan-to-value ratios; the minimum and maximum outstanding principal
balances as of the cut-off date and the average outstanding principal balance
as of the cut-off date; the aggregate principal balances of the contracts
included in the contract pool as of the cut-off date; the weighted average and
range of scheduled terms to maturity as of origination and as of the cut-off
date; the original maturities of the contracts and the last maturity date of
any contract; and the locations of the obligors on the contracts. If the trust
includes a pre-funding account, the related prospectus supplement will specify
the conditions that must be satisfied before any transfer of subsequent
contracts, including the requisite characteristics of the subsequent contracts.
Conveyance of Contracts
We will transfer to the trustee all our right, title and interest in the
contracts, including all security interests and any related mortgages or deeds
of trust, all principal and interest
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<PAGE>
received on the contracts, except receipts of principal and interest due on the
contracts before the cut-off date, all rights under hazard insurance policies
on the related manufactured homes, all documents contained in the contract
files and all proceeds derived from any of the foregoing. (Section 2.01.) On
behalf of the trust, as the issuer of the related series of certificates, the
trustee, concurrently with the conveyance, will execute and deliver the
certificates to the order of Green Tree. The contracts will be as described on
a list attached to the pooling and servicing agreement. (Sections 1.02 and
2.02.) This list will include the amount of monthly payments due on each
contract as of the date of issuance of the certificates, the contract rate on
each contract and the maturity date of each contract. This list will be
available for inspection by any certificateholder at the principal executive
office of the servicer. (Sections 1.02 and 5.04.) Before the conveyance of the
contracts to the trust, our internal audit department will complete a review of
all of the contract files, including the certificates of title to, or other
evidence of a perfected security interest in, the manufactured homes,
confirming the accuracy of the list of contracts delivered to the trustee. We
will repurchase or replace any contract discovered not to agree with that list
in a manner that is materially adverse to the interests of the
certificateholders, or, if the discrepancy relates to the unpaid principal
balance of a contract, we may deposit cash in the separate certificate account
maintained at an eligible institution in the name of the trustee in an amount
sufficient to offset the discrepancy. If the trust includes a pre-funding
account, the related prospectus supplement will specify the conditions that
must be satisfied before any transfer of subsequent contracts, including the
requisite characteristics of the subsequent contracts.
The pooling and servicing agreement will designate us as custodian to
maintain possession, as the trustee's agent, of the contracts and any other
documents related to the manufactured homes, except the land-and-home contracts
and related documents. (Sections 2.03 and 4.01.) To facilitate servicing and to
save administrative costs, the documents will not be physically segregated from
other similar documents that are in our possession. Uniform Commercial Code
financing statements will be filed in Minnesota reflecting the sale and
assignment of the contracts to the trustee, and our accounting records and
computer systems will also reflect the sale and assignment. In addition, the
contracts will be stamped to reflect their assignment to the trustee. However,
if through fraud, negligence or otherwise, a subsequent purchaser were able to
take physical possession of the contracts without knowledge of the assignment,
the trustee's interest in the contracts could be defeated. See "Risk Factors--
Some contracts may be unenforceable" in the prospectus supplement. The pooling
and servicing agreement will designate the trustee or another independent
custodian, as the trustee's agent, to maintain possession of the documents
relating to all land-and-home contracts.
Except as otherwise specified in the related prospectus supplement, we will
make warranties in the pooling and servicing agreement for each contract as of
closing date, including that:
. as of the cut-off date, or the date of origination, if later, the most
recent scheduled payment was made or was not delinquent more than 59
days;
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<PAGE>
. no provision of a contract has been waived, altered or modified in any
respect, except by instruments or documents contained in the contract
file or the land-and-home contract file;
. each contract is a legal, valid and binding obligation of the obligor
and is enforceable in accordance with its terms, except as may be
limited by laws affecting creditors' rights generally;
. no contract is subject to any right of rescission, set-off,
counterclaim or defense;
. each contract is covered by hazard insurance described under "--
Servicing--Hazard Insurance;"
. each contract has been originated by a manufactured housing dealer or
Green Tree in the ordinary course of the dealer's or Green Tree's
business and, if originated by a manufactured housing dealer, was
purchased by Green Tree in the ordinary course of business;
. no contract was originated in or is subject to the laws of any
jurisdiction whose laws would make the transfer of the contract or an
interest in the contract to the trustee under the pooling and servicing
agreement or under the certificates unlawful;
. each contract complies with all requirements of law;
. no contract has been satisfied, subordinated in whole or in part or
rescinded and the manufactured home securing the contract has not been
released from the lien of the contract in whole or in part;
. each contract creates a valid and enforceable first priority security
interest in favor of Green Tree in the manufactured home covered by the
contract and, each land-and-home contract, the lien created has been
recorded or will be recorded within six months, and the security
interest or lien has been assigned by Green Tree to the trustee;
. all parties to each contract had capacity to execute the contract;
. no contract has been sold, assigned or pledged to any other person and
before the transfer of the contracts by Green Tree to the trustee,
Green Tree had good and marketable title to each contract free and
clear of any encumbrance, equity, loan, pledge, charge, claim or
security interest, and was the sole owner and had full right to
transfer the contract to the trustee;
. as of the cut-off date, or the date of origination, if later, there was
no default, breach, violation or event permitting acceleration under
any contract except for payment delinquencies permitted by the first
clause above, no event which with notice and the expiration of any
grace or cure period would constitute a default, breach, violation or
event permitting acceleration under the contract, and we have not
waived any of the foregoing;
. as of the closing date there were, to the best of our knowledge, no
liens or claims which have been filed for work, labor or materials
affecting a manufactured home or any related mortgaged property
securing a contract, which are or may be liens prior or equal to the
lien of the contract;
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<PAGE>
. each contract other than a step-up rate contract is a fully-amortizing
loan with a fixed contract rate and provides for level payments over
the term of the contract;
. each contract contains customary and enforceable provisions which
render the rights and remedies of the holder adequate for realization
against the collateral of the benefits of the security;
. the description of each contract appearing in the list delivered to the
trustee is true and correct;
. there is only one original of each contract;
. except as specified in the related prospectus supplement, none of the
contracts had a loan-to-value ratio at origination greater than 95%
and, if the related manufactured home was new at the time the contract
was originated, the original principal balance of the contract did not
exceed 130% of the manufacturer's invoice price plus 100% of taxes and
license fees, 130% of freight charges, 100% of the dealer's cost of
dealer-installed equipment (not to exceed 25% of the amount financed in
all states except California; not to exceed 70% of the manufacturer's
invoice price in California if required to meet park requirements) and
up to $1,500 of set-up costs per module;
. at the time of origination of each contract the obligor was the primary
resident of the related manufactured home;
. other than the land-and-home contracts, the related manufactured home
is not considered or classified as part of the real estate on which it
is located under the laws of the jurisdiction in which it is located,
and as of the closing date the manufactured home was, to the best of
our knowledge, free of damage and in good repair;
. the related manufactured home is a manufactured home within the meaning
of 42 United States Code, Section 5402(6) and each manufactured housing
dealer from whom we purchased a contract was approved by us in
accordance with the requirements of the Secretary of Housing and Urban
Development;
. each contract is a qualified mortgage under Section 860G(a)(3) of the
IRS code and each manufactured home is manufactured housing within the
meaning of Section 25(e)(10) of the IRS code; and
. if a contract is an FHA/VA contract, the contract has been serviced in
accordance with FHA/VA regulations, the insurance or guarantee of the
contract under the FHA/VA regulations and related laws is in full force
and effect, and no event has occurred which, with or without notice or
lapse of time or both, would impair the insurance or guarantee.
Under the terms of the pooling and servicing agreement, and subject to the
conditions specified in the preceding paragraph and to our option to effect a
substitution as described in the next paragraph, we will be obligated to
repurchase for the Repurchase Price (as defined below in this paragraph) any
contract on the first business day after the first Determination
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Date (as defined below under "--Distributions on Certificates") which is more
than 90 days after we become aware, or should have become aware, or our receipt
of written notice from the trustee or the servicer, of a breach of any of our
representations or warranties in the pooling and servicing agreement that
materially adversely affects the trust's interest in any contract if the breach
has not been cured. (Section 3.05.) The Repurchase Price for any contract will
be the remaining principal amount outstanding on the contract on the date of
repurchase plus accrued and unpaid interest at its contract rate to the date of
the repurchase. (Section 1.02.) This repurchase obligation constitutes the sole
remedy available to the trust and the certificateholders for a breach of a
warranty under the pooling and servicing agreement regarding contracts, but not
for any other breach by us of our obligations under the pooling and servicing
agreement. If a prohibited transaction tax under the REMIC provisions of the
IRS code is incurred for the repurchase, distributions otherwise payable to
residual certificateholders will be applied to pay the tax. We will be required
to pay the amount of the tax that is not funded out of the distributions.
(Section 6.06.)
In lieu of purchasing a contract as specified in the preceding paragraph,
during the two-year period following the closing date, we may, at our option,
substitute, for the contract that it is otherwise obligated to repurchase, a
substitute contract that satisfies, as of the date of its substitution, the
representations and warranties specified in Article III of the pooling and
servicing agreement, has a scheduled principal balance that is not greater than
the scheduled principal balance of the replaced contract, has a contract rate
that is at least equal to the contract rate of the replaced contract and has a
remaining term to scheduled maturity that is not greater than the remaining
term to scheduled maturity of the replaced contract. (Section 1.02.) We will be
required to deposit in the certificate account cash in the amount by which the
scheduled principal balance of the replaced contract exceeds the scheduled
principal balance of the contract being substituted. This deposit will be
deemed to be a partial principal prepayment. (Sections 1.02 and 3.05.)
Payments on Contracts
Each certificate account will be a trust account established by the
servicer as to each series of certificates in the name of the trustee:
(1) with a depository institution, the long-term unsecured debt
obligations of which at the time of any deposit are rated within the
two highest rating categories or the other rating category as will not
adversely affect the ratings assigned to the certificates by each
rating agency rating the certificates of that series; or
(2) with the trust department of a national bank; or
(3) in an account or accounts the deposits in which are fully insured by
the FDIC; or
(4) in an account or accounts the deposits in which are insured by the
FDIC to the limits established by the FDIC, the uninsured deposits in
which are otherwise secured so that, as evidenced by an opinion of
counsel, the certificateholders have a claim for the funds in the
certificate account or a perfected first priority security
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interest against any collateral securing the funds that is superior to
the claims of any other depositors or general creditors of the
depository institution with which the certificate account is
maintained; or
(5) otherwise acceptable to the rating agency without reduction or
withdrawal of the rating assigned to the relevant certificates.
The collateral eligible to secure amounts in the certificate account is
limited to United States government securities and other high-quality
investments specified in the applicable pooling and servicing agreement
("Eligible Investments"). A certificate account may be maintained as an
interest bearing account, or the funds held in the account may be invested
pending each succeeding remittance date in Eligible Investments.
Unless we specify otherwise in the related prospectus supplement, the
servicer will deposit in the certificate account on a daily basis the
following payments and collections received or made by it subsequent to the
cut-off date, including scheduled payments of principal and interest due after
the cut-off date but received by the servicer on or before the cut-off date:
. all obligor payments on account of principal, including principal
prepayments, on the contracts;
. all obligor payments on account of interest on the contracts;
. all amounts received and retained for the liquidation of defaulted
contracts, net of liquidation expenses ("Net Liquidation Proceeds");
. all proceeds received under any hazard or other insurance policy
covering any contract, other than proceeds to be applied to the
restoration or repair of the manufactured home or released to the
obligor;
. any Advances made as described under "Advances" and other amounts
required under the pooling and servicing agreement to be deposited in
the certificate account;
. all amounts received from any credit enhancement provided on a series
of certificates; and
. all proceeds of any contract or property acquired, that we or the
servicer repurchase, as described above or under "--Termination of the
Agreement" below.
USE OF PROCEEDS
Unless we specify otherwise in the applicable prospectus supplement, we
will use substantially all of the net proceeds to be received from the sale of
each series of certificates for general corporate purposes, including the
purchase of the contracts, costs of carrying the contracts until sale of the
related certificates and to pay other expenses connected with pooling the
contracts and issuing the certificates.
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GREEN TREE FINANCIAL CORPORATION
General
Green Tree is a Delaware corporation which, as of December 31, 1998, had
stockholders' equity of approximately $2.2 billion. We purchase, pool, sell and
service conditional sales contracts for manufactured housing throughout the
nation. We are the largest servicer of manufactured housing government insured
or guaranteed contracts and of conventional manufactured housing contracts in
the United States. We act as servicer of the contracts. Servicing functions are
performed through Green Tree Financial Servicing Corporation, our wholly owned
subsidiary. Through our principal offices in Saint Paul, Minnesota and service
centers throughout the United States, we serve all 50 states. Our principal
executive offices are located at 1100 Landmark Towers, 345 St. Peter Street,
St. Paul, Minnesota 55102-1639 (telephone (651) 293-3400). Our annual report on
Form 10-K for the year ended December 31, 1998, and, when available, subsequent
quarterly and annual reports are available from us upon written request.
The SEC allows us to incorporate by reference some of the information we
file with it, which means that we can disclose important information to you by
referring you to those documents. The information that we incorporate by
reference is considered to be part of this prospectus, and later information
that we file with the SEC will automatically update and supersede this
information. We are incorporating by reference the following documents into
this prospectus and the prospectus supplement:
. Green Tree Financial Corporation's annual report on Form 10-K for
the year ended December 31, 1998.
. Green Tree Financial Corporation's quarterly report on Form 10-Q
for the period ended March 31, 1999.
All documents that we file under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 after the date of this prospectus and before
the termination of the offering of the certificates issued by that trust will
be incorporated by reference into this prospectus.
We will provide you, upon your written or oral request, a copy of any or
all of the documents incorporated by reference in this prospectus, exhibits to
those documents. Please direct your requests for copies to John Dolphin, Vice
President and Director of Investor Relations, 1100 Landmark Towers, 345 St.
Peter Street, St. Paul, Minnesota 55102-1639, telephone number (651) 293-3400.
Federal securities law requires the filing of information with the SEC,
including annual, quarterly and special reports (including those referred to
above as being incorporated by reference) and other information. You can read
and copy these documents at the public reference facility maintained by the SEC
at Judiciary Plaza, 450 Fifth Street, N.W., Room
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1024, Washington, D.C. 20549. You can also read and copy these reports and
other information at the following regional offices of the SEC:
New York Regional Office Chicago Regional Office
Seven World Trade Center Citicorp Center
Suite 1300 500 West Madison Street, Suite 1400
New York, NY 10048 Chicago, IL 60661
Please call the SEC at 1-800-SEC-0330 for more information about the public
reference rooms or visit the SEC's web site at http://www.sec.gov to access
available filings.
Contract Origination
Through our regional service centers, we arrange to purchase manufactured
housing contracts from manufactured housing dealers located throughout the
United States. Our regional service center personnel contact dealers located in
their region and explain our available financing plans, terms, prevailing rates
and credit and financing policies. If the dealer wishes to use our available
customer financing, the dealer must make an application for dealer approval.
Upon satisfactory results of our investigation of the dealer's creditworthiness
and general business reputation, we and the dealer execute a dealer agreement.
We also originate manufactured housing installment loan agreements directly
with customers, particularly in instances where a homeowner wants to refinance
an existing manufactured housing contract, which may or may not be with us.
All contracts that we originate are written on forms we provide and are
originated on an individually approved basis in accordance with our guidelines.
The dealer or the customer submits the customer's credit application and
purchase order to a regional service center where our personnel make an
analysis of the creditworthiness of the proposed buyer. The analysis includes a
review of the applicant's paying habits, length and likelihood of continued
employment, and certain other factors. We use a proprietary automated credit
scoring system, which is a statistically based scoring system that quantifies
information using variables obtained from customers' credit applications and
credit reports. We believe the use of this proprietary credit scoring system
has contributed to the reduction in the number of repossessions incurred as a
percentage of our servicing portfolio. Manufactured housing contracts are
assumable by any individual who meets our then-current underwriting criteria.
If the application meets our guidelines and the credit is approved, we purchase
the contract after the manufactured home is delivered and set up and the
customer has moved in.
We compute the loan-to-value ratio for each contract by first computing the
percentage relationship that the down payment bears to the total loan amount
plus any cash down payment, plus, in certain cases, fees and insurance premiums
financed, then subtracting the result from one. The down payment on some
contracts, including land-and-home contracts, may include the borrower's equity
in land (based on the appraised value,
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discounted up to 20%, less encumbrances), for which a lien has been granted to
us. For contracts in which a lien on land has been granted to us in lieu of or
as a supplement to a cash down payment, the loan-to-value ratio is computed by
dividing the appraised value of the land, discounted up to 20%, by the total
loan amount and subtracting the result from one. If the customer is refinancing
an existing loan, we may in some situations rely on an appraisal made at the
time the prior loan was originated. 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 volume of manufactured housing contracts we purchased or originated for
the past five years and other information at the end of those years were as
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------
1994 1995 1996 1997 1998
---------- ---------- ---------- ---------- ----------
(Dollars in thousands except for average size)
<S> <C> <C> <C> <C> <C>
Principal balance of
contracts purchased:
FHA/VA................ $ 67,260 $ 18,842 $ 14,333 $ 13,398 $ 9,903
Conventional.......... 3,134,231 4,140,994 4,867,685 5,541,120 6,120,552
---------- ---------- ---------- ---------- ----------
Total............. $3,201,491 $4,159,836 $4,882,018 $5,554,518 $6,130,455
========== ========== ========== ========== ==========
Number of contracts pur-
chased................. 117,742 133,398 143,145 152,839 152,176
Average contract size... $ 27,191 $ 31,184 $ 34,105 $ 36,342 $ 40,285
Average interest rate... 11.0% 10.7% 10.2% 10.3% 9.8%
Weighted average remain-
ing term at purchase
(months)............... 218 266 291 298 310
</TABLE>
Pooling and Disposition of Contracts
We generally pool contracts for sale to investors within 15 to 120 days of
purchase. In the case of FHA-insured and VA-guaranteed manufactured housing
contracts, we generally issue modified pass-through certificates secured by the
contracts and guaranteed by the Government National Mortgage Association. The
GNMA certificates provide for the payment by us to registered holders of GNMA
certificates of monthly payments of principal and interest and the pass-through
of any prepayments of the contracts.
In the case of conventional manufactured housing contracts, we sell pools
of contracts through asset securitization vehicles such as the trust described
under "The Trust." We establish a specified level of recourse, which may take
the form of a subordinated right to interest payments on the contracts, payable
after the payment of scheduled principal and interest on the related investor
interests, or a cash reserve fund for losses on the contracts comprising the
pools. Upon a default under a contract and a liquidation of the underlying
collateral, any net losses are charged against the established recourse amount
or the reserve fund.
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<PAGE>
Servicing
We service all of the manufactured housing contracts we originate or
purchase from other originators, collecting loan payments, taxes and insurance
payments where applicable and other payments from borrowers and remitting
principal and interest payments to the holders of the conventional contracts or
of the GNMA certificates backed by FHA-insured and VA-guaranteed contracts.
The following table shows the composition of our portfolio of contracts
that we originated, together with subserviced contracts we did not originate,
including manufactured housing contracts, recreational vehicle contracts,
motorcycle contracts, special product contracts and home improvement contracts,
on the dates indicated:
<TABLE>
<CAPTION>
December 31,
-------------------------------------------
1994 1995 1996 1997 1998
------- ------- ------- --------- ---------
(dollars in millions)
<S> <C> <C> <C> <C> <C>
Fixed term contracts............... $ 9,653 $13,314 $18,965 $ 26,036 $ 33,992
Revolving credit .................. 168 574 1,108 1,921 3,208
------- ------- ------- --------- ---------
Total............................ $ 9,821 $13,888 $20,073 $ 27,957 $ 37,200
======= ======= ======= ========= =========
Number of contracts serviced....... 511,519 656,845 826,863 1,076,000 1,262,643
</TABLE>
YIELD CONSIDERATIONS
The remittance rates and the weighted average contract rate of the
contracts for each series of certificates are listed in the related prospectus
supplement.
Unless we specify otherwise in the related prospectus supplement, each
monthly accrual of interest on a contract is calculated at one-twelfth of the
product of the contract rate and the principal balance outstanding on the
scheduled payment date for that contract in the preceding month. Unless we
specify otherwise in the related prospectus supplement, the remittance rate for
each certificate will be calculated similarly.
The prospectus supplement for each series will indicate that a lower rate
of principal prepayments than anticipated would negatively affect the total
return to investors of any class of certificates that is offered at a discount
to its principal amount, and a higher rate of principal prepayments than
anticipated would negatively affect the total return to investors of any class
of certificates that is offered at a premium to its principal amount or without
any principal amount.
The yield on some types of certificates which we may offer, such as
interest only certificates, principal only certificates, and fast pay/slow pay
certificates, each as further described under "Description of Certificates--
General," may be particularly sensitive to prepayment rates, and to changes in
prepayment rates, on the underlying contracts. If so stated in the related
prospectus supplement, the yield on some types of certificates which we may
offer could change and may be negative under some prepayment rate scenarios.
Accordingly, some types of certificates may not be legal or appropriate
investments for some
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financial institutions, pension funds or others. See "ERISA Considerations" and
"Legal Investment Considerations" in this prospectus and in the prospectus
supplement. In addition, the timing of changes in the rate of prepayment on the
contracts included in a contract pool may significantly affect an investor's
actual yield to maturity, even if the average prepayment rate over time is
consistent with the investor's expectations. In general, the earlier that
prepayments on contracts occur, the greater the effect on the investor's yield
to maturity.
If a series of certificates contains classes of certificates entitled to
receive distributions of principal or interest or both, in a specified order
other than as a specified percentage of each distribution of principal or
interest or both, the prospectus supplement will show that information,
measured relative to a prepayment standard or model specified in that
prospectus supplement, for the projected weighted average life of each class
and the percentage of the original principal of each class that would be
outstanding on specified remittance dates for that series based on the
assumptions stated in that prospectus supplement, including assumptions that
prepayments on the contracts in the related trust fund are made at rates
corresponding to the various percentages of the prepayment standard or model.
MATURITY AND PREPAYMENT CONSIDERATIONS
Maturity
Unless otherwise described in an applicable prospectus supplement, all of
the contracts will have maturities at origination of not more than 30 years.
Prepayment Considerations
Contracts generally may be prepaid in full or in part without penalty. FHA
contracts and VA contracts may be prepaid at any time without penalty. Based on
our experience with the portfolio of manufactured housing contracts we service,
we anticipate 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. In addition, repurchases of contracts on account of breaches of
representations and warranties have the effect of prepaying the contracts and
therefore would affect the average life of the certificates. 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
servicer will permit assumptions of the contracts if the purchaser of the
related manufactured home satisfies our then-current underwriting standards.
Information regarding the prepayment model or any other rate of assumed
prepayment, as applicable, will be described in the prospectus supplement for a
series of certificates.
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<PAGE>
See "Description of the Certificates--Termination of the Agreement" for a
description of Green Tree's or the servicer's option to repurchase the
contracts comprising part of a trust when the aggregate outstanding principal
balance of the contracts is less than a specified percentage of the initial
aggregate outstanding principal balance of the contracts as of the related cut-
off date. See also "The Trust--The Contract Pools."
DESCRIPTION OF THE CERTIFICATES
Each series of certificates will be issued under a separate pooling and
servicing agreement to be entered into among Green Tree, as seller and
servicer, and the trustee named in the related prospectus supplement, and other
parties, as are described in the applicable prospectus supplement. The
following summaries describe provisions expected to be common to each agreement
and the related certificates, but do not purport to be complete and are subject
to, and are qualified in their entirety by reference to, the provisions of the
related agreement and its description in the related prospectus supplement.
Section references refer to sections of the form of agreement filed as an
exhibit to the registration statement of which this prospectus is a part. The
portions of these sections we describe in the prospectus may be contained in
different numbered sections in the actual agreement. The provisions of the form
of agreement filed as an exhibit to the registration statement that are not
described in this prospectus may differ from the provisions of any actual
agreement. The material differences will be described in the related prospectus
supplement. Capitalized terms not otherwise defined in this prospectus have the
meanings assigned to them in the form of agreement filed as an exhibit to the
registration statement containing this prospectus.
Each series of certificates will have been rated in the rating category by
the rating agency or agencies specified in the related prospectus supplement.
General
The certificates may be issued in one or more classes. If the certificates
of a series are issued in more than one class, the certificates of all or less
than all of the classes may be sold under this prospectus, and there may be
separate prospectus supplements relating to one or more of the classes sold.
When we refer to the prospectus supplement relating to a series comprised of
more than one class it should be understood as a reference to each of the
prospectus supplements relating to the classes sold under this prospectus. When
we refer to the certificates of a class it should be understood to refer to the
certificates of a class within a series or all of the certificates of a single-
class series, as the context may require. For convenience of description, any
reference in this prospectus to a class of certificates includes a reference to
any subclass of that class.
The certificates of each series will be issued in fully registered form
only and will represent the interests specified in the related prospectus
supplement in a separate trust created under the related pooling and servicing
agreement. The trust will be held by the
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trustee for the benefit of the certificateholders. Except as we otherwise
specify in the related prospectus supplement, the certificates will be freely
transferable and exchangeable at the corporate trust office of the trustee at
the address listed in the related prospectus supplement. No service charge will
be made for any registration of exchange or transfer of certificates, but the
trustee may require payment of a sum sufficient to cover any tax or other
governmental charge.
Ownership of each contract pool may be evidenced by one or more classes of
certificates, each representing the interest in the contract pool specified in
the related prospectus supplement. Each series of certificates may include one
or more classes which are subordinated in right of distribution to one or more
other classes, as provided in the related prospectus supplement. A series of
senior/ subordinated certificates may include one or more classes of mezzanine
certificates which are subordinated to one or more classes of certificates and
are senior to one or more classes of certificates. The prospectus supplement
for a series of senior/subordinated certificates will describe the extent to
which the subordinated certificates are subordinated, which may include a
formula for determining the subordinated amount or for determining the
allocation of the amount available for distribution among senior certificates
and subordinated certificates, the allocation of losses among the classes of
subordinated certificates, the period or periods of subordination, any minimum
subordinated amount and any distributions or payments which will not be
affected by the subordination. The protection afforded to the senior
certificateholders from the subordination feature described above will be
effected by the preferential right of the certificateholders to receive current
distributions from the contract pool. If a series of certificates contains more
than one class of subordinated certificates, losses will be allocated among the
classes in the manner described in the prospectus supplement. If so specified
in the applicable prospectus supplement, mezzanine certificates or other
classes of subordinated certificates may be entitled to the benefits of other
forms of credit enhancement and may, if rated in one of the four highest rating
categories by a nationally recognized statistical rating organization, be
offered under this prospectus and the prospectus supplement.
If specified in a prospectus supplement, a series of certificates may
include one or more classes which:
(1) are entitled to receive distributions only in respect of principal,
interest or any combination of the two, or in specified proportions of
the payments, and/or
(2) are entitled to receive distributions of principal before or after
specified principal distributions have been made on one or more other
classes within a series, or on a planned amortization schedule or
targeted amortization schedule or upon the occurrence of other
specified events.
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The prospectus supplement will list the rate at which interest will be paid to
certificateholders of each class of a given series. The interest rate may be
fixed, variable or adjustable, as specified in the related prospectus
supplement.
The related prospectus supplement will specify the minimum denomination or
initial principal amount of contracts evidenced by a single certificate of each
class of certificates of a series.
Distributions of principal and interest on the certificates will be made on
the remittance dates listed in the related prospectus supplement to the persons
in whose names the certificates are registered at the close of business on the
related record date specified in the related prospectus supplement.
Distributions will be made by check mailed to the address of the person
entitled to the distribution as it appears on the certificate register, or, as
described in the related pooling and servicing agreement, by wire transfer,
except that the final distribution in retirement of certificates will be made
only upon presentation and surrender of the certificates at the office or
agency of the trustee specified in the final distribution notice to
certificateholders.
Global Certificates
The certificates of a class may be issued in whole or in part in the form
of one or more global certificates that will be deposited with, or on behalf
of, and registered in the name of a nominee for, a depositary identified in the
related prospectus supplement. The description of the certificates contained in
this prospectus assumes that the certificates will be issued in definitive
form. If the certificates of a class are issued in the form of one or more
global certificates, the term certificateholder should be understood to refer
to the beneficial owners of the global certificates, and the rights of the
certificateholders will be limited as described under this subheading.
Global certificates will be issued in registered form. Unless and until it
is exchanged in whole or in part for certificates in definitive form, a global
certificate may not be transferred except as a whole by the depositary for the
global certificate to a nominee of the depositary or by a nominee of the
depositary to the depositary or another nominee of the depositary or by the
depositary or any nominee to a successor of the depositary or a nominee of the
successor.
The specific terms of the depositary arrangement for any certificates of a
class will be described in the related prospectus supplement. It is anticipated
that the following provisions described in this subsection will apply to all
depositary arrangements.
Upon the issuance of a global certificate, the depositary for the global
certificate will credit, on its book-entry registration and transfer system,
the respective denominations of the certificates represented by the global
certificate to the accounts of institutions that have accounts with the
depositary ("Participants"). Ownership of beneficial interests in a global
certificate will be limited to Participants or persons that may hold interests
through Participants. Ownership of beneficial interests in the global
certificate will be shown on, and
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the transfer of that ownership will be effected only through, records
maintained by the depositary for the global certificate or by Participants or
persons that hold through Participants. The laws of some states require that
purchasers of securities take physical delivery of the securities in definitive
form. These limits and laws may impair the ability to transfer beneficial
interests in a global certificate.
So long as the depositary for a global certificate, or its nominee, is the
owner of the global certificate, the depositary or the nominee, as the case may
be, will be considered the sole owner or holder of the certificates represented
by the global certificate for all purposes under the pooling and servicing
agreement relating to those certificates. Except as described in the paragraph
below, owners of beneficial interests in a global certificate will not be
entitled to have certificates of the series represented by a global certificate
registered in their names, will not receive or be entitled to receive physical
delivery of certificates of that series in definitive form and will not be
considered the owners or holders under the pooling and servicing agreement
governing those certificates.
Distributions or payments on certificates registered in the name of or held
by a depositary or its nominee will be made to the depositary or its nominee,
as the case may be, as the registered owner for the holder of the global
certificate representing the certificates. In addition, all reports required
under the applicable pooling and servicing agreement to be made to
certificateholders, as described below under "Reports to Certificateholders,"
will be delivered to the depositary or its nominee, as the case may be. We, the
servicer, the trustee, or any agent, including any applicable certificate
registrar or paying agent, will not have any responsibility or liability for
any aspect of the records relating to or payments made on account of beneficial
ownership interests in a global certificate or for maintaining, supervising or
reviewing any records relating to the beneficial ownership interests or for
providing reports to the related beneficial owners.
We expect that the depositary for certificates of a class, upon receipt of
any distribution or payment on a global certificate, will credit immediately
Participants' accounts with payments in amounts proportionate to their
respective beneficial interest in the global certificate as shown on the
records of the depositary. We also expect that payments by Participants to
owners of beneficial interests in the global certificate held through
Participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers
registered in street name, and will be the responsibility of the Participants.
If a depositary for certificates of a class is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
or on behalf of Green Tree within the time period specified in the pooling and
servicing agreement, we will cause to be issued certificates of that class in
definitive form in exchange for the related global certificate or certificates.
In addition, we may at any time and in our sole discretion determine not to
have any certificates of a class represented by one or more global certificates
and, if this occurs, will cause to be issued certificates of that class in
definitive form in exchange for the related global certificate or certificates.
Further, if we so specify that the certificates of a
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class, an owner of a beneficial interest in a global certificate representing
certificates of that class may, on terms acceptable to us and the depositary
for the global certificate, receive certificates of that class in definitive
form. In any such instance, an owner of a beneficial interest in a global
certificate will be entitled to physical delivery in definitive form of
certificates of the class represented by the global certificate equal in
denominations to the beneficial interest and to have the certificates
registered in its name.
Distributions on Certificates
Except as otherwise provided in the related prospectus supplement, on each
remittance date, the trustee will withdraw from the applicable certificate
account and distribute to the certificateholders of each class, other than a
series having a class of subordinated certificates, as described below, either
the specified interest of the class in the contract pool times the aggregate of
all amounts on deposit in the certificate account as of the third business day
preceding the remittance date or another date as may be specified in the
related prospectus supplement (the "Determination Date"), or, in the case of a
series of certificates comprised of classes which have been assigned a
principal balance, payments of interest and payments in reduction of the
principal balance from all amounts on deposit in the certificate account on the
Determination Date, in the priority and calculated in the manner described in
the related prospectus supplement, except, in each case:
(1) all payments on the contracts that were due on or before the cut-off
date;
(2) all payments or collections received after the due period preceding
the month in which the remittance date occurs;
(3) all scheduled payments of principal and interest due on a date or
dates subsequent to the due period preceding the Determination Date;
(4) amounts representing reimbursement for Advances, these reimbursement
being limited, if specified in the related prospectus supplement, to
amounts received on particular contracts as late collections of
principal or interest as to which the servicer has made an
unreimbursed Advance; and
(5) amounts representing reimbursement for any unpaid servicing fee and
expenses from Liquidation Proceeds, condemnation proceeds and proceeds
of insurance policies with respect to the related contracts. The
amount of principal and interest specified in the related prospectus
supplement to be distributed to certificateholders is referred to in
this prospectus as the "Certificate Distribution Amount."
The amount available to make distriubtions on certificates will be the moneys
on deposit in the certificate account on a Determination Date, less the amounts
specified in (1) through (5) above.
Unless we otherwise specify in the related prospectus supplement, for a
series of certificates having a class of subordinated certificates, on each
remittance date, the trustee will withdraw from the applicable certificate
account and distribute to the holders of senior
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certificates, in the aggregate, the lesser of (1) the Senior Distribution
Amount plus the Outstanding Senior Shortfall (each defined below in this
section), or (2) the percentage interest which may vary as specified in the
related prospectus supplement of the classes of senior certificates times the
amount available plus (a) the percentage interest which may vary as specified
in the related prospectus supplement of the classes of subordinated
certificates times the amount available, not to exceed the available
subordination amount, if any, as described in the related prospectus
supplement, and (b) Advances, if any, made by the servicer. The distribution
made to the certificateholders of each class of senior certificates shall be
calculated as described in the related prospectus supplement and may vary as to
the allocation of principal or interest or both. Unless otherwise specified in
the related prospectus supplement, the Senior Distribution Amount is an amount
equal to the percentage interest of the classes of senior certificates times:
(1) all regularly scheduled payments of principal of and interest which
were due on contracts during the related due period, whether or not
received, with the interest portions adjusted to the remittance rate;
(2) all principal prepayments made by the obligor during the prior due
period;
(3) for each contract not described in (4) below, all insurance proceeds,
all condemnation awards and any other cash proceeds from a source
other than the obligor, as required to be deposited in the
certificate account, which were received during the prior due period,
net of related unreimbursed Advances and net of any portion thereof
which, as to any contract, constitutes late collections;
(4) for each contract as to which a receipt of Liquidation Proceeds has
been received during the prior due period or other event of
termination of the contract has occurred during the prior due period,
an amount equal to the principal amount of the contract outstanding
immediately before the date of receipt of the Liquidation Proceeds or
other event of termination, reduced by the principal portion of any
unpaid payments due on or before that date to the extent previously
advanced against or otherwise received by the certificateholder, plus
interest from the most recent due date at the remittance rate; and
(5) for each contract we repurchase for which the repurchase price was not
distributed previously, an amount equal to the principal amount of the
contract outstanding on the date of the repurchase reduced by the
principal portion of any unpaid payments due on or before that date,
but only to the extent advanced against or otherwise received by the
certificateholders, plus interest to the most recent due date.
The Outstanding Senior Shortfall for any class of senior certificates means
as of any date, to the extent not previously paid, the aggregate of the amounts
by which the Senior Distribution Amount for that class for any remittance date
exceeded the amount actually paid on that remittance date plus interest at the
remittance rate.
Unless we otherwise specify in the related prospectus supplement, on each
remittance date, the servicer shall distribute to the classes of subordinated
certificateholders, in the order
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listed in the related prospectus supplement, the balance of the amount
available for distribution, if any, after the payment to the senior
certificateholders, as described above.
Unless otherwise specified in the prospectus supplement relating to a
series of certificates, one or more classes of which have been assigned a
principal balance, distributions in reduction of the principal balance of the
certificates will be made on each remittance date to the certificateholders of
the class then entitled to receive the certificate distributions until the
aggregate amount of the distributions have reduced the principal balance of the
certificates of that class to zero or a specified percentage. Allocation of
distributions in reduction of principal balance will be made to each class of
certificates in the order specified in the related prospectus supplement,
which, if so specified in the prospectus supplement, may be concurrently.
Unless otherwise specified in the related prospectus supplement, distributions
in reduction of the principal balance of each certificate of a class then
entitled to receive distributions will be made pro rata among the certificates
of that class.
Unless otherwise specified in the related prospectus supplement, the
maximum amount which will be distributed in reduction of principal balance to
holders of certificates of a class then entitled to a distribution on any
remittance date will equal, to the extent funds are available, the sum of:
(1) the amount of the interest, if any, that has accrued but is not yet
payable on the Compound Interest Certificates of that series, if any,
from the prior remittance date or since the date specified in the
related prospectus supplement in the case of first remittance date
(the "Accrual Remittance Amount"); and
(2) the certificate remittance amount; and
(3) the applicable percentage of the excess cash flow, if any, specified
in the prospectus supplement.
Unless otherwise specified in the related prospectus supplement, the
certificate remittance amount for a remittance date will equal the amount, if
any, by which the then outstanding principal balance of the certificates of the
related classes of series (before taking into account the amount of interest
accrued on any class of Compound Interest Certificates of that series to be
added to the principal balance on the remittance date) exceeds the asset value,
as defined in the related prospectus supplement, of the contracts in the
contract pool underlying the series as of the end of the applicable Due Period
specified in the related prospectus supplement. For purposes of determining the
certificate remittance amount for a remittance date, the asset value of the
contracts will be reduced to take into account the interest evidenced by the
classes of certificates in the principal distributions for those contracts
received by the trustee during the preceding due period.
Unless otherwise specified in the prospectus supplement relating to a
series of certificates, one or more classes of which have been assigned a
principal balance, excess cash flow represents the excess of (1) the interest
evidenced by the classes of certificates in the distributions received on the
contracts underlying the series in the due period preceding a
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remittance date for that series and, in the case of the first due period, the
amount deposited in the certificate account on the closing date for the sale of
the certificates, together with income from the reinvestment of the interest,
(2) the sum of all interest accrued, whether or not then payable, on the
certificates of the classes since the preceding remittance date or since the
date specified in the related prospectus supplement in the case of the first
remittance date, the certificate remittance amount for the then current
remittance date and, if applicable, any payments made on any certificates of
the class under any special distributions in reduction of principal balance
during the due period.
Within the time specified in the pooling and servicing agreement and
described in the related prospectus supplement, the servicer will furnish a
statement to the trustee listing the amount to be distributed on the related
remittance date on account of principal and interest, stated separately, and a
statement providing information on the contracts.
If there are not sufficient funds in the certificate account to make the
full distribution to certificateholders described above on any remittance date,
the servicer will distribute the funds available for distribution to the
certificateholders of each class in accordance with their respective interests,
except that any subordinated certificateholders, will not, subject to the
limitations described in the related prospectus supplement, receive any
distributions until senior certificateholders receive the Senior Distribution
Amount plus the Outstanding Senior Shortfall. The difference between the amount
which the certificateholders would have received if there had been sufficient
eligible funds in the certificate account and the amount actually distributed,
plus interest at the remittance rates of the respective contracts to which such
shortfall is attributable, will be added to the amount which the
certificateholders are entitled to receive on the next remittance date.
Special Distributions. To the extent specified in the prospectus supplement
relating to a series of certificates, one or more classes of which have been
assigned a principal balance and having less frequent than monthly remittance
dates, these classes may receive special distributions in reduction of
principal balance in any month, other than a month in which a remittance date
occurs, if, as a result of principal prepayments on the contracts in the
related contract pool or low reinvestment yields, the trustee determines, based
on assumptions specified in the related agreement, that the amount of cash
anticipated to be on deposit in the certificate account on the next remittance
date for that series and available to be distributed to the holders of the
certificates of these classes may be less than the sum of:
(1) the interest scheduled to be distributed to holders of the
certificates of those classes; and
(2) the amount to be distributed in reduction of principal balance of
those certificates on the remittance date.
Any special distributions will be made in the same priority and manner as
distributions in reduction of principal balance would be made on the next
remittance date.
Subordinated Certificates. The rights of a class of certificateholders of a
series to receive any or a specified portion of distributions of principal or
interest or both on the
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contracts, to the extent specified in the related pooling and servicing
agreement and described in the related prospectus supplement, may be
subordinated to the rights of other certificateholders. The prospectus
supplement for a series of certificates having a class of subordinated
certificates will describe the extent to which the class is subordinated (which
may include a formula for determining the subordinated amount or for
determining the allocation of the amount available among senior certificates
and subordinated certificates), the allocation of losses among the classes of
subordinated certificates, the period or periods of subordination, and minimum
subordinated amount and any distributions or payments which will not be
affected by the subordination. The protection afforded to the senior
certificateholders from this subordination feature will be effected by the
preferential right of the certificateholders to receive current distributions
from the contract pool.
Example of Distributions
The following is an example of the flow of funds as it would relate to a
hypothetical series of certificates issued, and with a cut-off date occurring,
on January 15, 2000. All days are assumed to be business days. The initial
principal balance of the contract pool will be the aggregate principal balance
of the contracts at the close of business on the cut-off date, after deducting
principal payments due on or before that date, which, together with
corresponding interest payments, are not part of the contract pool and will not
be passed through to certificateholders. Scheduled payments and principal
prepayments may be received at any time during the due period and will be
deposited in the certificate account by the servicer for distribution to
certificateholders. When a contract is prepaid in full, interest on the amount
prepaid is collected from the obligor only to the date of payment.
Distributions on March 1 will be made to certificateholders of record at the
close of business on the business day immediately preceding the related
remittance date. On February 25 (the third business day before the remittance
date), the servicer will determine the amounts of principal and interest which
will be passed through on March 1. In addition, the servicer may advance funds
to cover any delinquencies, in which event the distribution to
certificateholders on March 1 will include the full amounts of principal and
interest due during the related due period. The servicer will also calculate
any changes in the relative interests evidenced by the senior certificates and
the subordinated certificates in the trust. On March 1, the amounts determined
on February 25 will be distributed to certificateholders.
<TABLE>
<S> <C>
January 15.................... Cut-off date.
January 15-February 14........ Due period. Servicer receives scheduled payments
on the contracts and any principal prepayments
made by obligors and applicable interest
thereon.
February 27................... Record date.
February 25................... Determination Date. Distribution amount
determined.
March 1....................... Remittance date.
</TABLE>
Succeeding months follow the pattern of the due period through the
remittance date. The flow of funds for any series of certificates may differ
from the above example, as specified in the related prospectus supplement.
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Reports to Certificateholders
The trustee will forward to each certificateholder on each remittance date,
or as soon thereafter as is practicable, as specified in the related prospectus
supplement, a statement listing the following information:
(1) the amount of distribution allocable to principal on the contracts;
(2) the amount of the distribution allocable to interest on the
contracts;
(3) if the distribution to the certificateholders is less than the full
amount that would be distributable to the certificateholders if there
were sufficient eligible funds in the certificate account, the
difference between the aggregate amounts of principal and interest
which certificateholders would have received if there were sufficient
eligible funds in the certificate account and the amounts actually
distributed;
(4) the aggregate amount of any Advance by the servicer included in the
amounts actually distributed to the certificateholders;
(5) the outstanding principal balance of the contracts; and
(6) the approximate weighted average remittance rate of the contracts
during the due period immediately preceding the remittance date.
In addition, not more than 90 days after the end of each calendar year, the
servicer will furnish a report to each certificateholder of record at any time
during that calendar year (a) as to the aggregate of amounts reported pursuant
to (1) through (5) above for that calendar year or, if the person was a
certificateholder of record during a portion of that calendar year, for the
applicable portion of that year, (b) other information as the servicer deems
necessary or desirable for certificateholders to prepare their tax returns and
(c) if so specified in the related prospectus supplement, a listing of the
principal balances of the contracts outstanding at the end of the calendar
year. Information in the monthly and annual reports provided to the
certificateholders will not have been examined and reported upon by an
independent public accountant. However, the servicer will provide to the
trustee annually a report by independent public accountants regarding the
servicing of the contracts as described under "Evidence as to Compliance"
above.
In addition, to the extent applicable, the report shall include:
(1) in the case of certificates which are assigned a principal balance,
the amount of the distribution being made in reduction of principal
balance specified in the related prospectus supplement, and the
principal balance of each class of certificates and a single
certificate of the holder's class after giving effect to the
distribution in reduction of principal balance made on such remittance
date and after giving effect to all special distributions since the
preceding remittance date or since the closing date in the case of the
first remittance date; and
(2) for Compound Interest Certificates, but only if the holders of those
certificates shall not have received on the remittance date a
distribution of interest equal to the entire
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amount of interest accrued on the certificate during the related due
period remittance date:
. the interest accrued on the class of Compound Interest Certificates
and on a single certificate of that class during the due period, or
specified interest accrual period, for that remittance date and
added to the principal of that Compound Interest Certificate; and
. the principal balance of the class of Compound Interest
Certificates and of a single certificate of that class after giving
effect to the addition of all interest accrued during the due
period, or specified interest accrual period for that remittance
date.
Advances
To the extent provided in the related prospectus supplement, the servicer
is obligated to make periodic advances of cash from its own funds or, if
specified in the related prospectus supplement, from excess funds in the
certificate account not then required to be distributed to certificateholders
(each, an "Advance"), for distribution to the certificateholders in an amount
equal to the difference between the amount due to them and the amount in the
certificate account, eligible for distribution to them under the pooling and
servicing agreement, but only to the extent the difference is due to delinquent
payments of principal and interest for the preceding due period and only to the
extent the servicer determines the advances are recoverable from future
payments and collections on the delinquent contracts. The servicer's obligation
to make any Advances, may, as specified in the related prospectus supplement,
be limited in amount. If specified in the related prospectus supplement, the
servicer will not be obligated to make Advances until all or a specified
portion of any reserve fund is depleted. Advances are intended to maintain a
regular flow of scheduled interest and principal payments to the senior
certificateholders, not to guarantee or insure against losses. Accordingly, any
funds advanced are recoverable by the servicer out of amounts received on
particular contracts which represent late recoveries of principal or interest
for which any Advance was made.
Indemnification
The pooling and servicing agreement requires us to defend and indemnify the
trust, the trustee, including any agent of the trustee and the
certificateholders (which indemnification will survive any removal of the
servicer as servicer of the contracts) against any and all costs, expenses,
losses, damages, claims and liabilities, including reasonable fees and expenses
of counsel and expenses of litigation (1) arising out of or resulting from the
use or ownership by Green Tree or the servicer or any of its affiliates of any
manufactured home and (2) for any taxes which may at any time be asserted for,
and as of the date of, the conveyance of the contracts to the trust but not
including any federal, state or other tax arising out of the creation of the
trust and the issuance of the certificates. (Article X).
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The pooling and servicing agreement also requires the servicer, in its
duties as servicer of the contracts, to defend and indemnify the trust, the
trustee and the certificateholders (which indemnification will survive any
removal of the servicer as servicer of the contracts) against any and all
costs, expenses, losses, damages, claims and liabilities, including reasonable
fees and expenses of counsel and expenses of litigation, for any action taken
by the servicer on any contract while it was the servicer. (Section 10.04.)
Amendment
Unless we specify otherwise in the related prospectus supplement, the
pooling and servicing agreement may be amended by Green Tree, the servicer and
the trustee without the consent of the certificateholders:
. to cure any ambiguity; or
. to correct or supplement any provision in the agreement that may be
inconsistent with another provision; or
. if an election has been made for a particular series of certificates to
treat the trust as a REMIC within the meaning of Section 860D(a) of the
IRS code, to maintain the REMIC status of the trust and to avoid the
imposition of certain taxes on the REMIC; or
. to make any other provisions on matters or questions arising under the
agreement that are not inconsistent with its provisions, provided that
the action will not adversely affect in any material respect the
interests of the certificateholders of the related series.
Unless we specify otherwise in the related prospectus supplement, the pooling
and servicing agreement may also be amended by Green Tree, the servicer and the
trustee with the consent of the certificateholders, other than holders of
residual certificates in the related REMIC, if any, evidencing interests
aggregating not less than 51% of the trust for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the pooling and servicing agreement or of modifying in any manner the rights of
the certificateholders; provided, however, that no amendment that reduces in
any manner the amount of, or delay the timing of, any payment received on
contracts which are required to be distributed on any certificate may be
effective without the consent of the holders of each certificate.
Termination of the Agreement
The obligations created by each pooling and servicing agreement will
terminate upon the date calculated as specified in the pooling and servicing
agreement, generally upon:
(1) the later of the final payment or other liquidation of the last
contracts subject to the agreement and the disposition of all property
acquired upon foreclosure of any land-and-home contract or
repossession of any manufactured home; and
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(2) the payment to the certificateholders of all amounts held by the
servicer or the trustee and required to be paid to it under to the
agreement.
In addition, unless otherwise specified in the related prospectus supplement,
Green Tree or the servicer may at its option regarding any series of
certificates, repurchase all certificates or contracts remaining outstanding at
that time as the aggregate unpaid principal balance of contracts is less than
the percentage of the aggregate unpaid principal balance of the contracts on
the cut-off date specified for that series in the related prospectus
supplement. Unless otherwise provided in the related prospectus supplement, the
repurchase price will equal the principal amount of the contracts plus accrued
interest from the first day of the month of repurchase to the first day of the
next succeeding month at the contract rates borne by the contracts.
The Trustee
The prospectus supplement for a series of certificates will specify the
trustee under the related pooling and servicing agreement. The trustee may have
normal banking relationships with Green Tree or its affiliates and the servicer
or its affiliates.
The trustee may resign at any time, in which event we will be obligated to
appoint a successor trustee. We may also remove the trustee if the trustee
ceases to be eligible to continue as trustee under the pooling and servicing
agreement or if the trustee becomes insolvent. Unless we specify otherwise in
the related prospectus supplement, the trustee may also be removed at any time
by the holders of certificates evidencing interests aggregating over 50% of the
related trust as specified in the pooling and servicing agreement. Any
resignation or removal of the trustee and appointment of a successor trustee
will not become effective until acceptance of the appointment by the successor
trustee.
The trustee will make no representation as to the validity or sufficiency
of the pooling and servicing agreement, the certificates, any contract,
contract file or related documents, and will not be accountable for the use or
application by Green Tree of any funds paid to Green Tree, as seller, in
consideration of the conveyance of the contracts, or deposited into or
withdrawn from the certificate account by the servicer. (Section 11.03.) If no
event of termination has occurred, the trustee will be required to perform only
those duties specifically required of it under the pooling and servicing
agreement. However, upon receipt of the various certificates, reports or other
instruments required to be furnished to it, the trustee will be required to
examine them to determine whether they conform as to form to the requirements
of the pooling and servicing agreement. (Section 11.01.) Whether or not an
event of termination has occurred, the trustee is not required to expend or
risk its own funds or otherwise incur any financial liability in the
performance of its duties or the exercise of its powers if it has reasonable
grounds to believe that repayment of the funds or adequate indemnity against
the risk or liability is not reasonably assured to it. (Section 11.01.)
Under the pooling and servicing agreement, the servicer agrees to pay to
the trustee on each remittance date:
. reasonable compensation for all services rendered by it under the
agreement, which compensation shall not be limited by any provision of
law regarding the compensation of a trustee of an express trust; and
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. reimbursement for all reasonable expenses, disbursements and advances
incurred or made by the trustee in accordance with any provision of the
agreement, including the reasonable compensation and the expenses and
disbursements of its agents and counsel, except any expense,
disbursement or advance attributable to the trustee's negligence or bad
faith.
We have agreed to indemnify the trustee for, and to hold it harmless against,
any loss, liability or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration of
the trust and the trustee's duties under the trust, including the costs and
expenses of defending itself against any claim or liability in the exercise or
performance of any of the trustee's powers or duties. (Section 11.05.)
SERVICING
Under the pooling and servicing agreement, the servicer will service and
administer the contracts assigned to the trustee as more fully described below
in this section. The servicer will perform diligently all services and duties
specified in each pooling and servicing agreement, in the same manner as
prudent lending institutions of manufactured housing contracts of the same type
as the contracts in those jurisdictions where the related manufactured homes
are located or as otherwise specified in the pooling and servicing agreement.
The duties to be performed by the servicer will include collection and
remittance of principal and interest payments, collection of insurance claims
and, if necessary, repossession.
The servicer will make reasonable efforts to collect all payments called
for under the contracts and, consistent with the pooling and servicing
agreement and any FHA insurance and VA guaranty, will follow the collection
procedures as it follows for mortgage loans or contracts serviced by it that
are comparable to the contracts.
Hazard Insurance. Except as otherwise specified in the related prospectus
supplement, the terms of the pooling and servicing agreement will require the
servicer to cause to be maintained for each contract one or more hazard
insurance policies which provide, at a minimum, the same coverage as a standard
form fire and extended coverage insurance policy that is customary for
manufactured housing, issued by a company authorized to issue policies in the
state in which the manufactured home is located, and in an amount which is not
less than the maximum insurable value of the manufactured home or the principal
balance due from the obligor on the related contract, whichever is less;
provided, however, that the amount of coverage provided by each hazard
insurance policy shall be sufficient to avoid the application of any co-
insurance clause contained in the policy. Each hazard insurance policy caused
to be maintained by the servicer shall contain a standard loss payee clause in
favor of the servicer and its successors and assigns. If any obligor is in
default in the payment of premiums on its hazard insurance policy or policies,
the servicer shall pay
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the premiums out of its own funds, and may add separately the premium to the
obligor's obligation as provided by the contract, but may not add the premium
to the remaining principal balance of the contract.
The servicer may maintain, in lieu of causing individual hazard insurance
policies to be maintained for each manufactured home, and shall maintain, to
the extent that the related contract does not require the obligor to maintain a
hazard insurance policy for the related manufactured home, one or more blanket
insurance policies covering losses on the obligor's interest in the contracts
resulting from the absence or insufficiency of individual hazard insurance
policies. Any blanket policy shall be substantially in the form and in the
amount carried by the servicer as of the date of the agreement. The servicer
shall pay the premium for the policy on the basis described in the policy and
shall pay any deductible amount for claims under the policy relating to the
contracts. If the insurer thereunder shall cease to be acceptable to the
servicer, the servicer shall exercise its best reasonable efforts to obtain
from another insurer a replacement policy comparable to the policy.
If the servicer shall have repossessed a manufactured home on behalf of the
trustee, the servicer shall either:
(1) maintain at its expense hazard insurance for the manufactured home, or
(2) indemnify the trustee against any damage to the manufactured home
before resale or other disposition.
Evidence as to Compliance. Unless we specify otherwise in the related
prospectus supplement, each pooling and servicing agreement will require the
servicer to deliver to the trustee a monthly report before each remittance
date, describing information about the contract pool and the certificates of
the series as is specified in the related prospectus supplement. Each report to
the trustee will be accompanied by a statement from an appropriate officer of
the servicer certifying the accuracy of the report and stating that the
servicer has not defaulted in the performance of its obligations under the
pooling and servicing agreement. On or before May 1 of each year, the servicer
will deliver to the trustee a report of a firm of independent public
accountants which is a member of the American Institute of Certified Public
Accountants stating that the firm has examined documents, records and
managements' assertions relating to loans serviced by the servicer and stating
that, on the basis of those procedures, the servicing has been conducted in
compliance with the minimum servicing standards identified in the Mortgage
Bankers Association of America's Uniform Single Attestation Program for
Mortgage Bankers, or any successor program, except for any significant
exceptions or errors in records that, in the opinion of the firm, generally
accepted attestation standards require it to report. (Article VI.)
About the Servicer. The servicer may not resign from its obligations and
duties under a pooling and servicing agreement except upon a determination that
its duties under the pooling and servicing agreement are no longer permissible
under applicable law. No resignation will become effective until the trustee or
a successor servicer has assumed the servicer's obligations and duties under
the pooling and servicing agreement. The servicer can
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only be removed as servicer under to an event of termination as discussed below
under "--Events of Termination". Any person with which the servicer is merged
or consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the servicer is a party, or any person succeeding to the
business of the servicer, will be the successor to the servicer under the
pooling and servicing agreement so long as such successor services at least
$100 million of manufactured housing contracts. (Section 12.01.)
Unless we specify otherwise in the related prospectus supplement, each
pooling and servicing agreement will also provide that neither the servicer,
nor any director, officer, employee or agent of the servicer, will be under any
liability to the trust or the certificateholders for any action taken or for
restraining from the taking of any action in good faith under the pooling and
servicing agreement, or for errors in judgment; provided, however, that neither
the servicer nor any such person will be protected against any liability which
would otherwise be imposed by reason of the failure to perform its obligations
in strict compliance with the standards of care described in the pooling and
servicing agreement. The servicer may, in its discretion, undertake any action
which it may deem necessary or desirable with respect to the pooling and
servicing agreement and the rights and duties of the parties to the agreement
and the interests of the certificateholders. In such event, the legal expenses
and costs of the action and any liability resulting from the action will be
expenses, costs and liabilities of the trust and the servicer will be entitled
to be reimbursed out of the certificate account.
The servicer shall keep in force throughout the term of the pooling and
servicing agreement:
. policy or policies of insurance covering errors and omissions for
failure to maintain insurance as required by the pooling and servicing
agreement, and
. a fidelity bond.
The policy or policies and the fidelity bond shall be in the form and amount as
is generally customary among persons which service a portfolio of manufactured
housing contracts having an aggregate principal amount of $100 million or more
and which are generally regarded as servicers acceptable to institutional
investors.
The servicer, to the extent practicable, shall cause the obligors to pay
all taxes and similar governmental charges when and as due. To the extent that
nonpayment of any taxes or charges would result in the creation of a lien upon
any manufactured home having a priority equal or senior to the lien of the
related contract, the servicer shall advance any delinquent tax or charge.
Servicing Compensation and Payment of Expenses. For its servicing of the
contracts, the servicer will receive servicing fees which include a monthly
servicing fee, which we may assign, for each due period, paid on the next
succeeding remittance date, equal to 1/12th of the product of 0.50% and the
Pool Scheduled Principal Balance for the immediately preceding remittance date.
As long as we are the servicer the trustee will pay us its monthly servicing
fee from any monies remaining after the certificateholders have received all
payments of principal and interest for the remittance date.
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The monthly servicing fee provides compensation for customary manufactured
housing contract third-party servicing activities to be performed by the
servicer for the trust and for additional administrative services performed by
the servicer on behalf of the trust. Customary servicing activities include
collecting and recording payments, communicating with obligors, investigating
payment delinquencies, providing billing and tax records to obligors and
maintaining internal records on each contract. Administrative services
performed by the servicer on behalf of the trust include calculating
distributions to certificateholders and providing related data processing and
reporting services for certificateholders and on behalf of the trustee.
Expenses incurred in servicing the contracts and paid by the servicer from its
servicing fees include, payment of fees and expenses of accountants, payments
of all fees and expenses incurred in the enforcement of contracts except
liquidation expenses and payment of expenses incurred in distributions and
reports to certificateholders. The servicer will be reimbursed out of the
Liquidation Proceeds of a liquidated contract for all ordinary and necessary
liquidation expenses incurred by it in realization upon the related
manufactured home. (Section 5.08.)
As part of its servicing fees the servicer will also be entitled to retain,
as compensation for the additional services provided, any fees for late
payments made by obligors, extension fees paid by obligors for the extension of
scheduled payments and assumption fees for permitted assumptions of contracts
by purchasers of the related manufactured homes. (Section 1.02.)
Events of Termination. Except as otherwise specified in the related
prospectus supplement, events of termination under each agreement will include:
. any failure by the servicer to distribute to the certificateholders any
required payment which continues unremedied for 5 days, or another
period specified in the related prospectus supplement after the giving
of written notice;
. any failure by the servicer duly to observe or perform in any material
respect any other of its covenants or agreements in the agreement that
materially and adversely affects the interests of certificateholders,
which, in either case, continues unremedied for 30 days after the
giving of written notice of the failure of breach;
. any assignment or delegation by the servicer of its duties or rights
under the agreement, except as specifically permitted under the
agreement, or any attempt to make an assignment or delegation;
. events of insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings regarding the servicer; and
. the servicer is no longer an eligible servicer as defined in the
applicable agreement.
Notice as used in the pooling and servicing agreement shall mean notice to the
servicer by the trustee or Green Tree, or to Green Tree, the servicer, if any,
and the trustee by the holders of certificates representing interests
aggregating not less than 25% of the trust.
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Rights Upon Event of Termination. Except as otherwise specified in the
related prospectus supplement, so long as an event of termination remains
unremedied, the trustee may, and at the written direction of the
certificateholders of a series evidencing interests aggregating 25% or more of
the related trust, shall, terminate all of the rights and obligations of the
servicer under the related pooling and servicing agreement and in and to the
contracts, and the proceeds of the contracts, at which time subject to
applicable law regarding the trustee's ability to make advances the trustee or
a successor servicer under the agreement will succeed to all the
responsibilities, duties and liabilities of the servicer under the agreement
and will be entitled to similar compensation arrangements; provided, however,
that neither the trustee nor any successor servicer will assume any obligation
of Green Tree to repurchase contracts for breaches of representations or
warranties, and the trustee and the successor servicer will not be liable for
any acts or omissions of the prior servicer occurring before a transfer of the
servicer's servicing and related functions or for any breach by the servicer of
any of its obligations contained in the pooling and servicing agreement.
Notwithstanding the termination, the servicer shall be entitled to payment of
amounts payable to it before termination, for services rendered before
termination. No termination will affect in any manner our obligation to
repurchase contracts for breaches of representations or warranties under the
agreement. If the trustee is obligated to succeed the servicer but is unwilling
or unable, it may appoint, or petition to a court of competent jurisdiction for
the appointment of a servicer. Pending the appointment, the trustee is
obligated to act in that capacity. The trustee and the successor may agree upon
the servicing compensation to be paid, which in no event may be greater than
the compensation to the servicer under the agreement.
No certificateholder will have any right under a pooling and servicing
agreement to institute any proceeding regarding the pooling and servicing
agreement unless the holder previously has given to the trustee written notice
of default and unless the holders of certificates evidencing interests
aggregating not less than 25% of the related trust requested the trustee in
writing to institute the proceeding in its own name as trustee and have offered
to the trustee reasonable indemnity and the trustee for 60 days has neglected
or refused to institute any proceeding. The trustee will be under no obligation
to take any action or institute, conduct or defend any litigation under the
pooling and servicing agreement at the request, order or direction of any of
the holders of certificates, unless the certificateholders have offered to the
trustee reasonable security or indemnity against the costs, expenses and
liabilities which the trustee may incur.
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DESCRIPTION OF FHA INSURANCE AND VA GUARANTEES
Certain of the contracts may be FHA-insured or VA-guaranteed, the payments
upon which, subject to the following discussion, are insured by the FHA under
Title I of the National Housing Act or partially guaranteed by the VA.
The regulations governing FHA manufactured home insurance provide that
insurance benefits are payable upon the repossession and resale of the
collateral and assignment of the contract to HUD. For a defaulted FHA contract,
the servicer must follow applicable regulations before initiating repossession
procedures. These regulations include requirements that the lender arrange a
face-to-face meeting with the borrower, initiate a modification or repayment
plan, if feasible, and give the borrower 30 days' notice of default before any
repossession. The insurance claim is paid in cash by HUD. For manufactured
housing contracts, the amount of insurance benefits generally paid by FHA is
equal to 90% of the sum of:
(1) the unpaid principal amount of the contract at the date of default and
uncollected interest earned to the date of default computed at the
contract rate, after deducting the best price obtainable for the
collateral, based in part on a HUD-approved appraisal, and all amounts
retained or collected by the lender from other sources regarding the
contract; and
(2) accrued and unpaid interest on the unpaid amount of the contract from
the date of default to the date of submission of the claim plus 15
calendar days, but in no event more than nine months, computed at a
rate of 7% per year; and
(3) costs paid to a dealer or other third party to repossess and preserve
the manufactured home; and
(4) the amount of any sales commission paid to a dealer or other third
party for the resale of the property; and
(5) for a land-and-home contract, property taxes, special assessments and
other similar charges and hazard insurance premiums, prorated to the
date of disposition of the property; and
(6) uncollected court costs; and
(7) legal fees, not to exceed $500; and
(8) expenses for recording the assignment of the lien on the collateral to
the United States.
The insurance available to a lender under FHA Title I insurance is subject
to the limit of a reserve amount equal to ten percent of the original principal
balance of all Title I insured loans originated by the lender, which amount is
reduced by all claims paid to the lender and which is increased by an amount
equal to ten percent of the original principal balance of insured loans
subsequently originated by the lender. As of December 31, 1998, the Company's
Title I reserve amount was approximately $85,534,000, which amount was
available to pay claims in respect of approximately $848,571,000 of FHA-insured
home
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improvement loans and manufactured housing contracts serviced by Green Tree. If
we were replaced as servicer of the contracts under the pooling and servicing
agreement, it is not clear from the FHA regulations what portion of this
reserve amount would be available for claims for the FHA-insured contracts. The
obligation to pay insurance premiums to FHA is our obligation, as servicer of
the FHA-insured contracts.
The maximum guarantee that may be issued by the VA for a VA-guaranteed
contract is the lesser of (1) the lesser of $20,000 and 40% of the principal
amount of the contract and (2) the maximum amount of guaranty entitlement
available to the obligor veteran, which may range from $20,000 to zero. The
amount payable under the guarantee will be the percentage of the VA contract
originally guaranteed applied to indebtedness outstanding as of the applicable
date of computation specified in the VA regulations, interest accrued on the
unpaid balance of the loan to the appropriate date of computation and limited
expenses of the contract holder, but in each case only to the extent that the
amounts have not been recovered through resale of the manufactured home. The
amount payable under the guarantee may in no event exceed the amount of the
original guarantee.
CERTAIN LEGAL ASPECTS OF THE CONTRACTS
The following discussion contains summaries of certain legal aspects of
manufactured housing contracts, including land-and-home contracts, which are
general in nature. Because these legal aspects are governed by applicable state
law, and these laws may differ substantially, the summaries do not purport to
be complete nor to reflect the laws of any particular state, nor to encompass
the laws of all states in which the security for the contracts or land-and-home
contracts is situated. The summaries are qualified in their entirety by
reference to the applicable federal and state laws governing the contracts or
land-and-home contracts.
The Contracts (Other than Land-and-Home Contracts)
General. As a result of the assignment of the contracts to the trustee, the
trust will succeed collectively to all of the rights, including the right to
receive payment on the contracts, and will assume the obligations of the
obligee under the contracts. Each contract evidences both (1) the obligation of
the obligor to repay the loan evidenced by the contract, and (2) the grant of a
security interest in the manufactured home to secure repayment of the loan.
Aspects of both features of the contracts are described more fully in this
section below.
The contracts generally are "chattel paper" as defined in the UCC in effect
in the states in which the manufactured homes initially were registered. Under
the UCC, the sale of chattel paper is treated in a manner similar to perfection
of a security interest in chattel paper. Under the pooling and servicing
agreement, we will retain possession of the contracts as custodian for the
trustee, and will make an appropriate filing of a UCC-1 financing statement in
Minnesota to give notice of the trustee's ownership of the contracts. The
contracts will be stamped to reflect their assignment from Green Tree to the
trustee. However, if through negligence, fraud or otherwise, a subsequent
purchaser were able to
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take physical possession of the contracts without notice of the assignment, the
trustee's interest in the contracts could be defeated.
Security Interests in the Manufactured Homes. The manufactured homes
securing the contracts may be located in all 50 states and the District of
Columbia. Security interests in manufactured homes may be perfected either by
notation of the secured party's lien on the certificate of title or by delivery
of the required documents and payment of a fee to the state motor vehicle
authority, depending on state law. In some nontitle states, perfection pursuant
to the provisions of the UCC is required. We effect the notation or delivery of
the required documents and fees, and obtains possession of the certificate of
title, as appropriate, under the laws of the state in which a manufactured home
is registered. If we fail, due to clerical errors, to effect this notation or
delivery, or file the security interest under the wrong law (for example, under
a motor vehicle title statute rather than under the UCC, in a few states), the
certificateholders may not have a first priority security interest in the
manufactured home securing a contract. As manufactured homes have become larger
and often have been attached to their sites without any apparent intention to
move them, courts in many states have held that manufactured homes, under
certain circumstances, may become subject to real estate title and recording
laws. As a result, a security interest in a manufactured home could be rendered
subordinate to the interests of other parties claiming an interest in the home
under applicable state real estate law. In order to perfect a security interest
in a manufactured home under real estate laws, the holder of the security
interest must file either a fixture filing under the provisions of the UCC or a
real estate mortgage under the real estate laws of the state where the home is
located. See "Land-and-Home Contracts" below. These filings must be made in the
real estate records office of the county where the home is located.
Substantially all of the contracts contain provisions prohibiting the borrower
from permanently attaching the manufactured home to its site. So long as the
borrower does not violate this agreement, a security interest in the
manufactured home will be governed by the certificate of title laws or the UCC,
and the notation of the security interest on the certificate of title or the
filing of a UCC financing statement will be effective to maintain the priority
of the security interest in the manufactured home. If, however, a manufactured
home becomes permanently attached to its site, other parties could obtain an
interest in the manufactured home which is prior to the security interest
originally retained by the seller and transferred to Green Tree. We will
represent that at the date of the initial issuance of the related certificates
we have obtained a perfected first priority security interest by proper
notation or delivery of the required documents and fees on substantially all of
the manufactured homes securing the contracts.
We will assign the security interest in the manufactured homes to the
trustee on behalf of the certificateholders. Unless we specify otherwise in the
related prospectus supplement, neither Green Tree nor the trustee will amend
the certificates of title to identify the trustee as the new secured party, and
neither Green Tree nor the servicer will deliver the certificates of title to
the trustee or note the interest of the trustee. Accordingly, we will continue
to be named as the secured party on the certificates of title relating to the
manufactured homes. In some states, the assignment is an effective conveyance
of the security interest without amendment of any lien noted on the related
certificate of title and the new secured party
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succeeds to the servicer's rights as the secured party. However, in some states
in the absence of an amendment to the certificate of title, the assignment of
the security interest in the manufactured home may not be held effective or the
security interests may not be perfected and in the absence of the notation or
delivery to the trustee, the assignment of the security interest in the
manufactured home may not be effective against creditors of Green Tree or a
trustee in bankruptcy of Green Tree.
In the absence of fraud, forgery or permanent affixation of the
manufactured home to its site by the manufactured home owner, or administrative
error by state recording officials, the notation of the lien of Green Tree on
the certificate of title or delivery of the required documents and fees will be
sufficient to protect the certificateholders against the rights of subsequent
purchasers of a manufactured home or subsequent lenders who take a security
interest in the manufactured home. If there are any manufactured homes as to
which Green Tree's security interest is not perfected, the security interest
would be subordinate to, among others, subsequent purchasers for value of the
manufactured homes and holders of perfected security interests. There also
exists a risk in not identifying the trustee as the new secured party on the
certificate of title that, through fraud or negligence, the security interest
of the trustee could be released.
If the owner of a manufactured home moves it to a state other than the
state in which the manufactured home initially is registered, under the laws of
most states the perfected security interest in the manufactured home would
continue for four months after the relocation and thereafter only if and after
the owner re-registers the manufactured home in that state. If the owner were
to relocate a manufactured home to another state and not re-register the
manufactured home in that state, and if steps were not taken to re-perfect the
trustee's security interest in that state, the security interest in the
manufactured home would cease to be perfected. A majority of states generally
require surrender of a certificate of title to re-register a manufactured home;
accordingly, we must surrender possession if it holds the certificate of title
to the manufactured home or, in the case of manufactured homes registered in
states which provide for notation of lien, we would receive notice of surrender
if the security interest in the manufactured home is noted on the certificate
of title. Accordingly, we would have the opportunity to re-perfect our security
interest in the manufactured home in the state of relocation. In states which
do not require a certificate of title for registration of a manufactured home,
re-registration could defeat perfection. In the ordinary course of servicing
the manufactured housing conditional sales contracts, we take steps to effect
the re-perfection upon receipt of notice of re-registration or information from
the obligor as to relocation. Similarly, when an obligor under a contract sells
a manufactured home, we must surrender possession of the certificate of title
or we will receive notice as a result of our lien noted on the title and
accordingly we will have an opportunity to require satisfaction of the related
manufactured housing conditional sales contract before release of the lien.
Under the pooling and servicing agreement, the servicer is obligated to take
steps, at the servicer's expense, necessary to maintain perfection of security
interests in the manufactured homes.
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Under the laws of most states, liens for repairs performed on a
manufactured home and liens for personal property taxes take priority over a
perfected security interest. We will represent in the pooling and servicing
agreement that we have no knowledge of any liens on any manufactured home
securing payment on any contract. However, liens could arise at any time during
the term of a contract. No notice will be given to the trustee or
certificateholders if a lien arises.
Enforcement of Security Interests in Manufactured Homes. The servicer on
behalf of the trustee, as required by the related pooling and servicing
agreement, may take action to enforce the trustee's security interest on
contracts in default by repossession and resale of the manufactured homes
securing the defaulted contracts. So long as the manufactured home has not
become subject to real estate laws, a creditor can repossess a manufactured
home securing a contract by voluntary surrender, by self-help repossession that
is peaceful (i.e., without breach of the peace) or, in the absence of voluntary
surrender and the ability to repossess without breach of the peace, by judicial
process. The holder of a contract must give the debtor a number of days'
notice, which varies from 10 to 30 days depending on the state, before
commencement of any repossession. The UCC and consumer protection laws in most
states place restrictions on repossession sales, including requiring prior
notice to the debtor and commercial reasonableness in effecting such a sale.
The law in most states also requires that the debtor be given notice of any
sale before resale of the unit so that the debtor may redeem at or before the
resale. In the event of such repossession and resale of a manufactured home,
the trustee would be entitled to be paid out of the sale proceeds before the
proceeds could be applied to the payment of the claims of unsecured creditors
or the holders of subsequently perfected security interests or, thereafter, to
the debtor.
Under the laws applicable in most states, a creditor is entitled to obtain
a deficiency judgment from a debtor for any deficiency on repossession and
resale of the manufactured home securing the debtor's loan. However, some
states impose prohibitions or limitations on deficiency judgments, and in many
cases the defaulting borrower would have no assets with which to pay a
judgment.
Certain other statutory provisions, including federal and state bankruptcy
and insolvency laws and general equitable principles, may limit or delay the
ability of a lender to repossess and resell collateral or enforce a deficiency
judgment.
Under the terms of the federal Soldiers' and Sailors' Civil Relief Act of
1940, an obligor who enters military service after the origination of the
obligor's contract, including an obligor who is a member of the National Guard
or is in reserve status at the time of the origination of the contract and is
later called to active duty, may not be charged interest above an annual rate
of 6% during the period of the obligor's active duty status, unless a court
orders otherwise upon application of the lender. It is possible that the action
could have an effect, for an indeterminate period of time, on the ability of
the servicer to collect full amounts of interest on some of the contracts. Any
shortfall in interest collections resulting from the application of the Relief
Act, to the extent not covered by the subordination of a class of subordinated
certificates, could result in losses to the holders of a
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series of certificates. In addition, the Relief Act imposes limitations which
would impair the ability of the servicer to foreclose on an affected contract
during the obligor's period of active duty status. Thus, if a contract goes
into default, there may be delays and losses occasioned by the inability to
realize upon the manufactured home in a timely fashion.
Land-and-Home Contracts
General. The land-and-home contracts will be secured by either first
mortgages or deeds of trust, depending upon the prevailing practice in the
state where the underlying property is located. A mortgage creates a lien upon
the real property described in the mortgage. There are two parties to a
mortgage: the mortgagor, who is the borrower, and the mortgagee, who is the
lender. In a mortgage state, the mortgagor delivers to the mortgagee a note or
bond evidencing the loan and the mortgage. Although a deed of trust is similar
to a mortgage, a deed of trust has three parties: the borrower, a lender as
beneficiary, and a third-party grantee called the trustee. Under a deed of
trust, the borrower grants the property, irrevocably until the debt is paid, in
trust, generally with a power of sale, to the trustee to secure payment of the
loan. The trustee's authority under a deed of trust and the mortgagee's
authority under a mortgage are governed by the express provisions of the deed
of trust or mortgage, applicable law, and, in some cases, with respect to the
deed of trust, the directions of the beneficiary.
Foreclosure. Foreclosure of a mortgage is generally accomplished by
judicial action. Generally, the action is initiated by the service of legal
pleadings upon all parties having an interest of record in the real property.
Delays in completion of the foreclosure occasionally may result from
difficulties in locating necessary parties defendant. When the mortgagee's
right to foreclosure is contested, the legal proceedings necessary to resolve
the issue can be time-consuming and expensive. After the completion of a
judicial foreclosure proceeding, the court may issue a judgment of foreclosure
and appoint a receiver or other officer to conduct the sale of the property. In
some states, mortgages may also be foreclosed by advertisement, under a power
of sale provided in the mortgage. Foreclosure of a mortgage by advertisement is
essentially similar to foreclosure of a deed of trust by non-judicial power of
sale.
Foreclosure of a deed of trust is generally accomplished by a non-judicial
trustee's sale under a specific provision in the deed of trust that authorizes
the trustee to sell the property to a third party upon any default by the
borrower under the terms of the note or deed of trust. In some states, the
foreclosure also may be accomplished by judicial action in the manner provided
for foreclosure of mortgages. In some states the trustee must record a notice
of default and send a copy to the borrower-trustor and to any person who has
recorded a request for a copy of a notice of default and the notice of sale. In
addition, the trustee must provide notice in some states to any other
individual having an interest of record in the real property, including any
junior lienholders. If the deed of trust is not reinstated within any
applicable cure period, a notice of sale must be posted in a public place and,
in most states, published for a specified period of time in one or more
newspapers. In
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addition, some state laws require that a copy of the notice of sale be posted
on the property and sent to all parties having an interest of record in the
property.
In some states, the borrower-trustor has the right to reinstate the loan at
any time following default until shortly before the trustee's sale. In general,
the borrower, or any other person having a junior encumbrance on the real
estate, may, during a reinstatement period, cure the default by paying the
entire amount in arrears plus the costs and expenses incurred in enforcing the
obligation. Some state laws control the amount of foreclosure expenses and
costs, including attorneys' fees, that may be recovered by a lender.
In the case of foreclosure under either a mortgage or a deed of trust, the
sale by the receiver or other designated officer, or by the trustee, is a
public sale. However, because of the difficulty a potential buyer at the sale
would have in determining the exact status of title and because the physical
condition of the property may have deteriorated during the foreclosure
proceedings, it is not common for a third party to purchase the property at the
foreclosure sale. Rather, the lender generally purchases the property from the
trustee or receiver for an amount equal to the unpaid principal amount of the
note, accrued and unpaid interest and the expenses of foreclosure. Thereafter,
subject to the right of the borrower in some states to remain in possession
during the redemption period, the lender will assume the burdens of ownership,
including obtaining hazard insurance and making such repairs at its own expense
as are necessary to render the property suitable for sale. The lender commonly
will obtain the services of a real estate broker and pay the broker a
commission in connection with the sale of the property. Depending upon market
conditions, the ultimate proceeds of the sale of the property may not equal the
lender's investment in the property.
Rights of Redemption. In some states, after sale under a deed of trust or
foreclosure of a mortgage, the borrower and foreclosed junior lienors are given
a statutory period in which to redeem the property from the foreclosure sale.
In other states, this right of redemption applies only to sale following
judicial foreclosure, and not sale pursuant to a non-judicial power of sale. In
most states where the right of redemption is available, statutory redemption
may occur upon payment of the foreclosure purchase price, accrued interest and
taxes. In some states the right to redeem is an equitable right. The effect of
a right of redemption is to diminish the ability of the lender to sell the
foreclosed property. The exercise of a right of redemption would defeat the
title of any purchaser at a foreclosure sale, or of any purchaser from the
lender subsequent to judicial foreclosure or sale under a deed of trust.
Consequently, the practical effect of the redemption right is to force the
lender to maintain the property and pay the expenses of ownership until the
redemption period has run.
Anti-Deficiency Legislation and Other Limitations on Lenders. Some states
have imposed statutory restrictions that limit the remedies of a beneficiary
under a deed of trust or a mortgagee under a mortgage relating to a single
family residence. In some states, statutes limit the right of the beneficiary
or mortgagee to obtain a deficiency judgment against the borrower following
foreclosure or sale under a deed of trust. A deficiency judgment is a personal
judgment against the borrower equal in most cases to the difference between the
amount due to the lender and the net amount realized upon the foreclosure sale.
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Some state statutes may require the beneficiary or mortgagee to exhaust the
security afforded under a deed of trust or mortgage by foreclosure in an
attempt to satisfy the full debt before bringing a personal action against the
borrower. In other states, the lender has the option of bringing a personal
action against the borrower on the debt without first exhausting the security;
however, in some of these states, the lender, following judgment on the
personal action, may be deemed to have elected a remedy and may be precluded
from exercising remedies on the security. Consequently, the practical effect of
the election requirement, when applicable, is that lenders will usually proceed
first against the security rather than bringing a personal action against the
borrower.
Other statutory provisions may limit any deficiency judgment against the
former borrower following a foreclosure sale to the excess of the outstanding
debt over the fair market value of the property at the time of the sale. The
purpose of these statutes is to prevent a beneficiary or a mortgagee from
obtaining a large deficiency judgment against the former borrower as a result
of low or no bids at the foreclosure sale.
In some states, exceptions to the anti-deficiency statutes are provided for
in certain instances where the value of the lender's security has been impaired
by acts or omissions of the borrower, for example, in the event of waste of the
property.
In addition to anti-deficiency and related legislation, numerous other
federal and state statutory provisions, including the federal bankruptcy laws,
the federal Soldiers' and Sailors' Civil Relief Act of 1940 and state laws
affording relief to debtors, may interfere with or affect the ability of a
secured mortgage lender to realize upon its security. For example, with respect
to a land-and-home contract, in a Chapter 13 proceeding under the federal
Bankruptcy Code, when a court determines that the value of a home is less than
the principal balance of the loan, the court may prevent a lender from
foreclosing on the home, and, as part of the rehabilitation plan, reduce the
amount of the secured indebtedness to the value of the home as it exists at the
time of the proceeding, leaving the lender as a general unsecured creditor for
the difference between that value and the amount of outstanding indebtedness. A
bankruptcy court may grant the debtor a reasonable time to cure a payment
default, and in the case of a mortgage loan not secured by the debtor's
principal residence, also may reduce the monthly payments due under the
mortgage loan, change the rate of interest and alter the mortgage loan
repayment schedule. Some court decisions have applied such relief to claims
secured by the debtor's principal residence.
The Code provides priority to certain tax liens over the lien of the
mortgage or deed of trust. The laws of some states provide priority to certain
tax liens over the lien of the mortgage or deed of trust. Numerous federal and
some state consumer protection laws impose substantive requirements upon
mortgage lenders in connection with the origination, servicing and the
enforcement of mortgage loans. These laws include the federal Truth in Lending
Act, Real Estate Settlement Procedures Act, Equal Credit Opportunity Act, Fair
Credit Billing Act, Fair Credit Reporting Act, and related statutes and
regulations. These federal laws and state laws impose specific statutory
liabilities upon lenders who originate or
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service mortgage loans and who fail to comply with the provisions of the law.
In some cases, this liability may affect assignees of the contracts.
Consumer Protection Laws
The holder-in-due-course rule of the Federal Trade Commission is intended
to defeat the ability of the transferor of a consumer credit contract which is
the seller of goods which gave rise to the transaction and related lenders and
assignees, to transfer the contract free of notice of claims by the debtor. The
effect of this rule is to subject the assignee of the contract, such as the
trust, to all claims and defenses which the obligor could assert against the
seller of the manufactured home. Liability under this rule is limited to
amounts paid under a contract; however, the obligor also may be able to assert
the rule to set off remaining amounts due as a defense against a claim brought
by the trust against the obligor. Numerous other federal and state consumer
protection laws impose requirements applicable to the origination and lending
under the contracts, including the Truth in Lending Act, the Federal Trade
Commission Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the
Equal Credit Opportunity Act, the Fair Debt Collection Practices Act and the
Uniform Consumer Credit Code. In the case of some of these laws, the failure to
comply with their provisions may affect the enforceability of the related
contract.
Transfers of Manufactured Homes; Enforceability of Due-on-Sale Clauses
The contracts, in general, prohibit the sale or transfer of the related
manufactured homes without the consent of the servicer and permit the
acceleration of the maturity of the contracts by the servicer upon any sale or
transfer that is not consented to. We expect that we will permit most transfers
of manufactured homes and not accelerate the maturity of the related contracts.
In some cases, the transfer may be made by a delinquent Obligor in order to
avoid a repossession proceeding on a manufactured home.
In the case of a transfer of a manufactured home after which the servicer
desires to accelerate the maturity of the related contract, the servicer's
ability to do so will depend on the enforceability under state law of the due-
on-sale clause. The Garn-St. Germain Depositary Institutions Act of 1982
preempts, subject to exceptions and conditions, state laws prohibiting
enforcement of due-on-sale clauses applicable to the manufactured homes.
Consequently, in some states the servicer may be prohibited from enforcing a
"due-on-sale" clause on some manufactured homes.
Applicability of Usury Laws
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980, provides that, subject to the following conditions, state usury
limitations shall not apply to any loan which is secured by a first lien on
certain kinds of manufactured housing. The contracts would be covered if they
satisfy certain conditions governing the terms of any prepayments, late charges
and deferral fees and requiring a 30-day notice period before instituting any
action leading to repossession of or foreclosure on to the related unit.
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Title V authorized any state to reimpose limitations on interest rates and
finance charges by adopting before April 1, 1983 a law or constitutional
provision which expressly rejects application of the federal law. Fifteen
states adopted such a law prior to the April 1, 1983 deadline. In addition,
even where Title V was not rejected, any state is authorized by the law to
adopt a provision limiting discount points or other charges on loans covered by
Title V. Green Tree will represent in the applicable Agreement that all of the
contracts comply with applicable usury law.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974 imposes requirements on
employee benefit plans subject to ERISA ("Plans") and on persons who are
fiduciaries with respect to such Plans. Generally, ERISA applies to investments
made by such Plans. Among other requirements, ERISA mandates that the assets of
Plans be held in trust and that the trustee, or other duly authorized
fiduciary, have exclusive authority and discretion to manage and control the
assets of those Plans. ERISA also imposes duties on persons who are fiduciaries
of the Plans. Under ERISA, and subject to exemptions not relevant to this
offering, any person who exercises any authority or control over the management
or disposition of the assets of a Plan is considered to be a fiduciary of the
Plan, subject to the standards of fiduciary conduct under ERISA. These
standards include the requirements that the assets of Plans be invested and
managed for the exclusive benefit of Plan participants and beneficiaries, a
determination by the Plan fiduciary that any such investment is permitted under
the governing Plan instruments and is prudent and appropriate for the Plan in
view of its overall investment policy and the composition and diversification
of its portfolio. Some employee benefit plans, such as governmental plans (as
defined in ERISA Section 3(32)) and certain church plans (as defined in ERISA
Section 3(33)), are not subject to ERISA. Accordingly, assets of these plans
may be invested in certificates without regard to the ERISA considerations
described above and in the paragraphs below, subject to the provisions of
applicable state law. Any plan which is qualified and exempt from taxation
under Sections 401(a) and 501(a) of the IRS code, however, is subject to the
prohibited transaction rules provided in Section 503 of the IRS code.
In addition to the imposition of general fiduciary standards of investment
prudence and diversification, ERISA, and the corresponding provisions of the
IRS code, prohibit a broad range of transactions involving Plan assets and
persons having specified relationships to a Plan ("parties in interest" within
the meaning of ERISA, and "disqualified persons" within the meaning of ERISA).
These transactions are treated as "prohibited transactions" under Sections 406
and 407 of ERISA and excise taxes are imposed upon such persons by Section 4975
of the IRS code. An investment in the certificates by a Plan might constitute
prohibited transactions under the foregoing provisions unless an administrative
exemption applies. In addition, if an investing Plan's assets were deemed to
include an interest in the assets of the contract pool and not merely an
interest in the certificates, transactions occurring in the operation of the
contract pool might constitute prohibited transactions unless an administrative
exemption applies. Exemptions which may be applicable to the acquisition
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and holding of the certificates or to the servicing and operation of the
contract pool are noted in the paragraphs below.
The Department of Labor has issued a regulation (29 C.F.R. Section 2510.3-
101) concerning the definition of what constitutes the assets of a Plan. This
regulation provides that, as a general rule, the underlying assets and
properties of corporations, partnerships, trusts and certain other entities in
which a Plan makes an equity investment will be deemed for purposes of ERISA to
be assets of the investing plan unless certain exceptions apply. However, the
regulation provides that, generally, the assets of a corporation or partnership
in which a Plan invests will not be deemed for purposes of ERISA to be assets
of such Plan if the equity interest acquired by the investing Plan is a
publicly-offered security. A publicly-offered security, as defined under the
regulation, is a security that is widely held, freely transferable, and
registered under the Securities Exchange Act of 1934. The certificates are not
expected to be publicly-offered securities under the terms of this regulation.
Relief from the prohibited transaction rules of Section 406 and 407 of
ERISA (and from the prohibited transaction excise tax provisions of Section
4975 of the IRS code) may be found under the provisions of specific statutory
or administrative exemptive relief authorized under Section 408 of ERISA. In
Prohibited Transaction Exemption 83-1 ("PTE 83-1"), which amended Prohibited
Transaction Exemption 81-7, the DOL exempted from ERISA's prohibited
transaction rules transactions relating to the operation of residential
mortgage pool investment trusts and the purchase, sale and holding of "mortgage
pool pass-through certificates" in the initial issuance of such certificates.
PTE 83-1 permits, subject to certain conditions, transactions which might
otherwise be prohibited between Plans and parties in interest with respect to
those Plans related to the origination, maintenance and termination of mortgage
pools consisting of mortgage loans secured by first or second mortgages or
deeds of trust on single-family residential property, and the acquisition and
holding of certain mortgage pool pass-through certificates representing an
interest in such mortgage pools by Plans. If the general conditions of PTE 83-1
are satisfied, investments by a Plan in certificates that represent interests
in a mortgage pool consisting of single family loans will be exempt from the
prohibitions of Sections 406(a) and 407 of ERISA (relating generally to
transactions with parties in interest who are not fiduciaries) if the Plan
purchases such certificates at no more than fair market value, and will be
exempt from the prohibitions of Section 406(b)(1) and (2) of ERISA (relating
generally to transactions with fiduciaries) if, in addition, the purchase is
approved by an independent fiduciary, no sales commission is paid to the pool
sponsor, the Plan does not purchase more than 25 percent of such certificates,
and at least 50 percent of all such certificates are purchased by persons
independent of the pool sponsor or pool trustee. However, PTE 83-1 does not
provide an exemption for transactions involving subordinate certificates or for
certificates representing an interest in conditional sales contracts and
installment sales or loan agreements secured by manufactured housing like the
contracts.
We cannot assure you that any of the exceptions provided in the regulation
described in the paragraph above, PTE 83-1 or any other administrative
exemption under ERISA, will apply to the purchase of certificates offered under
this prospectus, and, as a result, an
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investing Plan's assets could be considered to include an undivided interest in
the manufactured housing contracts and any other assets held in the contract
pool. If the assets of a contract pool are considered assets of an investing
Plan, Green Tree, the servicer, the trustee and other persons, in providing
services on the contracts, may be considered fiduciaries to the Plan and
subject to the fiduciary responsibility provisions of Title I of ERISA and the
prohibited transaction provisions of Section 4975 of the IRS code for
transactions involving those assets unless a statutory or administrative
exemption applies.
Any Plan fiduciary considering the purchase of a certificate should consult
with its counsel about the potential applicability of ERISA and the IRS code to
the investment. Moreover, each Plan fiduciary should determine whether, under
the general fiduciary standards of investment prudence and diversification, an
investment in the certificates is appropriate for the Plan, taking into account
the overall investment policy of the Plan and the composition of the Plan's
investment portfolio.
PTE 95-60 exempts from ERISA's prohibited transaction rules transactions
engaged in by insurance company general accounts in which an employee benefit
plan has an interest if specified conditions are met. Additional exemptive
relief is provided for plans to engage in transactions with persons who provide
services to insurance company general accounts. PTE 95-60 also permits
transactions relating to the origination and operation of asset pool investment
trusts in which an insurance company general account has an interest as the
result of the acquisition of certificates issued by the trust.
PTE 95-60 will provide an exemption for transactions involving 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 PTE 95-60. The receivables covered by PTE 95-60 include
manufactured housing installment sale contracts and installment loan agreements
such as the manufactured housing contracts. The exemption offered by PTE 95-60
is conditioned upon compliance with the requirements of one of several
"underwriter exemptions," other than compliance with the requirements that the
certificates acquired by the general account not be subordinated and receive a
rating that is in one of the three highest generic rating categories from
either S&P, Moody's, Duff & Phelps Credit Rating Co. or Fitch.
In addition to any exemption that may be available under PTCE 95-60 for the
purchase and holding of the certificates by an insurance company general
account, the Small Business Job Protection Act of 1996 added a new Section
401(c) to ERISA, which provides exemptive relief from the provisions of Part 4
of Title I of ERISA and Section 4975 of the IRS code, including the prohibited
transaction restrictions imposed by ERISA and the related excise taxes imposed
by the IRS code, for transactions involving an insurance company general
account. Under Section 401(c) of ERISA, the DOL published proposed regulations
("Proposed 401(c) Regulations") on December 22, 1997 to provide guidance for
the purpose of determining, in cases where insurance policies supported by an
insurer's general account are issued to or for the benefit of a Plan on or
before December 31, 1998, which
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general account assets constitute Plan assets. Section 401(c) of ERISA
generally provides that, until the date which is 18 months after the Proposed
401(c) Regulations become final, no person will be subject to liability under
Part 4 of Title I of ERISA and Section 4975 of the Code on the basis of a claim
that the assets of an insurance company general account constitute Plan assets,
unless
(1) as otherwise provided by the Secretary of Labor in the Proposed
401(c) Regulations to prevent avoidance of the regulations; or
(2) an action is brought by the Secretary of Labor for breaches of
fiduciary duty which would also constitute a violation of federal or
state criminal law.
Any assets of an insurance company general account which support insurance
policies issued to a Plan after December 31, 1998 or issued to Plans on or
before December 31, 1998 for which the insurance company does not comply with
the Proposed 401(c) Regulations may be treated as Plan assets. In addition,
because Section 401(c) does not relate to insurance company separate accounts,
separate account assets are still treated as Plan assets of any Plan invested
in the separate account. Insurance companies contemplating the investment of
general account assets in the certificates should consult with their legal
counsel about the applicability of PTCE 95-60 and Section 401(c) of ERISA,
including the general account's ability to continue to hold the securities
after the date which is 18 months after the date the Proposed 401(c)
Regulations become final.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General
The following is a general discussion of certain federal income tax
consequences relating to the purchase, ownership, and disposition of the
certificates. The discussion is based upon laws, regulations, rulings, and
decisions now in effect, including Treasury Regulations issued on December 23,
1992, and generally effective for REMICs with startup days on or after November
12, 1991, all of which are subject to change or possibly differing
interpretations. The discussion does not purport to deal with federal income
tax consequences applicable to all categories of investors, some of which may
be subject to special rules. Investors should consult their own tax advisors to
determine the federal, state, local, and any other tax consequences of the
purchase, ownership, and disposition of the certificates.
Many aspects of the federal tax treatment of the purchase, ownership, and
disposition of the certificates will depend upon whether an election is made to
treat the trust or a segregated portion of the trust evidenced by a particular
series or sub-series of certificates as a REMIC within the meaning of Section
860D(a) of the IRS code. The prospectus supplement for each series will
indicate whether or not an election to be treated as a REMIC has been or will
be made with respect thereto. The following discussion deals first with series
for which a REMIC election is made and then with series for which a REMIC
election is not made.
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REMIC Series
For each series of certificates for which a REMIC election is made, counsel
to Green Tree identified in the applicable prospectus supplement will have
advised Green Tree that in its opinion, assuming (1) the making of that
election in accordance with the requirements of the IRS code and (2) ongoing
compliance with the applicable pooling and servicing agreement, at the initial
issuance of the certificates in the series the trust will qualify as a REMIC
and the certificates in that series ("REMIC Certificates") will be treated
either as regular interests in the REMIC within the meaning of Section
860G(a)(1) of the IRS code ("Regular Certificates") or as residual interests in
the REMIC within the meaning of Section 860G(a)(2) of the IRS code ("Residual
Certificates").
Qualification as a REMIC. Qualification as a REMIC involves ongoing
compliance with requirements and the following discussion assumes that these
requirements will be satisfied by the trust so long as there are any REMIC
certificates outstanding. Substantially all of the assets of the REMIC must
consist of qualified mortgages and permitted investments as of the close of the
third month beginning after the day on which the REMIC issues all of its
regular and residual interests (the "startup day") and at all times thereafter.
The term "qualified mortgage" means any obligation, including a participation
or certificate of beneficial ownership in that obligation, which is principally
secured by an interest in real property that is transferred to the REMIC on the
startup day in exchange for regular or residual interests in the REMIC or is
purchased by the REMIC within the three-month period beginning on the startup
day if the purchase is under a fixed price contract in effect on the startup
day. The REMIC regulations provide that a contract is principally secured by an
interest in real property if the fair market value of the real property
securing the contract is at least equal to either (1) 80% of the issue price
(generally, the principal balance) of the contract at the time it was
originated or (2) 80% of the adjusted issue price (the then-outstanding
principal balance, with adjustments) of the contract at the time it is
contributed to a REMIC. The fair market value of the underlying real property
is to be determined after taking into account other liens encumbering that real
property. Alternatively, a contract is principally secured by an interest in
real property if substantially all of the proceeds of the contract were used to
acquire or to improve or protect an interest in real property that, at the
origination date, is the only security for the contract (other than the
personal liability of the obligor). The REMIC regulations provide that
obligations secured by manufactured housing or mobile homes (not including
recreational vehicles, campers or similar vehicles) which are single family
residences under Section 25(e)(10) of the IRS code will qualify as obligations
secured by real property without regard to state law classifications. See the
discussion below under "REMIC Series--Status of Manufactured Housing
Contracts." A qualified mortgage also includes a qualified replacement mortgage
that is used to replace any qualified mortgage within three months of the
startup day or to replace a defective mortgage within two years of the startup
day.
"Permitted investments" consist of:
. temporary investments of cash received under qualified mortgages before
distribution to holders of interests in the REMIC ("cash-flow
investments"),
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. amounts, such as a reserve rund, if any, reasonably required to provide
for full payment of expenses of the REMIC, the principal and interest
due on regular or residual interests in the event of defaults on
qualified mortgages, lower than expected returns on cash-flow
investments, prepayment interest shortfalls or other contingencies
("qualified reserve assets"), and
. property acquired as a result of foreclosure of defaulted qualified
mortgages ("foreclosure property").
A reserve fund will not be qualified if more than 30% of the gross income from
the assets in the reserve fund is derived from the sale or other disposition of
property held for three months or less, unless the sale is necessary to prevent
a default in payment of principal or interest on Regular Certificates. In
accordance with Section 860G(a)(7) of the IRS code, a reserve fund must be
"promptly and appropriately" reduced as payments on contracts are received.
Foreclosure property will be a permitted investment only to the extent that the
property is not held for more than two years.
The IRS code requires that in order to qualify as a REMIC an entity must
make reasonable arrangements designed to ensure that specified entities,
generally including governmental entities or other entities that are exempt
from United States tax, including the tax on unrelated business income
("disqualified organizations"), not hold residual interests in the REMIC.
Consequently, it is expected that in the case of any trust for which a REMIC
election is made the transfer, sale, or other disposition of a Residual
Certificate to a disqualified organization will be prohibited and the ability
of a Residual Certificate to be transferred will be conditioned on the
trustee's receipt of a certificate or other document representing that the
proposed transferee is not a disqualified organization. The transferor of a
Residual Certificate must not, as of the time of the transfer, have actual
knowledge that the representation is false. The IRS code further requires that
reasonable arrangements must be made to enable a REMIC to provide the IRS and
certain other parties, including transferors of residual interests in a REMIC,
with the information needed to compute the tax imposed by Section 860E(e)(1) of
the IRS code if, in spite of the steps taken to prevent disqualified
organizations from holding residual interests, such an organization does, in
fact, acquire a residual interest. See "REMIC Series--Restrictions on Transfer
of Residual Certificates" below.
If the trust fails to comply with one or more of the ongoing requirements
for qualification as a REMIC, the trust will not be treated as a REMIC for the
year during which the failure occurs and thereafter unless the IRS determines,
in its discretion, that the failure was inadvertent (in which case, the IRS may
require any adjustments which it deems appropriate). If the ownership interests
in the assets of the trust consist of multiple classes, failure to treat the
trust fund as a REMIC may cause the trust to be treated as an association
taxable as a corporation. This treatment could result in income of the trust
being subject to corporate tax in the hands of the trust and in a reduced
amount being available for distribution to certificateholders as a result of
the payment of the taxes.
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Status of Manufactured Housing Contracts. The REMIC regulations as well as
a notice issued by the IRS provide that obligations secured by interests in
manufactured housing, which qualify as "single family residences" within the
meaning of Section 25(e)(10) of the IRS code, are to be treated as "qualified
mortgages" for a REMIC. Under Section 25(e)(10) of the IRS code, the term
"single family residence" includes any manufactured home which has a minimum of
400 square feet of living space and a minimum width in excess of 102 inches and
which is of a kind customarily used at a fixed location. Green Tree will
represent and warrant that each of the manufactured homes securing the
contracts which are a part of a trust meets this definition of a "single family
residence." See the discussion above under "REMIC Series--Qualification as a
REMIC."
Two-Tier REMIC Structures. For certain series of certificates, two separate
elections may be made to treat segregated portions of the assets of a single
trust as REMICs for federal income tax purposes (respectively, the "Subsidiary
REMIC" and the "Master REMIC"). Upon the issuance of any such series of
certificates, counsel will have advised Green Tree, as described above, that at
the initial issuance of the certificates, the Subsidiary REMIC and the Master
REMIC will each qualify as a REMIC for federal income tax purposes, and that
the certificates in that a series will be treated either as Regular
Certificates or Residual Certificates of the appropriate REMIC. Only REMIC
Certificates issued by the Master REMIC will be offered under this prospectus.
Solely for the purpose of determining whether the regular certificates will
constitute qualifying real estate or real property assets for certain
categories of financial institutions or real estate investment trusts as
described below, both REMICs in a two-tier REMIC structure will be treated as
one. See the discussion below under "REMIC Series--Taxation of Regular
Interests."
Taxation of Regular Interests. Regular Certificates will be treated as new
debt instruments issued by the REMIC on the startup day. If a Regular
Certificate represents an interest in a REMIC that consists of a specified
portion of the interest payments on the REMIC's qualified mortgages, the stated
principal amount for that Regular Certificate may be zero. Such a specified
portion may consist of a fixed number of basis points, a fixed percentage of
interest or a qualified variable rate on some or all of the qualified
mortgages. Stated interest on a Regular Certificate will be taxable as ordinary
income. Holders of Regular Certificates that would otherwise report income
under a cash method of accounting will be required to report income on these
Regular Certificates under the accrual method. Under temporary treasury
regulations, if a trust, with respect to which a REMIC election is made, is
considered to be a single-class REMIC, a portion of the REMIC's servicing fees,
administrative and other non-interest expenses, including assumption fees and
late payment charges retained by Green Tree, will be allocated as a separate
item to those Regular Certificateholders that are pass-through interest
holders. Generally, a single-class REMIC is defined as a REMIC that would be
treated as a fixed investment trust under applicable law but for its
qualification as a REMIC, or a REMIC that is substantially similar to an
investment trust but is structured with the principal purpose of avoiding this
allocation requirement imposed by the temporary treasury regulations.
Generally, a pass-through interest holder refers to individuals, entities taxed
as individuals, such as certain trusts and estates, and regulated investment
companies. An individual, an estate, or a trust that holds a
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Regular Certificate in the REMIC will be allowed to deduct the foregoing
expenses under Section 212 of the IRS code only to the extent that, in the
aggregate and combined with certain other itemized deductions, they exceed 2%
of the adjusted gross income of the holder. In addition, Section 68 of the IRS
code provides that the amount of itemized deductions (including those provided
for in Section 212 of the IRS code) otherwise allowable for the taxable year
for an individual whose adjusted gross income exceeds a threshold amount
specified in the IRS code ($124,500 in 1998 in the case of a joint return) will
be reduced by the lesser of (1) 3% of the excess of adjusted gross income over
the specified threshold amount or (2) 80% of the amount of itemized deductions
otherwise allowable for such taxable year. As a result of these limitations,
certain holders of Regular Certificates in single-class REMICs may not be
entitled to deduct all or any part of these expenses.
Tax Status of REMIC Certificates. In general, (1) Regular Certificates held
by a thrift institution taxed as a "domestic building and loan association"
within the meaning of Section 7701(a)(19) of the IRS code will constitute "a
regular ... interest in a REMIC" within the meaning of Section
7701(a)(19)(C)(xi) of the IRS code; and (2) Regular Certificates held by a real
estate investment trust will constitute "real estate assets" within the meaning
of Section 856(c)(4)(A) of the IRS code and interest thereon will be considered
"interest on obligations secured by mortgages on real property" within the
meaning of Section 856(c)(3)(B) of the IRS code. If less than 95% of the
average adjusted basis of the assets comprising the REMIC are assets qualifying
under any of the foregoing Sections of the IRS code (including assets described
in Section 7701(a)(19)(C) of the IRS code), then the Regular Certificates will
be qualifying assets only to the extent that the assets comprising the REMIC
are qualifying assets. Section 7701(a)(19)(C)(v) of the IRS code provides that
"loans secured by an interest in real property" includes loans secured by
mobile homes not used on a transient basis. Treasury regulations promulgated
under Section 856 of the IRS code state that local law definitions are not
controlling in determining the meaning of the term "real property" for purposes
of that section, and the IRS has ruled that obligations secured by permanently
installed mobile home units qualify as "real estate assets" under this
provision. Furthermore, interest paid with respect to certificates held by a
real estate investment trust will be considered "interest on obligations
secured by mortgages on real property or on interests in real property" within
the meaning of Section 856(c)(3)(B) of the IRS code to the same extent that the
certificates themselves are treated as real estate assets. Regular Certificates
held by a regulated investment company or a real estate investment trust will
not constitute "Government securities" within the meaning of Sections
851(b)(4)(A)(i) and 856(c)(5)(A) of the IRS code, respectively. In addition,
the REMIC regulations provide that payments on contracts held and reinvested
pending distribution to certificateholders will be considered to be "real
estate assets" within the meaning of Section 856(c)(4)(A) of the IRS code. The
Small Business Job Protection Act of 1996 repealed the application of Section
593(d) of the IRS code to any taxable year beginning after December 31, 1995.
Entities affected by the foregoing provisions of the IRS code that are
considering the purchase of certificates should consult their own tax advisors
regarding these provisions.
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Original Issue Discount. Regular Certificates may be issued with "original
issue discount." Rules governing original issue discount are set forth in
Sections 1271-1273 and 1275 of the IRS code and the Treasury regulations issued
thereunder in January 1994, as amended in June 1996 (the "OID Regulations").
The discussion herein is based in part on the OID Regulations, which generally
apply to debt instruments issued on or after April 4, 1994, but which generally
may be relied upon for debt instruments issued after December 21, 1992.
Moreover, although the rules relating to original issue discount contained in
the IRS code were modified by the Tax Reform Act of 1986 specifically to
address the tax treatment of securities, such as the Regular Certificates, on
which principal is required to be prepaid based on prepayments of the
underlying assets, regulations under that legislation have not yet been
finalized. Certificateholders also should be aware that the OID Regulations do
not address certain issues relevant to prepayable securities such as the
Regular Certificates.
In general, in the hands of the original holder of a Regular Certificate,
original issue discount, if any, is the difference between the "stated
redemption price at maturity" of the Regular Certificate and its "issue price."
The original issue discount with respect to a Regular Certificate will be
considered to be zero if it is less than .25% of the Regular Certificate's
stated redemption price at maturity multiplied by the number of complete years
from the date of issue of the Regular Certificate to its maturity date. The OID
Regulations, however, provide a special de minimis rule to apply to obligations
such as the Regular Certificates that have more than one principal payment or
that have interest payments that are not qualified stated interest as defined
in the OID Regulations, payable before maturity ("installment obligations").
Under the special rule, original issue discount on an installment obligation is
generally considered to be zero if it is less than .25% of the principal amount
of the obligation multiplied by the weighted average maturity of the obligation
as defined in the OID Regulations. Because of the possibility of prepayments,
it is not clear whether or how the de minimis rules will apply to the Regular
Certificates. It is possible that the anticipated rate of prepayments assumed
in pricing the debt instrument (the "Prepayment Assumption") will be required
to be used in determining the weighted average maturity of the Regular
Certificates. In the absence of authority to the contrary, Green Tree expects
to apply the de minimis rule applicable to installment obligations by using the
Prepayment Assumption. The OID Regulations provide a further special de minimis
rule applicable to any Regular Certificates that are self-amortizing
installment obligations, i.e., Regular Certificates that provide for equal
payments composed of principal and qualified stated interest payable
unconditionally at least annually during its entire term, with no significant
additional payment required at maturity. Under this special rule, original
issue discount on a self-amortizing installment obligation is generally
considered to be zero if it is less than .167% of the principal amount of the
obligation multiplied by the number of complete years from the date of issue of
such a Regular Certificate to its maturity date.
Generally, the original holder of a Regular Certificate that includes a de
minimis amount of original issue discount includes that original issue discount
in income as principal payments are made. The amount includable in income with
respect to each principal payment equals a pro rata portion of the entire
amount of de minimis original issue discount
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with respect to that Regular Certificate. Any de minimis amount of original
issue discount includable in income by a holder of a Regular Certificate is
generally treated as a capital gain if the Regular Certificate is a capital
asset in the hands of the holder of the certificate. Pursuant to the OID
Regulations, a holder of a Regular Certificate that uses the accrual method of
tax accounting or that acquired the Regular Certificate on or after April 4,
1994, may, however, elect to include in gross income all interest that accrues
on a Regular Certificate, including any de minimis original issue discount and
market discount, by using the constant yield method described below with
respect to original issue discount.
The stated redemption price at maturity of a Regular Certificate generally
will be equal to the sum of all payments, whether denominated as principal or
interest, to be made with respect thereto other than qualified stated interest.
Pursuant to the OID Regulations, qualified stated interest is stated interest
that is unconditionally payable at least annually at a single fixed rate of
interest (or, under certain circumstances, a variable rate tied to an objective
index) during the entire term of the Regular Certificate, including short
periods. Under the OID Regulations, interest is considered unconditionally
payable only if reasonable legal remedies exist to compel timely payment or the
debt instrument otherwise provides terms and conditions that make the
likelihood of late payment or nonpayment a remote contingency. It is possible
that interest payable on Regular Certificates may be considered not to be
unconditionally payable under the OID Regulations. Until further guidance is
issued, however, the REMIC will treat the interest on Regular Certificates as
unconditionally payable under the OID Regulations. In addition, under the OID
Regulations, certain variable interest rates payable on Regular Certificates,
including rates based upon the weighted average interest rate of a pool of
contracts, might not be treated as qualified stated interest. In this case, the
OID Regulations would treat interest under these rates as contingent interest
which generally must be included in income by the Regular Certificateholder
when the interest becomes fixed, as opposed to when it accrues. Until further
guidance is issued concerning the treatment of the interest payable on Regular
Certificates, the REMIC will treat the interest as being payable at a variable
rate tied to a single objective index of market rates. Prospective investors
should consult their tax advisors regarding the treatment of the interest under
the OID Regulations. In the absence of authority to the contrary and if
otherwise appropriate, Green Tree expects to determine the stated redemption
price at maturity of a Regular Certificate by assuming that the anticipated
rate of prepayment for all contracts will occur in such a manner that the
initial remittance rate for a certificate will not change. Accordingly,
interest at the initial remittance rate will constitute qualified stated
interest payments for purposes of applying the original issue discount
provisions of the Code. In general, the issue price of a Regular Certificate is
the first price at which a substantial amount of the Regular Certificates of
the class are sold for money to the public, excluding bond houses, brokers or
similar persons or organizations acting in the capacity of underwriters,
placement agents or wholesalers. If a portion of the initial offering price of
a Regular Certificate is allocable to interest that has accrued prior to its
date of issue, the issue price of such a Regular Certificate includes that pre-
issuance accrued interest.
If the Regular Certificates are determined to be issued with original issue
discount, a holder of a Regular Certificate must generally include the original
issue discount in ordinary
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gross income for federal income tax purposes as it accrues in advance of the
receipt of any cash attributable to such income. The amount of original issue
discount, if any, required to be included in a Regular Certificateholder's
ordinary gross income for federal income tax purposes in any taxable year will
be computed in accordance with Section 1272(a) of the IRS code and the OID
Regulations. Under this section and the OID Regulations, original issue
discount accrues on a daily basis under a constant yield method that takes into
account the compounding of interest. The amount of original issue discount to
be included in income by a holder of a debt instrument, such as a Regular
Certificate, under which principal payments may be subject to acceleration
because of prepayments of other debt obligations securing such instruments, is
computed by taking into account the Prepayment Assumption.
The amount of original issue discount includable in income by a holder of a
Regular Certificate is the sum of the daily portions of the original issue
discount for each day during the taxable year on which the holder held the
Regular Certificate. The daily portions of original issue discount are
determined by allocating to each day in any accrual period a pro rata portion
of the excess, if any, of the sum of (1) the present value of all remaining
payments to be made on the Regular Certificate as of the close of the accrual
period and (2) the payments during the accrual period of amounts included in
the stated redemption price of the Regular Certificate over the adjusted issue
price of the Regular Certificate at the beginning of the accrual period.
Generally, the accrual period for the Regular Certificates corresponds to the
intervals at which amounts are paid or compounded with respect to such Regular
Certificate, beginning with their date of issuance and ending with the maturity
date. The adjusted issue price of a Regular Certificate at the beginning of any
accrual period is the sum of the issue price and accrued original issue
discount for each prior accrual period reduced by the amount of payments other
than payments of qualified stated interest made during each prior accrual
period. The IRS code requires the present value of the remaining payments to be
determined on the bases of:
. the original yield to maturity, determined on the basis of compounding
at the close of each accrual period and properly adjusted for the
length of the accrual period;
. events, including actual prepayments, which have occurred before the
close of the accrual period; and
. the assumption that the remaining payments will be made in accordance
with the original Prepayment Assumption.
The effect of this method is to increase the portions of original issue
discount that a Regular Certificateholder must include in income to take into
account prepayments with respect to the contracts held by the trust that occur
at a rate that exceeds the Prepayment Assumption and to decrease, but not below
zero for any period, the portions of original issue discount that a Regular
Certificateholder must include in income to take into account prepayments on to
the contracts that occur at a rate that is slower than the Prepayment
Assumption. Although original issue discount will be reported to Regular
Certificateholders based on the Prepayment Assumption, no representation is
made to Regular Certificateholders that the Contracts will be prepaid at that
rate or at any other rate.
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A subsequent purchaser of a Regular Certificate will also be required to
include in the purchaser's ordinary gross income for federal income tax
purposes the original issue discount, if any, accruing with respect to the
Regular Certificate, unless the price paid equals or exceeds the Regular
Certificate's outstanding principal amount. If the price paid exceeds the sum
of the Regular Certificate's issue price plus the aggregate amount of original
issue discount accrued on the Regular Certificate, but does not equal or exceed
the outstanding principal amount of the Regular Certificate, the amount of
original issue discount to be accrued will be reduced in accordance with a
formula listed in Section 1272(a)(7)(B) of the IRS code.
Green Tree believes that the holder of a Regular Certificate determined to
be issued with non-de minimis original issue discount will be required to
include the original issue discount in ordinary gross income for federal income
tax purposes computed in the manner described above. However, the OID
Regulations either do not address or are subject to varying interpretations
regarding several issues concerning the computation of original issue discount
for obligations such as the Regular Certificates.
Variable Rate Regular Certificates. Regular Certificates may bear interest
at a variable rate. Under the OID Regulations, if a variable rate Regular
Certificate provides for qualified stated interest payments computed on the
basis of certain qualified floating rates or objective rates, then any original
issue discount on a Regular Certificate is computed and accrued under the same
methodology that applies to Regular Certificates paying qualified stated
interest at a fixed rate. See the discussion above under "REMIC Series--
Original Issue Discount." Accordingly, if the issue price of such a Regular
Certificate is equal to its stated redemption price at maturity, the Regular
Certificate will not have any original issue discount.
For purposes of applying the original issue discount provisions of the IRS
code, all or a portion of the interest payable on a variable rate Regular
Certificate may not be treated as qualified stated interest in certain
circumstances, including the following:
. if the variable rate of interest is subject to one or more minimum or
maximum rate floors or ceilings which are not fixed throughout the term
of the Regular Certificate and which are reasonably expected as of the
issue date to cause the rate in certain accrual periods to be
significantly higher or lower than the overall expected return on the
Regular Certificate determined without the floor or ceiling;
. if it is reasonably expected that the average value of the variable
rate during the first half of the term of the Regular Certificate will
be either significantly less than or significantly greater than the
average value of the rate during the final half of the term of the
Regular Certificate; or
. if interest is not payable in all circumstances.
In these situations, as well as others, it is unclear under the OID Regulations
whether these interest payments constitute qualified stated interest payments,
or must be treated either as part of a Regular Certificate's stated redemption
price at maturity resulting in original issue
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discount, or represent contingent payments which are recognized as ordinary
gross income for federal income tax purposes only as the interest payments
become fixed in each accrual period.
If a variable rate Regular Certificate is deemed to have been issued with
original issue discount, as described above, the amount of original issue
discount accrues on a daily basis under a constant yield method that takes into
account the compounding of interest; provided, however, that the interest
associated with the Regular Certificate generally is assumed to remain constant
throughout the term of the Regular Certificate at a rate that, in the case of a
qualified floating rate, equals the value of such qualified floating rate as of
the issue date of the Regular Certificate, or, in the case of an objective
rate, at a fixed rate that reflects the yield that is reasonably expected for
the Regular Certificate. A holder of such a Regular Certificate would then
recognize original issue discount during each accrual period which is
calculated based upon such Regular Certificate's assumed yield to maturity,
adjusted to reflect the difference between the assumed and actual interest
rate.
The OID Regulations either do not address or are subject to varying
interpretations on several issues concerning the computation of original issue
discount of the Regular Certificates, including variable rate Regular
Certificates. Additional information regarding the manner of reporting original
issue discount to the IRS and to holders of variable rate Regular Certificates
will be provided in the prospectus supplement relating to the issuance of the
Regular Certificates.
Market Discount. Regular Certificates, whether or not issued with original
issue discount, will be subject to the market discount rules of the IRS code. A
purchaser of a Regular Certificate who purchases the Regular Certificate at a
market discount (i.e., a discount from its original issue price plus any
accrued original issue discount, if any, as described above) will be required
to recognize accrued market discount as ordinary income as payments of
principal are received on such Regular Certificate or upon the sale or exchange
of the Regular Certificate. In general, the holder of a Regular Certificate may
elect to treat market discount as accruing either (1) under a constant yield
method that is similar to the method for the accrual of original issue discount
or (2) in proportion to accruals of original issue discount (or, if there is no
original issue discount, in proportion to accruals of stated interest), in each
case computed taking into account the Prepayment Assumption.
The IRS code provides that the market discount on a Regular Certificate
will be considered to be zero if the amount allocable to the Regular
Certificate is less than 0.25% of the Regular Certificate's stated redemption
price at maturity multiplied by the number of complete years remaining to its
maturity after the holder acquired the obligation. If market discount is
treated as de minimis under this rule, the actual discount would be allocated
among a portion of each scheduled distribution representing the stated
redemption price of the Regular Certificate and that portion of the discount
allocable to such distribution would be reported as income when the
distribution occurs or is due.
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The IRS code further provides that any principal payment on a Regular
Certificate acquired with market discount or any gain on disposition of a
Regular Certificate shall be treated as ordinary income to the extent it does
not exceed the accrued market discount at the time of such payment. The amount
of accrued market discount for purposes of determining the amount of ordinary
income to be recognized with respect to subsequent payments on such a Regular
Certificate is to be reduced by the amount previously treated as ordinary
income.
The IRS code grants authority to the Treasury Department to issue
regulations providing for the computation of accrued market discount on debt
instruments such as the Regular Certificates. Until those regulations are
issued, rules described in the legislative history for these provisions of the
IRS code will apply. Under those rules, as described above, the holder of a
Regular Certificate with market discount may elect to accrue market discount
either on the basis of a constant interest rate or according to certain other
methods. Certificateholders who acquire a Regular Certificate at a market
discount should consult their tax advisors concerning various methods which are
available for accruing that market discount.
In general, limitations imposed by the IRS code that are intended to match
deductions with the taxation of income may require a holder of a Regular
Certificate having market discount to defer a portion of the interest
deductions attributable to any indebtedness incurred or continued to purchase
or carry such Regular Certificate. Alternatively, a holder of a Regular
Certificate may elect to include market discount in gross income as it accrues
and, if he or she makes such an election, is exempt from this rule. Any
election made on a Regular Certificate issued with market discount will apply
to all Regular Certificates acquired by the holder on or after the first day of
the first taxable year to which such election applies and may be revoked only
with the consent of the IRS. The adjusted basis of a Regular Certificate
subject to such election will be increased to reflect market discount included
in gross income, thereby reducing any gain or increasing any loss on a sale or
taxable disposition.
Amortizable Premium. A holder of a Regular Certificate who holds the
Regular Certificate as a capital asset and who purchased the Regular
Certificate at a cost greater than its outstanding principal amount will be
considered to have purchased the Regular Certificate at a premium. In general,
the Regular Certificateholder may elect to deduct the amortizable bond premium
as it accrues under a constant yield method. A Regular Certificateholder's tax
basis in the Regular Certificate will be reduced by the amount of the
amortizable bond premium deducted. In addition, it appears that the same
methods which apply to the accrual of market discount on installment
obligations are intended to apply in computing the amortizable bond premium
deduction with respect to a Regular Certificate. It is not clear, however, (1)
whether the alternatives to the constant-yield method which may be available
for the accrual of market discount are available for amortizing premium on
Regular Certificates and (2) whether the Prepayment Assumption should be taken
into account in determining the term of a Regular Certificate for this purpose.
Certificateholders who pay a
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premium for a Regular Certificate should consult their tax advisors concerning
such an election and rules for determining the method for amortizing bond
premium.
Gain or Loss on Disposition. If a Regular Certificate is sold, the seller
will recognize gain or loss equal to the difference between the amount realized
from the sale and the seller's adjusted basis in such Regular Certificate. The
adjusted basis generally will equal the cost of such Regular Certificate to the
seller, increased by any original issue discount included in the seller's
ordinary gross income with respect to such Regular Certificate and reduced, but
not below zero, by any payments on the Regular Certificate previously received
or accrued by the seller, other than qualified stated interest payments, and
any amortizable premium. Similarly, a Regular Certificateholder who receives a
principal payment with respect to a Regular Certificate will recognize gain or
loss equal to the difference between the amount of the payment and the holder's
allocable portion of his or her adjusted basis in the Regular Certificate.
Except as discussed below or with respect to market discount, any gain or loss
recognized upon a sale, exchange, retirement, or other disposition of a Regular
Certificate will be capital gain if the Regular Certificate is held as a
capital asset.
Any capital gain recognized upon a sale, exchange or other disposition of a
Regular Certificate will be long-term capital gain if the seller's holding
period is more than one year and will be short-term capital gain if the
seller's holding period is one year or less. The deductibility of capital
losses is subject to certain limitations.
Gain from the disposition of a Regular Certificate that might otherwise be
capital gain, including any gain attributable to de minimis original issue
discount, will be treated as ordinary income to the extent of the excess, if
any, of (1) the amount that would have been includable in the holder's income
if the yield on the Regular Certificate had equaled 110% of the applicable
federal rate determined as of the beginning of the holder's holding period,
over (2) the amount of ordinary income actually recognized by the holder with
respect to the Regular Certificate.
If Green Tree is determined to have intended on the date of issue of the
Regular Certificates to call all or any portion of the Regular Certificates
before their stated maturity within the meaning of Section 1271(a)(2)(A) of the
IRS code, any gain realized upon a sale, exchange, retirement, or other
disposition of a Regular Certificate would be considered ordinary income to the
extent it does not exceed the unrecognized portion of the original issue
discount, if any, with respect to the Regular Certificate. The OID Regulations
provide that the intention to call rule will not be applied to mortgage-backed
securities such as the Regular Certificates. In addition, under the OID
Regulations, a mandatory sinking fund or call option is not evidence of an
intention to call.
Taxation of Residual Interests. Generally, the "daily portions" of the
taxable income or net loss of a REMIC will be includable as ordinary income or
loss in determining the taxable income of holders of Residual Certificates
("Residual Holders"), and will not be taxed separately to the REMIC. The daily
portions are determined by allocating the REMIC's taxable income or net loss
for each calendar quarter ratably to each day in the
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quarter and by allocating such daily portion among the Residual Holders in
proportion to their respective holdings of Residual Certificates in the REMIC
on that day.
REMIC taxable income is generally determined in the same manner as the
taxable income of an individual using the accrual method of accounting except
that:
. the limitation on deductibility of investment interest expense and
expenses for the production of income do not apply,
. all bad loans will be deductible as business bad debts, and
. the limitation on the deductibility of interest and expenses related to
tax-exempt income will apply.
REMIC taxable income generally means a REMIC's gross income, including
interest, original issue discount income, and market discount income, if any,
on the contracts, plus income on reinvestment of cash flows and reserve assets,
minus deductions, including interest and original issue discount expense on the
Regular Certificates, servicing fees on the contracts, other administrative
expenses of a REMIC, and amortization of premium, if any, with respect to the
contracts.
The taxable income recognized by a Residual Holder in any taxable year will
be affected by, among other factors, the relationship between the timing of
interest, original issue discount or market discount income, or amortization of
premium with respect to the contracts, on the one hand, and the timing of
deductions for interest, including original issue discount, on the Regular
Certificates, on the other hand. In the event that an interest in the contracts
is acquired by a REMIC at a discount, and one or more of such contracts is
prepaid, the Residual Holder may recognize taxable income without being
entitled to receive a corresponding cash distribution because:
. the prepayment may be used in whole or in part to make distributions on
Regular Certificates, and
. the discount on the contracts which is includable in a REMIC's income
may exceed its deduction with respect to the distributions on those
Regular Certificates.
When there is more than one class of Regular Certificates that receive payments
sequentially (i.e., a fast-pay, slow-pay structure), this mismatching of income
and deductions is particularly likely to occur in the early years following
issuance of the Regular Certificates, when distributions are being made on
earlier classes of Regular Certificates to the extent that the classes are not
issued with substantial discount. If taxable income attributable to the
mismatching is realized, in general, losses would be allowed in later years as
distributions on the later classes of Regular Certificates are made. Taxable
income may also be greater in earlier years than in later years because
interest expense deductions, expressed as a percentage of the outstanding
principal amount of Regular Certificates, may increase over time as
distributions are made on the lower yielding classes of Regular Certificates,
whereas interest income on any given contract will remain constant over time as
a percentage of the outstanding principal amount of that loan, assuming it
bears interest at a fixed rate. Consequently, Residual Holders must have
sufficient other sources of cash to pay any
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federal, state, or local income taxes due as a result of this mismatching, or
the holders must have unrelated deductions against which to offset this income,
subject to the discussion of "excess inclusions" below under "REMIC Series--
Limitations on Offset or Exemption of REMIC Income." The mismatching of income
and deductions described in this paragraph, if present with respect to a series
of certificates, may have a significant adverse effect upon the Residual
Holder's after-tax rate of return.
The amount of any net loss of a REMIC that may be taken into account by the
Residual Holder is limited to the adjusted basis of the Residual Certificate as
of the close of the quarter, or time of disposition of the Residual Certificate
if earlier, determined without taking into account the net loss for the
quarter. The initial adjusted basis of a purchaser of a Residual Certificate is
the amount paid for such Residual Certificate. This adjusted basis will be
increased by the amount of taxable income of the REMIC reportable by the
Residual Holder and decreased by the amount of loss of the REMIC reportable by
the Residual Holder. A cash distribution from the REMIC also will reduce such
adjusted basis, but not below zero. Any loss that is disallowed on account of
this limitation may be carried over indefinitely by the Residual Holder for
whom the loss was disallowed and may be used by the Residual Holder only to
offset any income generated by the same REMIC.
If a Residual Certificate has a negative value, it is not clear whether its
issue price would be considered to be zero or such negative amount for purposes
of determining the REMIC's basis in its assets. The REMIC Regulations imply
that residual interests cannot have a negative basis or a negative issue price.
However, the preamble to the REMIC Regulations indicates that, while existing
tax rules do not accommodate these concepts, the IRS is considering the tax
treatment of these types of residual interests, including the proper tax
treatment of a payment made by the transferor of the residual interest to
induce the transferee to acquire that interest. Absent regulations or
administrative guidance to the contrary, Green Tree does not intend to treat a
class of Residual Certificates as having a value of less than zero for purposes
of determining the basis of the related REMIC in its assets.
Further, to the extent that the initial adjusted basis of a Residual
Holder, other than an original holder in the Residual Certificate is greater
than the corresponding portion of the REMIC's basis in the contracts, the
Residual Holder will not recover a portion of such basis until termination of
the REMIC unless Treasury Regulations yet to be issued provide for periodic
adjustments to the REMIC income otherwise reportable by such holder.
Treatment of Certain Items of REMIC Income and Expense. Generally, a
REMIC's deductions for original issue discount will be determined in the same
manner as original issue discount income on Regular Certificates as described
above under "REMIC Series--Original Issue Discount" and "--Variable Rate
Regular Certificates," without regard to the de minimis rule described therein.
The REMIC will have market discount income in respect of the contracts if,
in general, the basis of the REMIC in the contracts is exceeded by their unpaid
principal balances. The
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REMIC's basis in the contracts is generally the fair market value of the
contracts immediately after their transfer to the REMIC, which may equal a
proportionate part of the aggregate fair market value of the REMIC
Certificates. In respect of the contracts that have market discount to which
IRS code Section 1276 applies, the accrued portion of the market discount would
be recognized currently as an item of ordinary income. Market discount income
generally should accrue in the manner described above under "REMIC Series--
Market Discount."
Generally, if the basis of a REMIC in the contracts exceeds the unpaid
principal balances thereof, the REMIC will be considered to have acquired such
contracts at a premium equal to the amount of such excess. As stated above, the
REMIC's basis in the contracts is the fair market value of the contracts
immediately after the transfer thereof to the REMIC. Generally, a person that
holds a contract as a capital asset may elect to amortize premium on the
contracts under a constant interest method. See the discussion under "REMIC
Series--Amortizable Premium."
Limitations on Offset or Exemption of REMIC Income. If the aggregate value
of the Residual Certificates relative to the aggregate value of the Regular
Certificates and Residual Certificates is considered to be "significant," as
described below, then a portion but not all of the REMIC taxable income
includable in determining the federal income tax liability of a Residual Holder
will be subject to special treatment. That portion, referred to as the "excess
inclusion," is equal to the excess of REMIC taxable income for the calendar
quarter allocable to a Residual Certificate over the daily accruals for such
quarterly period of (1) 120% of the long-term applicable federal rate that
would have applied to the Residual Certificate if it were a debt instrument on
the startup day under Section 1274(d) of the IRS code, multiplied by (2) the
adjusted issue price of such Residual Certificate at the beginning of such
quarterly period. For this purpose, the adjusted issue price of a Residual
Certificate at the beginning of a quarter is the issue price of the Residual
Certificate, plus the amount of such daily accruals of REMIC income described
in this paragraph for all prior quarters, decreased by any distributions made
with respect to such Residual Certificate before the beginning of the quarterly
period. The value of the Residual Certificates would be considered significant
in cases where the aggregate issue price of the Residual Certificates is at
least 2% of the aggregate issue price of the Regular Certificates and Residual
Certificates, and the anticipated weighted average life of the Residual
Certificates is at least 20% of the anticipated weighted average life of the
REMIC.
The portion of a Residual Holder's REMIC taxable income consisting of the
excess inclusions generally may not be offset by other deductions on the
Residual Holder's tax return, including net operating loss carry forwards.
Further, if the Residual Holder is an organization subject to the tax on
unrelated business income imposed by Section 511 of the IRS code, the Residual
Holder's excess inclusions will be treated as unrelated business taxable income
of such Residual Holder for purposes of Section 511. Finally, if a real estate
investment trust or regulated investment company owns a Residual Certificate, a
portion (allocated under Treasury Regulations yet to be issued) of dividends
paid by the real estate investment trust or regulated investment company could
not be offset by net operating losses
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of its shareholders, would constitute unrelated business taxable income for
tax-exempt shareholders, and would be ineligible for reduction of withholding
to certain persons who are not U.S. persons.
The Small Business Job Protection Act of 1996 has eliminated the special
rule permitting Section 593 institutions ("thrift institutions") to use net
operating losses and other allowable deductions to offset their excess
inclusion income from REMIC residual certificates that have significant value
within the meaning of the REMIC Regulations, effective for taxable years
beginning after December 31, 1995, except with respect to residual certificates
continuously held by a thrift institution since November 1, 1995.
In addition, the Small Business Job Protection Act of 1996 provides three
rules for determining the effect of excess inclusions on the alternative
minimum taxable income of a residual holder. First, alternative minimum taxable
income for such residual holder is determined without regard to the special
rule that taxable income cannot be less than excess inclusions. Second, a
residual holder's alternative minimum taxable income for a tax year cannot be
less than the excess inclusions for the year. Third, the amount of any
alternative minimum tax net operating loss deductions must be computed without
regard to any excess inclusions. These rules are effective for tax years
beginning after December 31, 1986, unless a residual holder elects to have such
rules apply only to tax years beginning after August 20, 1996.
Restrictions on Transfer of Residual Certificates. As described above under
"REMIC Series--Qualification as a REMIC," an interest in a Residual Certificate
may not be transferred to a Disqualified Organization. If any legal or
beneficial interest in a Residual Certificate is, nonetheless, transferred to a
Disqualified Organization, a tax would be imposed in an amount equal to the
product of (1) the present value of the total anticipated excess inclusions
with respect to such Residual Certificate for periods after the transfer, and
(2) the highest marginal federal income tax rate applicable to corporations.
The anticipated excess inclusions are based on actual prepayment experience to
the date of the transfer and projected payments based on the Prepayment
Assumption. The present value rate equals the applicable federal rate under
Section 1274(d) of the IRS code as of the date of the transfer for a term
ending on the close of the last quarter in which excess inclusions are expected
to accrue. Such rate is applied to the anticipated excess inclusions from the
end of the remaining calendar quarters in which they arise to the date of the
transfer. Such a tax generally would be imposed on the transferor of the
Residual Certificate, except that where such transfer is through an agent
(including a broker, nominee, or other middleman) for a Disqualified
Organization, the tax would instead be imposed on such agent. However, a
transferor of a Residual Certificate would in no event be liable for such tax
with respect to a transfer if the transferee furnishes to the transferor an
affidavit, under penalties of perjury, that the transferee is not a
Disqualified Organization and, as of the time of the transfer, the transferor
does not have actual knowledge that such affidavit is false. The tax also may
be waived by the Treasury Department if the Disqualified Organization promptly
disposes of the residual interest and the transferor pays such amount of tax as
the Treasury Department
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may require (presumably, a corporate tax on the excess inclusion for the period
the residual interest is actually held by the Disqualified Organization).
In addition, if a "Pass-Through Entity," as defined in the next paragraph,
below has excess inclusion income with respect to a Residual Certificate during
a taxable year and a Disqualified Organization is the record holder of an
equity interest in such entity, then a tax is imposed on such entity equal to
the product of (1) the amount of excess inclusions on the Residual Certificate
that are allocable to the interest in the Pass-Through Entity during the period
such interest is held by the Disqualified Organization, and (2) the highest
marginal federal income tax rate imposed on corporations. This tax would be
deductible from the ordinary gross income of the Pass-Through Entity for the
taxable year. The Pass-Through Entity would not be liable for the tax if it has
received an affidavit from the record holder that it is not a Disqualified
Organization and, during the period the person is the record holder of the
Residual Certificate, the Pass-Through Entity does not have actual knowledge
that the affidavit is false. For taxable years beginning after December 31
1997, notwithstanding the preceding sentences, in the case of a REMIC Residual
Certificate held by an "electing large partnership," all interests in the
partnership shall be treated as held by disqualified organizations, without
regard to whether the recordholders of the partnership furnish statements
described in the preceding sentence, and the amount that is subject to tax is
excluded from the gross income of the partnership allocated to the partners, in
lieu of allocating to the partners a deduction for the tax paid by the
partnership.
For these purposes, a "Pass-Through Entity" means any regulated investment
company, real estate investment trust, common trust, partnership, trust or
estate and certain corporations operating on a cooperative basis. Except as may
be provided in Treasury Regulations, any person holding an interest in a Pass-
Through Entity as a nominee for another will, with respect to such interest, be
treated as a Pass-Through Entity.
Noneconomic Residual Interests. The REMIC Regulations would disregard
certain transfers of Residual Certificates, in which case the transferor would
continue to be treated as the owner of the Residual Certificates and thus would
continue to be subject to tax on its allocable portion of the net income of the
REMIC. Under the REMIC Regulations, a transfer of a "noneconomic residual
interest" (as defined below) to a Residual Holder is disregarded for all
federal income tax purposes if a significant purpose of the transfer is to
enable the transferor to impede the assessment or collection of tax. A residual
interest in a REMIC, including a residual interest with a positive value at
issuance, is a "noneconomic residual interest" unless, at the time of transfer,
(1) the present value of the expected future distributions on the residual
interest at least equals the product of the present value of the anticipated
excess inclusions and the highest corporate income tax rate in effect for the
year in which the transfer occurs, and (2) the transferor reasonably expects
that the transferee will receive distributions from the REMIC at or after the
time at which taxes accrue on the anticipated excess inclusions in an amount
sufficient to satisfy the accrued taxes. The anticipated excess inclusions and
the present value rate are determined in the same manner as set forth above.
The REMIC Regulations explain that a significant purpose to impede the
assessment or collection of tax exists if the transferor, at the time of the
transfer, either knew
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or should have known that the transferee would be unwilling or unable to pay
taxes due on its share of the taxable income of the REMIC. A safe harbor is
provided if:
. the transferor conducted, at the time of the transfer, a reasonable
investigation of the financial condition of the transferee and found
that the transferee historically had paid its debts as they came due
and found no significant evidence to indicate that the transferee would
not continue to pay its debts as they came due in the future, and
. the transferee represents to the transferor that it understands that,
as the holder of a non-economic residual interest, the transferee may
incur tax liabilities in excess of any cash flows generated by the
interest and that the transferee intends to pay taxes associated with
holding the residual interest as they become due.
The pooling and servicing agreement with respect to each series of REMIC
Certificates will require the transferee of a Residual Certificate to certify
to the statements in the second clause of the preceding sentence as part of the
affidavit described above under "Restrictions on Transfer of Residual
Certificates."
Sale or Exchange of a Residual Certificate. Upon the sale or exchange of a
Residual Certificate, the Residual Holder will recognize gain or loss equal to
the excess, if any, of the amount realized over the adjusted basis as described
above of the Residual Holder in the Residual Certificate at the time of the
sale or exchange. In addition to reporting the taxable income of the REMIC, a
Residual Holder will have taxable income to the extent that any cash
distribution to him from the REMIC exceeds such adjusted basis on that
distribution date. This income will be treated as gain from the sale or
exchange of the Residual Certificate. It is possible that the termination of
the REMIC may be treated as a sale or exchange of a Residual Holder's Residual
Certificate, in which case, if the Residual Holder has an adjusted basis in his
Residual Certificate remaining when his interest in the REMIC terminates, and
if he holds such Residual Certificate as a capital asset, then he will
recognize a capital loss at that time in the amount of such remaining adjusted
basis.
The Conference Committee Report to the Tax Reform Act of 1986 provides
that, except as provided in Treasury Regulations, the wash sale rules of IRS
code Section 1091 will apply to dispositions of Residual Certificates where the
seller of the Residual Certificate, during the period beginning six months
before the sale or disposition of the Residual Certificate and ending six
months after the sale or disposition, acquires (or enters into any other
transaction that results in the application of IRS code Section 1091) any
residual interest in any REMIC or any interest in a taxable mortgage pool, such
as a non-REMIC owner trust, that is economically comparable to a Residual
Certificate.
Mark-to-Market of Residual Certificates. Prospective purchasers of a
Residual Certificate should be aware that the IRS recently released final
regulations (the "Mark-to-Market Regulations") which provide that a Residual
Certificate acquired after January 3, 1995 cannot be marked-to-market. The
Mark-to-Market Regulations changed the temporary regulations which allowed a
Residual Certificate to be marked-to-market provided that it was
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not a "negative value" residual interest and did not have the same economic
effect as a "negative value" residual interest.
Certain Other Taxes on the REMIC. The REMIC provisions of the IRS code
impose a 100% tax on any net income derived by a REMIC from certain prohibited
transactions. These transactions are:
. any disposition of a qualified mortgage, other than pursuant to the
substitution of a qualified replacement mortgage for a qualified
mortgage (or the repurchase in lieu of substitution of a defective
obligation), a disposition incident to the foreclosure, default, or
imminent default of a mortgage, the bankruptcy or insolvency of the
REMIC, or a qualified liquidation of the REMIC;
. the receipt of income from assets other than qualified mortgages and
permitted investments;
. the receipt of compensation for services; and
. the receipt of gain from the dispositions of cash flow investments.
The REMIC regulations provide that the modification of the terms of a contract
occasioned by default or a reasonably foreseeable default of the contract, the
assumption of the contract, the waiver of a due-on-sale clause or the
conversion of an interest rate by an obligor pursuant to the terms of a
convertible adjustable-rate contract will not be treated as a disposition of
the contract. In the event that a REMIC holds adjustable rate contracts which
are convertible at the option of the obligor into fixed-rate, fully amortizing,
level payment contracts, a sale of the contracts by the REMIC pursuant to a
purchase agreement or other contract with Green Tree or other party, if and
when the obligor elects to so convert the terms of the contract, is not
expected to result in a prohibited transaction for the REMIC. The IRS code also
imposes a 100% tax on contributions to a REMIC made after the startup day,
unless such contributions are payments made to facilitate a cleanup call or a
qualified liquidation of the REMIC, payments in the nature of a guaranty,
contributions during the three-month period beginning on the startup day or
contributions to a qualified reserve fund of the REMIC by a holder of a
residual interest in the REMIC. The IRS code also imposes a tax on a REMIC at
the highest corporate rate on certain net income from foreclosure property that
the REMIC derives from the management, sale, or disposition of any real
property, or any personal property incident thereto, acquired by the REMIC in
connection with the default or imminent default of a loan. Generally, it is not
anticipated that a REMIC will generate a significant amount of such income.
Liquidation of the REMIC. A REMIC may liquidate without the imposition of
entity-level tax only in a "qualified liquidation." A liquidation is considered
qualified if a REMIC adopts a plan of complete liquidation, which may be
accomplished by designating in the REMIC's final tax return a date on which
such adoption is deemed to occur and sells all of its assets (other than cash)
within the ninety-day period beginning on the date of the adoption of the plan
of liquidation, provided that it distributes to holders of Regular or
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Residual Certificates, on or before the last day of the ninety-day liquidation
period, all the proceeds of the liquidation (including all cash), less amounts
retained to meet claims.
Taxation of Certain Foreign Investors. For purposes of this discussion, a
"Foreign Holder" is a certificateholder who holds a Regular Certificate and who
is not:
(1) a citizen or resident of the United States;
(2) a corporation, partnership, or other entity organized in or under the
laws of the United States or a political subdivision (except, in the
case of a partnership, to the extent provided in regulations);
(3) an estate the income of which is includible in gross income for United
States tax purposes regardless of its source; or
(4) a trust if:
. a court within the United States is able to exercise primary
supervision over administration of the trust; and
. one or more United States persons have authority to control all
substantial decisions of the trust.
To the extent prescribed in regulations by the Secretary of the Treasury, which
regulations have not yet been issued, a trust which was in existence on August
20, 1996 (other than a trust treated as owned by the grantor under Subpart E of
Part I of Subchapter J of Chapter 1 of the IRS code), and which was treated as
a United States person on August 19, 1996, may elect to continue to be treated
as a United States person notwithstanding the previous sentence. Unless the
interest on a Regular Certificate is effectively connected with the conduct by
the Foreign Holder of a trade or business within the United States, the Foreign
Holder is not subject to federal income or withholding tax on interest (or
original issue discount, if any) on a Regular Certificate (subject to possible
backup withholding of tax, discussed below), provided the Foreign Holder is not
a controlled foreign corporation related to Green Tree and does not own
actually or constructively 10% or more of the voting stock of Green Tree. To
qualify for this tax exemption, the Foreign Holder will be required to provide
periodically a statement signed under penalties of perjury certifying that the
Foreign Holder meets the requirements for treatment as a Foreign Holder and
providing the Foreign Holder's name and address. The statement, which may be
made on a Form W-8 or substantially similar substitute form, generally must be
provided in the year a payment occurs or in either of the two preceding years.
The statement must be provided, either directly or through clearing
organization or financial institution intermediaries, to the person that
otherwise would withhold tax. This exemption may not apply to a Foreign Holder
that owns both Regular Certificates and Residual Certificates. If the interest
on a Regular Certificate is effectively connected with the conduct by a Foreign
Holder of a trade or business within the United States, then the Foreign Holder
will be subject to tax at regular graduated rates. Foreign Holders should
consult their own tax advisors regarding the specific tax consequences of their
owning a Regular Certificate.
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Any gain recognized by a Foreign Holder upon a sale, retirement or other
taxable disposition of a Regular Certificate generally will not be subject to
United States federal income tax unless either:
(1) the Foreign Holder is a nonresident alien individual who holds the
Regular Certificate as a capital asset and who is present in the
United States for 183 days or more in the taxable year of the
disposition and either the gain is attributable to an office or other
fixed place of business maintained in the U.S. by the individual or
the individual has a tax home in the United States; or
(2) the gain is effectively connected with the conduct by the Foreign
Holder of a trade or business within the United States.
A Regular Certificate will not be includible in the estate of a Foreign
Holder who does not own actually or constructively 10% or more of the voting
stock of Green Tree.
Backup Withholding. Under certain circumstances, a REMIC certificateholder
may be subject to backup withholding at a 31% rate. Backup withholding may
apply to a REMIC certificateholder who is a United States person if the holder,
among other circumstances, fails to furnish his social security number or other
taxpayer identification number to the trustee. Backup withholding may apply,
under certain circumstances, to a REMIC certificateholder who is a foreign
person if the REMIC certificateholder fails to provide the trustee or the REMIC
certificateholder's securities broker with the statement necessary to establish
the exemption from federal income and withholding tax on interest on the REMIC
certificate. Backup withholding, however, does not apply to payments on a
certificate made to certain exempt recipients, such as corporations and tax-
exempt organizations, and to certain foreign persons. REMIC certificateholders
should consult their tax advisors for additional information concerning the
potential application of backup withholding to payments received by them with
respect to a certificate.
On October 6, 1997, the Treasury Department issued new regulations which
make certain modifications to the withholding, backup withholding and
information reporting rules described above. The new regulations attempt to
unify certification requirements and modify reliance standards, and will
generally be effective for payments made after December 31, 1999, subject to
certain transition rules. You are urged to consult your own tax advisors
regarding the new regulations.
Reporting Requirements and Tax Administration. We will report annually to
the IRS, holders of record of the Regular Certificates that are not excepted
from the reporting requirements and, to the extent required by the IRS code,
other interested parties, information with respect to the interest paid or
accrued on the Regular Certificates, original issue discount, if any, accruing
on the Regular Certificates and information necessary to compute the accrual of
any market discount or the amortization of any premium on the Regular
Certificates.
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The Treasury Department has issued final regulations concerning certain
aspects of REMIC tax administration. Under those regulations, a Residual
Certificateholder must be designated as the REMICs "tax matters person." The
tax matters person, generally, has responsibility for overseeing and providing
notice to the other Residual Certificateholders of certain administrative and
judicial proceedings regarding the REMIC's tax affairs. Unless we indicate
otherwise in the related prospectus supplement, we will be designated as tax
matters person for each REMIC, and in conjunction with the trustee will act as
the agent of the Residual Certificateholders in the preparation and filing of
the REMIC's federal and state income tax and other information returns.
Non-REMIC Series
Tax Status of the Trust. In the case of a trust evidenced by a series or
sub-series of certificates, or a segregated portion of the trust, for which a
REMIC election is not made ("Non-REMIC certificates"), counsel will have
advised us that, in their opinion, each contract pool and the arrangement to be
administered by us under which the trustee will hold and we will be obligated
to service the contracts and under which Non-REMIC certificates will be issued
to Non-REMIC certificateholders will not be classified as an association
taxable as a corporation or a taxable mortgage pool, within the meaning of IRS
code Section 7701(i), but rather will be classified as a grantor trust under
Subpart E, Part I of Subchapter J of Chapter 1 of the IRS code. Each Non-REMIC
certificateholder will be treated as the owner of a pro rata undivided interest
in the ordinary income and corpus portions of the trust attributable to the
contract pool in which its certificate evidences an ownership interest and will
be considered the equitable owner of a pro rata undivided interest in each of
the contracts included therein.
Tax Status of Non-REMIC Certificates. In general:
. certificates held by a "domestic building and loan association" within
the meaning of Section 7701(a)(19) of the IRS code may be considered to
represent "qualifying real property loans" within the meaning of
Section 7701(a)(19)(C)(v) of the IRS code; and
. certificates held by a real estate investment trust may constitute
"real estate assets" within the meaning of Section 856(c)(4)(A) of the
IRS code and interest thereon may be considered "interest on
obligations secured by mortgages on real property" within the meaning
of Section 856(c)(3)(B) of the IRS code.
See the discussions of the IRS code provisions above under "REMIC Series Tax
Status of REMIC Certificates." Investors should review the related prospectus
supplement for a discussion of the treatment of Non-REMIC certificates and
contracts under these IRS code sections and should, in addition, consult with
their own tax advisors with respect to these matters.
Tax Treatment of Non-REMIC Certificates. Non-REMIC certificateholders will
be required to report on their federal income tax returns, and in a manner
consistent with their
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respective methods of accounting, their pro rata share of the entire income
arising from the contracts comprising such contract pool, including interest,
original issue discount, if any, prepayment fees, assumption fees, and late
payment charges we receive, and any gain upon disposition of such contracts.
For purposes of this discussion, the term "disposition," when used with respect
to the contracts, includes scheduled or prepaid collections with respect to the
contracts, as well as the sale or exchange of a Non-REMIC certificate. Non-
REMIC certificateholders will be entitled under Section 162 or 212 of the IRS
code to deduct their pro rata share of related servicing fees, administrative
and other non-interest expenses, including assumption fees and late payment
charges we retain. An individual, an estate, or a trust that holds a Non-REMIC
certificate either directly or through a pass-through entity will be allowed to
deduct such expenses under Section 212 of the IRS code only to the extent that,
in the aggregate and combined with other itemized deductions, they exceed 2% of
the adjusted gross income of the holder. In addition, Section 68 of the IRS
code provides that the amount of itemized deductions (including those provided
for in Section 212 of the IRS code) otherwise allowable for the taxable year
for an individual whose adjusted gross income exceeds a threshold amount
specified in the IRS code ($126,600 in 1999 in the case of a joint return) will
be reduced by the lesser of (1) 3% of the excess of adjusted gross income over
the specified threshold amount or (2) 80% of the amount of itemized deductions
otherwise allowable for such taxable year. To the extent that a Non-REMIC
certificateholder is not permitted to deduct servicing fees allocable to a Non-
REMIC certificate, the taxable income of the Non-REMIC certificateholder
attributable to that Non-REMIC certificate will exceed the net cash
distributions related to such income. Non-REMIC certificateholders may deduct
any loss on disposition of the contracts to the extent permitted under the IRS
code.
Under current IRS interpretations of applicable treasury regulations we
would be able to sell or otherwise dispose of any subordinated Non-REMIC
certificates. Accordingly, we expect to offer subordinated Non-REMIC
certificates for sale to investors. In general, such subordination should not
affect the federal income tax treatment of either the subordinated or senior
certificates. Holders of subordinated classes of certificates should be able to
recognize any losses allocated to such class when and if losses are realized.
To the extent that any of the contracts comprising a contract pool were
originated on or after March 2, 1984 and under circumstances giving rise to
original issue discount, certificateholders will be required to report annually
an amount of additional interest income attributable to the discount in those
contracts prior to receipt of cash related to the discount. To the extent that
the Non-REMIC certificates represent an interest in any pool of debt
instruments the yield on which may be affected by reason of prepayments, for
taxable years beginning after August 5, 1997, a prepayment assumption must be
used with respect to the contracts comprising the contract pool in computing
the accrual of any original issue discount, market discount or amortizable
premiums. See the discussion above under "REMIC Series--Original Issue
Discount." Similarly, IRS code provisions concerning market discount and
amortizable premium will apply to the contracts comprising a contract pool to
the extent that the loans were originated after July 18, 1984 and September 27,
1985,
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respectively. See the discussions above under "REMIC Series--Market Discount"
and "REMIC Series--Amortizable Premium." It is unclear whether a prepayment
assumption would be applicable in accruing or amortizing any such original
issue or market discount or premium with respect to Non-REMIC certificates that
do not represent an interest in any pool of debt instruments the yield on which
may be affected by reason of prepayments, or for taxable years beginning prior
to August 5, 1997.
Stripped Non-REMIC Certificates. Certain classes of Non-REMIC certificates
may be subject to the stripped bond rules of Section 1286 of the IRS code and
for purposes of this discussion will be referred to as "Stripped Certificates."
In general, a Stripped Certificate will be subject to the stripped bond rules
where there has been a separation of ownership of the right to receive some or
all of the principal payments on a contract from ownership of the right to
receive some or all of the related interest payments. Non-REMIC certificates
will constitute Stripped Certificates and will be subject to these rules under
various circumstances, including the following:
. if any servicing compensation is deemed to exceed a reasonable amount;
. if we or any other party retain a Retained Yield with respect to the
contracts comprising a contract pool;
. if two or more classes of Non-REMIC certificates are issued
representing the right to non-pro rata percentages of the interest or
principal payments on the contracts; or
. if Non-REMIC certificates are issued which represent the right to
interest only payments or principal only payments.
Although not entirely clear, each Stripped Certificate should be considered
to be a single debt instrument issued on the day it is purchased for purposes
of calculating any original issue discount. Original issue discount with
respect to a Stripped Certificate, if any, must be included in ordinary gross
income for federal income tax purposes as it accrues in accordance with the
constant-yield method that takes into account the compounding of interest and
such accrual of income may be in advance of the receipt of any cash
attributable to such income. See "REMIC Series--Original Issue Discount" above.
For purposes of applying the original issue discount provisions of the IRS
code, the issue price of a Stripped Certificate will be the purchase price paid
by each holder and the stated redemption price at maturity may include the
aggregate amount of all payments to be made with respect to the Stripped
Certificate whether or not denominated as interest. The amount of original
issue discount with respect to a Stripped Certificate may be treated as zero
under the original issue discount de minimis rules described above. A purchaser
of a Stripped Certificate will be required to account for any discount on the
certificate as market discount rather than original issue discount if either
(1) the amount of original issue discount with respect to the certificate was
treated as zero under the original issue discount de minimis rule when the
certificate was stripped or (2) no more than 100 basis points (including any
amount of servicing in excess of reasonable servicing) is stripped off of the
contracts. See "REMIC Series--Market Discount" above.
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To the extent the Stripped Certificates represent an interest in any pool
of debt instrument the yield on which may by affected by reason of prepayments,
for taxable years beginning after August 5, 1997, a prepayment assumption must
be used in computing yield on the underlying assets of a trust with respect to
which a REMIC election is not made. It is unclear whether a prepayment
assumption would be applicable to the Stripped Certificates that do not
represent an interest in any such pool or for taxable years beginning prior to
August 5, 1997. The IRS code appears to require that such a prepayment
assumption be used in computing yield with respect to Stripped Certificates
that do not represent an interest in a pool of debt instruments the yield on
which may be affected by reason of prepayments or for taxable years beginning
prior to August 5, 1997. In the absence of authority to the contrary, Green
Tree intends to base information reports and returns to the IRS and the holders
of Stripped Certificates taking into account an appropriate prepayment
assumption. Holders of Stripped Certificates should refer to the related
prospectus supplement to determine whether and in what manner the original
issue discount rules will apply.
When an investor purchases more than one class of Stripped Certificates it
is currently unclear whether for federal income tax purposes such classes of
Stripped Certificates should be treated separately or aggregated for purposes
of applying the original issue discount rules described above.
It is possible that the IRS may take a contrary position with respect to
some or all of the foregoing tax consequences. For example, a holder of a
Stripped Certificate may be treated as the owner of:
(1) as many stripped bonds or stripped coupons as there are scheduled
payments of principal and/or interest on each contract; or
(2) a separate installment obligation for each contract representing the
Stripped Certificate's pro rata share of principal and/or interest
payments to be made with respect thereto.
As a result of these possible alternative characterizations, investors should
consult their own tax advisors regarding the proper treatment of Stripped
Certificates for federal income tax purposes.
Gain or Loss on Disposition. Upon sale or exchange of a Non-REMIC
certificate, a Non-REMIC certificateholder will recognize gain or loss equal to
the difference between the amount realized in the sale and its aggregate
adjusted basis in the contracts represented by the Non-REMIC certificate.
Generally, the aggregate adjusted basis will equal the Non-REMIC
certificateholder's cost for the Non-REMIC certificate increased by the amount
of any previously reported gain with respect to the Non-REMIC certificate and
decreased by the amount of any losses previously reported with respect to the
Non-REMIC certificate and the amount of any distributions received thereon.
Except as provided above with respect to the original issue discount and market
discount rules, any such gain or loss would be capital gain or loss if the Non-
REMIC certificate was held as a capital asset.
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Recharacterization of Servicing Fees. The servicing compensation to be
received by Green Tree may be questioned by the IRS with respect to certain
certificates or contracts as exceeding a reasonable fee for the services being
performed in exchange therefor, and a portion of such servicing compensation
could be recharacterized as an ownership interest retained by us or other party
in a portion of the interest payments to be made pursuant to the contracts. In
this event, a certificate might be treated as a Stripped Certificate subject to
the stripped bond rules of Section 1286 of the IRS code and the original issue
discount provisions rather than to the market discount and premium rules. See
the discussion above under "Non-REMIC Series--Stripped Non-REMIC Certificates."
Tax Treatment of Certain Foreign Investors. Generally, interest or original
issue discount paid to or accruing for the benefit of a Non-REMIC
certificateholder who is a Foreign Holder (as defined in "REMIC Series--
Taxation of Certain Foreign Investors") will be treated as "portfolio interest"
and therefore will be exempt from the 30% withholding tax. Such Non-REMIC
certificateholder will be entitled to receive interest payments and original
issue discount on the Non-REMIC certificates free of United States federal
income tax, but only to the extent the contracts were originated after July 18,
1984 and provided that such Non-REMIC certificateholder periodically provides
the Trustee (or other person who would otherwise be required to withhold tax)
with a statement certifying under penalty of perjury that such Non-REMIC
certificateholder is not a United States person and providing the name and
address of such Non-REMIC certificateholder. For additional information
concerning interest or original issue discount paid by Green Tree to a Foreign
Holder and the treatment of a sale or exchange of a Non-REMIC certificate by a
Foreign Holder, which will generally have the same tax consequences as the sale
of a Regular certificate, see the discussion above under "REMIC Series--
Taxation of Certain Foreign Investors".
Tax Administration and Reporting. We will furnish to each Non-REMIC
certificateholder with each distribution a statement listing the amount of such
distribution allocable to principal and to interest. In addition, we will
furnish, within a reasonable time after the end of each calendar year, to each
Non-REMIC certificateholder who was a certificateholder at any time during such
year, information regarding the amount of servicing compensation we received
and any sub-servicer and other customary factual information as we deem
necessary or desirable to enable certificateholders to prepare their tax
returns. Reports will be made annually to the IRS and to holders of record that
are not excepted from the reporting requirements regarding information as may
be required with respect to interest and original issue discount, if any, with
respect to the Non-REMIC certificates.
Other Tax Consequences
No advice has been received as to local income, franchise, personal
property, or other taxation in any state or locality, or as to the tax effect
of ownership of certificates in any state or locality. You are advised to
consult your own tax advisors about any state or local
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income, franchise, personal property, or other tax consequences arising out of
your ownership of certificates.
LEGAL INVESTMENT CONSIDERATIONS
Unless we indicate otherwise in the applicable prospectus supplement, any
certificates that we offer under this prospectus that are rated in one of the
two highest rating categories by at least one nationally recognized statistical
rating organization will constitute mortgage related securities for purposes of
the Secondary Mortgage Market Enhancement Act of 1984 and will be legal
investments for persons, trusts, corporations, partnerships, associations,
business trusts and business entities, including depository institutions, life
insurance companies and pension funds, created under or existing under the laws
of the United States or of any state whose authorized investments are subject
to state regulation to the same extent as, under applicable law, obligations
issued by or guaranteed as to principal and interest by the United States or
any such entities. Under SMMEA, some states have created legislation
specifically limiting the legal investment authority of any entities regarding
mortgage related securities, in which case the certificates will constitute
legal investments for entities subject to, and as provided in, this
legislation. SMMEA provides, however, that in no event will the enactment of
any legislation affect the validity of any contractual commitment to purchase,
hold or invest in certificates, or require the sale or other disposition of
certificates, so long as such contractual commitment was made or the
certificates were acquired before the enactment of the legislation.
SMMEA also amended the legal investment authority of federally-chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal in certificates
without limitation as to the percentage of their assets represented; federal
credit unions may invest in certificates; and national banks may purchase
certificates for their own account without regard to the limitations generally
applicable to investment securities set forth in 12 U.S.C. (S)24 (Seventh),
subject in each case to the regulations as the applicable federal regulatory
authority may prescribe.
Some classes of certificates offered in this prospectus may not be rated in
one of the two highest rating categories and thus would not constitute mortgage
related securities for purposes of SMMEA.
The Federal Financial Institutions Examination Council, The Federal Deposit
Insurance Corporation, the Office of Thrift Supervision, the Office of the
Comptroller of the Currency and the National Credit Union Administration have
proposed or adopted guidelines regarding investment in various types of
mortgage-backed securities. In addition, certain state regulators have taken
positions that may prohibit regulated institutions subject to their
jurisdiction from holding securities representing residual interests, including
securities previously purchased. There may be other restrictions on the ability
of certain investors, including depository institutions, either to purchase
certificates or to purchase certificates
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representing more than a specified percentage of the investor's assets.
Investors should consult their own legal advisors in determining whether and to
what extent the certificates constitute legal investments for such investors.
RATINGS
It is a condition precedent to the issuance of any class of certificates
sold under this prospectus that they be rated by at least one nationally
recognized statistical rating organization in one of its four highest rating
categories within which there may be sub-categories or gradations indicating
relative standing. A security rating is not a recommendation to buy, sell or
hold securities and may be subject to revision or withdrawal at any time by the
assigning rating agency. The security rating of any series of certificates
should be evaluated independently of similar security ratings assigned to other
kinds of securities.
UNDERWRITING
We may sell certificates of each series to or through underwriters by a
negotiated firm commitment underwriting and public reoffering by the
underwriters, and also may sell and place certificates directly to other
purchasers or through agents. We intend that certificates will be offered
through various methods from time to time and that offerings may be made
concurrently through more than one of these methods or that an offering of a
particular series of certificates may be made through a combination of these
methods.
The distribution of the certificates may be effected from time to time in
one or more transactions at a fixed price or prices, which may be changed, or
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
If we so specify in the prospectus supplement relating to a series of
certificates, we or any of our affiliates may purchase some or all of one or
more classes of certificates of that series from the underwriter or
underwriters at a price specified in the prospectus supplement. The purchaser
may then from time to time offer and sell, under this prospectus, some or all
of the certificates so purchased directly, through one or more underwriters to
be designated at the time of the offering of the certificates or through
broker-dealers acting as agent and/or principal. The offering may be restricted
in the manner specified in the prospectus supplement. These transactions may be
effected at market prices prevailing at the time of sale, at negotiated prices
or at fixed prices.
In connection with the sale of the certificates, underwriters may receive
compensation from us or from purchasers of certificates for whom they may act
as agents in the form of discounts, concessions or commissions. Underwriters
may sell the certificates of a series to or through dealers and such dealers
may receive compensation in the form of discounts, concessions or commissions
from the underwriters and/or commissions from the purchasers for whom they may
act as agents. Underwriters, dealers and agents that participate in the
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distribution of the certificates of a series may be deemed to be underwriters,
and any discounts or commissions received by them from us and any profit on the
resale of the certificates by them may be deemed to be underwriting discounts
and commissions, under the Securities Act. These underwriters or agents will be
identified, and any compensation received from us will be described, in the
prospectus supplement.
Under agreements which may be entered into by Green Tree, underwriters and
agents who participate in the distribution of the certificates may be entitled
to indemnification by us against certain liabilities, including liabilities
under the Securities Act.
If we so indicate in the prospectus supplement, we will authorize
underwriters or other persons acting as our agents to solicit offers by certain
institutions to purchase the certificates from us under contracts providing for
payment and delivery on a future date. Institutions with which the contracts
may be made include commercial and savings banks, insurance companies, pension
funds, investment companies, educational charitable institutions and others,
but in all cases such institutions must be approved by us. The obligation of
any purchaser under any contract will be subject to the condition that the
purchaser of the offered certificates shall not at the time of delivery be
prohibited under the laws of the jurisdiction to which the purchaser is subject
from purchasing the certificates. The underwriters and other agents will not
have responsibility in respect of the validity or performance of the contracts.
The underwriters may, from time to time, buy and sell certificates, but
there can be no assurance that an active secondary market will develop and
there is no assurance that any market, if established, will continue.
Some persons participating in this offering may engage in transactions that
stabilize, maintain or in some way affect the price of the certificates. These
types of transactions may include stabilizing, the purchase of certificates to
cover syndicate short positions and the imposition of penalty bids. See
"Underwriting" in the related prospectus supplement.
Some of the underwriters and their associates may engage in transactions
with and perform services for us in the ordinary course of business.
LEGAL MATTERS
The legality and material federal income tax consequences of the
certificates will be passed upon for Green Tree by our counsel identified in
the applicable prospectus supplement.
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EXPERTS
The consolidated financial statements of Green Tree as of December 31, 1998
and for the year ended December 31 1998, incorporated by reference in this
prospectus have been audited by PricewaterhouseCoopers LLP, independent
accountants, as stated in their opinion given upon their authority as experts
in accounting and auditing.
The consolidated financial statements of Green Tree as of December 31, 1997
and for each of the years in the two-year period ended December 31, 1997 are
incorporated by reference in this prospectus and in the registration statement
in reliance upon the report of KPMG Peat Marwick LLP, independent certified
public accountants, incorporated by reference in this prospectus, and upon the
authority of KPMG Peat Marwick LLP as experts in accounting and auditing.
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GLOSSARY
Below are abbreviated definitions of capitalized terms used in this
prospectus and the prospectus supplement. The pooling and servicing agreement
may contain a more complete definition of some of the terms defined here and
reference should be made to the pooling and servicing agreement for a more
complete definition of all such terms.
"Accrual Remittance Amount" means, with respect to the Compound Interest
Certificates of a series of certificates providing for sequential distributions
in reduction of the principal balance of the classes of that series, as of any
remittance date, the amount of interest which has accrued on the Compound
Interest Certificates from the prior remittance date.
"Adjustable Rate Certificates" means certificates which evidence the right
to receive distributions of income at a variable remittance rate.
"Advances" means the advances made by a servicer (including from advances
made by a sub-servicer) on any remittance date pursuant to a pooling and
servicing agreement.
"Amount Available" means, for each series of certificates, amounts on
deposit in the certificate account on a Determination Date.
"Certificate Distribution Amount" means the amount of principal and
interest specified in the related prospectus supplement to be distributed to
certificateholders.
"Class A Percentage" means for any remittance date will equal a fraction,
expressed as a percentage, the numerator of which is the Class A principal
balance, and the denominator of which is the sum of:
. the Class A principal balance,
. if the Class M-1 distribution test is satisfied on that remittance
date, the Class M-1 principal balance, otherwise zero,
. if the Class M-2 distribution test is satisfied on that remittance
date, the Class M-2 principal balance, otherwise zero, and
. if the Class B distribution test is satisfied on that remittance date,
the Class B principal balance, otherwise zero.
"Class B Percentage" for any remittance date will equal:
(1) zero, if the Class A principal balance, the Class M-1 principal
balance and the Class M-2 principal balance have not yet been reduced
to zero and the Class B distribution test is not satisfied or
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(2) a fraction, expressed as a percentage, the numerator of which is the
Class B principal balance as of the remittance date, and the
denominator of which is, as of the remittance date, the sum of:
(a) any Class A principal balance,
(b) any Class M-1 principal balance,
(c) any Class M-2 principal balance, and
(d) the Class B principal balance.
"Class M-1 Percentage" for any remittance date will equal:
(1) zero, if the Class A principal balance has not yet been reduced to
zero and the Class M-1 distribution test is not satisfied, or
(2) a fraction, expressed as a percentage, the numerator of which is the
Class M-1 principal balance as of the remittance date, and the
denominator of which is, as of the remittance date, the sum of:
(a) any Class A principal balance
(b) the Class M-1 principal balance,
(c) if the Class M-2 distribution test is satisfied on that
remittance date, the Class M-2 principal balance, otherwise
zero and
(d) if the Class B distribution test is satisfied on that
remittance date, the Class B principal balance, otherwise zero.
"Class M-2 Percentage" means, for any remittance date:
(1) zero, if the Class A principal balance and the Class M-1 principal
balance have not yet been reduced to zero and the Class M-2
distribution test is not satisfied or
(2) a fraction, expressed as a percentage, the numerator of which is the
Class M-2 principal balance as of the remittance date, and the
denominator of which is, as of the remittance date, the sum of:
(a) any Class A principal balance,
(b) any Class M-1 principal balance,
(c) the Class M-2 principal balance, and
(d) if the Class B distribution test is satisfied on that
remittance date, the Class B principal balance, otherwise
zero.
"Compound Interest Certificates" means certificates on which interest may
accrue but not be paid for the period described in the related prospectus
supplement.
"Cut-off Date" means the date specified in the related prospectus
supplement as the date from which principal and interest payments on the
contracts are included in the trust.
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"Determination Date" means, unless otherwise specified in the related
prospectus supplement, the third business day immediately preceding the related
remittance date.
"Due Period" means, unless otherwise provided in a related prospectus
supplement, with respect to any remittance date, the period from and including
the 15th day of the second month preceding the remittance date, to and
including the 14th day of the month immediately preceding the remittance date.
"Eligible Investments" means one or more of the investments specified in
the pooling and servicing agreement in which moneys in the certificate account
and certain other accounts are permitted to be invested.
"Eligible Substitute Contract" means a manufactured housing contract that
satisfies, as of the date of its substitution, the representations and
warranties specified in Article III of the pooling and servicing agreement, has
a scheduled principal balance that is not greater than the Scheduled Principal
Balance of the Replaced Contract and has a contract rate that is at least equal
to the contract rate of the Replaced Contract and has a remaining term to
scheduled maturity that is not greater than the remaining term to scheduled
maturity of the Replaced Contract.
"Formula Principal Distribution Amount" means the sum of:
(1) all scheduled payments of principal due on each outstanding contract
during the related due period, after adjustments for previous partial
principal prepayments and after any adjustments to a contract's
amortization schedule as a result of a bankruptcy or a similar
proceeding involving the related obligor,
(2) the Scheduled Principal Balance of each contract which, during the
month preceding the related due period, was purchased by Green Tree
under the pooling and servicing agreement on account of breaches of
its representations and warranties,
(3) all partial principal prepayments applied and all principal
prepayments in full received during the related due period,
(4) the Scheduled Principal Balance of each contract that became a
liquidated contract during the related due period, plus the amount of
any reduction in the outstanding principal balance of a contract
during the related due period ordered as the result of a bankruptcy or
similar proceeding involving the related obligor,
(5) without repeating the above, all collections in respect of principal
on the contracts received during the due period in which the
remittance date occurs up to and including the third business day
prior to such remittance date, but in no event later than the 25th day
of the month before the remittance rate, minus
(6) with respect to all remittance dates other than the remittance date in
1999, the amount included in the formula principal distribution
amount for the preceding remittance date by virtue of clause (5)
above, plus
(7) with respect to the remittance date in 2000, any amount, by which
the Class A-1 principal balance as of the remittance date exceeds the
sum on the remittance date of the amounts described in clause (1)
through (6) above; minus
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(8) with respect to the remittance date in 2000, any amount,
distributed in respect of principal on the Class A-1 certificates on
the remittance date in 2000 under clause (7) above.
"Liquidation Proceeds" means cash including insurance proceeds received in
connection with the repossession of a manufactured home.
"MHP" means the manufactured housing prepayment model, which is based on an
assumed rate of prepayment each month of the then unpaid principal balance of a
pool of new contracts.
"Monthly Payment" means the scheduled monthly payment of principal and
interest on a contract.
"Net Liquidated Proceeds" means all amounts received and retained for the
liquidation of defaulted contracts, net of liquidation expenses.
"Outstanding Senior Shortfall" means, as of any date, to the extent not
previously paid, the aggregate of the amounts by which the Senior Distribution
Amount for that class for any remittance date exceeded the amount actually paid
on that remittance date plus interest at the remittance rate.
"Participants means institutions that have accounts with the depositary.
"Pool Scheduled Principal Balance" means, as of any remittance date, the
aggregate of the Scheduled Principal Balances of contracts outstanding at the
end of the related due period.
"Replaced Contract" means an Eligible Substitute Contract substituted for a
manufactured housing contract which Green Tree is otherwise obligated to
repurchase under the pooling and servicing agreement.
"Repurchase Price" means the remaining principal amount outstanding on a
manufactured housing contract on the date of repurchase plus accrued and unpaid
interest at its contract rate to the date of the repurchase.
"Scheduled Principal Balance" means, as of any remittance date, the
"Scheduled Principal Balance" of a contract as of any remittance date is the
unpaid principal balance of the contract as specified in the amortization
schedule at the time relating to the contract as of the due date in the related
due period, after giving effect to any previous partial prepayments and to the
payment of principal due on the due date and irrespective of any delinquency in
payment on the contract.
"Senior Distribution Amount" means, for a series of certificates having
Subordinated Certificates, as of each remittance date and for each class of
Senior Certificates, the amount due the holders of that class of Senior
Certificates.
"Senior Percentage" means, for a series of certificates having Subordinated
Certificates, the percentage specified in the related prospectus supplement.
"Subordinated Percentage" means, for a series of certificates having
Subordinated Certificates, the percentage specified in the related prospectus
supplement.
"WAC" means the weighted average contract rate.
"WAM" means the weighted average maturity of a contract.
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For 90 days after the date of this prospectus supplement, all dealers
that effect transactions in these securities, whether or not participating in
this offering, may be required to deliver a prospectus. This is in addition to
the dealers' obligation to deliver a copy of this prospectus supplement and the
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
[GreenTree Logo]
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
<TABLE>
<S> <C>
SEC registration fee........................................ $1,112,000.00
Blue Sky fees and expenses.................................. 5,000.00
Accountant's fee and expenses............................... 20,000.00
Attorney's fees and expenses................................ 168,000.00
Trustee's fees and expenses................................. 22,000.00
Printing and engraving expenses............................. 100,000.00
Rating Agency fee........................................... 180,000.00
Miscellaneous............................................... 22,500.00
-------------
Total................................................... $1,629,500.00
=============
</TABLE>
Item 15. Indemnification of Directors and Officers
Green Tree Financial Corporation is incorporated under the laws of
Delaware. Section 145 of the Delaware General Corporation Law provides that a
Delaware corporation may indemnify any persons, including officers and
directors, who are, or are threatened to be made, parties to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
such corporation, by reason of the fact that such person was an officer,
director, employee or agent of such corporation, or is or was serving at the
request of such corporation as a director, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise). The
indemnity may include expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding, provided such person acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the corporation's best interests and, for criminal proceedings, had no
reasonable cause to believe that his conduct was illegal. A Delaware
corporation may indemnify officers and directors in an action by or in the
right of the corporation under the same conditions, except that no
indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where and officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses
which such officer or director actually and reasonably incurred.
The Certificate of Incorporation and Bylaws of Green Tree Financial
Corporation provide, in effect, that, subject to certain limited exceptions,
such corporation will indemnify its officers and directors to the extent
permitted by the Delaware General Corporation Law.
The Company maintains a directors' and officers' insurance policy.
Pursuant to the form of Underwriting Agreement, the Underwriters will
agree, subject to certain conditions, to indemnify the Company, its directors,
certain of their officers and any persons who control the Company, within the
meaning of the Securities Act of 1933, as amended (the "Securities Act"),
against certain liabilities.
II-1
<PAGE>
Item 16. Exhibits
<TABLE>
<CAPTION>
<C> <S> <C>
1.1 Proposed form of Underwriting Agreement (incorporated by
reference to similarly numbered exhibit on Registrant's
Registration Statement No. 333-36969)
1.2 Proposed form of alternate Underwriting Agreement (incor-
porated by reference to similarly numbered exhibit on Reg-
istrant's Registration Statement No. 333-36969)
3.1 Certificate of Incorporation of Green Tree (incorporated
by reference to Exhibit 1.2 to the Registrant's Registra-
tion Statement No. 33-60869)
3.2 Restated By-Laws of Green Tree (incorporated by reference
to Exhibit 3.2 to Registrant's Registration Statement No.
333-52233)
4.1 Form of Pooling and Servicing Agreement (incorporated by
reference to Exhibit 4.1 to the Registrant's Current Re-
port on Form 8-K dated February 22, 1999)
*5.1 Opinion and consent of Dorsey & Whitney LLP as to legality
*8.1 Opinion of Dorsey & Whitney LLP as to tax matters
12.1 Computation of Ratio of Earnings to Fixed Charges (incor-
porated by reference to Exhibit 12.1 to the Registrant's
Annual Report on Form 10-K for the period ended December
31, 1998)
**23.1 Consent of PricewaterhouseCoopers LLC
**23.2 Consent of KPMG Peat Marwick LLP
*23.3 Consent of Dorsey & Whitney LLP (included as part of Ex-
hibit 5.1)
*24.1 Power of attorney from officers and directors of the
Registrants signed by an attorney-in-fact
</TABLE>
- --------
*Previously filed.
**Filed herewith.
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed
as a part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed
to be part of this registration statement as of the time it was declared
effective.
II-2
<PAGE>
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change to the information
set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to Rule
424(b) under the Securities Act of 1933 if, in the aggregate, the
changes in volume and price represent no more than a 20% change in
the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement;
and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply
if the registration statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the
registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference
in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remains unsold at
the termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is
II-3
<PAGE>
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Amendment No. 2 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Saint Paul, State of
Minnesota, on the 1st day of June, 1999.
Green Tree Financial Corporation
/s/ Rollin M. Dick
By___________________________________
Rollin M. Dick
Executive Vice President and Chief
Financial Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act, this Amendment No.
2 to the Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
Signature Title Date
* Director and
- ------------------------------------- President
Thomas J. Kilian
Director/Executive
/s/ Rollin M. Dick Vice President and June 1, 1999
- ------------------------------------- Chief Financial
Rollin M. Dick Officer (Principal
Financial Officer)
* Senior Vice
- ------------------------------------- President and Chief
James S. Adams Accounting Officer
(Principal
Accounting Officer)
* Director
- -------------------------------------
Stephen C. Hilbert
/s/ Joel H. Gottesman
*By: ________________________________ June 1, 1999
Joel H. Gottesman
as Attorney-in-Fact
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<C> <S>
1.1 Proposed form of Underwriting Agreement (incorporated by reference
to similarly numbered exhibit on Registrant's Registration Statement
No. 333-36969)
1.2 Proposed form of alternate Underwriting Agreement (incorporated by
reference to similarly numbered exhibit on Registrant's Registration
Statement No. 333-36969)
3.1 Certificate of Incorporation of Green Tree (incorporated by
reference to Exhibit 1.2 to the Registrant's Registration Statement
No. 33-60869)
3.2 Restated By-Laws of Green Tree (incorporated by reference to Exhibit
3.2 to Registrant's Registration Statement No. 333-52233)
4.1 Form of Pooling and Servicing Agreement (incorporated by reference
to Exhibit 4.1 to the Registrant's Current Report on Form 8-K dated
February 22, 1999)
*5.1 Opinion and consent of Dorsey & Whitney LLP as to legality
*8.1 Opinion of Dorsey & Whitney LLP as to tax matters
12.1 Computation of Ratio of Earnings to Fixed Charges (incorporated by
reference to Exhibit 12.1 to the Registrant's Annual Report on Form
10-K for the period ended December 31, 1998)
**23.1 Consent of PricewaterhouseCoopers LLP
**23.2 Consent of KPMG Peat Marwick LLP
*23.3 Consent of Dorsey & Whitney LLP (included as part of Exhibit 5.1)
*24.1 Power of attorney from officers and directors of the Registrants
signed by an attorney-in-fact
</TABLE>
- --------
*Previously filed.
**Filed herewith.
<PAGE>
EXHIBIT 23.1
CONSENT OF PRICEWATERHOUSECOOPERS LLP
We consent to the incorporation by reference in this Prospectus to the
Registration Statement of Green Tree Financial Corporation on Form S-3
(Registration No. 333-75365) of our report dated March 30, 1999, relating to the
consolidated financial statements of Green Tree Financial Corporation as of
December 31, 1998 and for the year then ended, which report is included in Green
Tree Financial Corporation's Annual Report on Form 10-K for the year ended
December 31, 1998. We also consent to the references to us under the caption
"Experts" in such Registration Statement.
PRICEWATERHOUSECOOPERS LLP
/s/ PricewaterhouseCoopers LLP
Minneapolis, Minnesota
June 1, 1999
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Green Tree Financial Corporation:
We consent to the incorporation by reference in Amendment No. 2 to the
Registration Statement (No. 333-75365) on Form S-3 of Green Tree Financial
Corporation of our report dated January 27, 1998, relating to the consolidated
balance sheet of Green Tree Financial Corporation and subsidiaries as of
December 31, 1997, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the years in the two-year period
ended December 31, 1997, and to the reference to our firm under the heading
"EXPERTS" in the Registration Statement. Our report refers to the Company's
adoption of the Financial Accounting Standards Board's Statement No. 125
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities," in 1997.
/s/ KPMG Peat Marwick LLP
Minneapolis, Minnesota
June 1, 1999
